Rating Rationale
January 07, 2023 | Mumbai
Go Fashion (India) Limited
Ratings reaffirmed at 'CRISIL A/Stable/CRISIL A1'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.180 Crore (Enhanced from Rs.65 Crore)
Long Term RatingCRISIL A/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Rating’s ratings on the bank facilities of Go Fashion (India) Limited (GFIL) continues to strong market position in the women’s bottom wear segment and strong financial risk profile. These strengths are partially offset by exposure to intense competition and large working capital requirement.

 

CRISIL Ratings had upgraded the ratings on the bank facilities of GFIL to 'CRISIL A/Stable/CRISIL A1' from 'CRISIL A-/Stable/CRISIL A2+' on January 06, 2023.

Key Rating Drivers & Detailed Description

Strengths:

Strong market position:The company enjoys a strong market position and healthy brand recall in the women bottom wear segment across the country.  While the revenue is around Rs 400 crore in FY 2022 and Rs.331 Crore till H2FY23. The revenue is expected to improve steadily over the medium term with addition of EBO’s and geographical expansion of its revenue profile.

 

Healthy financial risk profile: The healthy financial risk profile is indicated by gearing is 0.57 times as on March 31, 2022. The capital structure has strengthened by IPO proceeds and healthy accruals. Interest coverage was comfortable at around 5.86 times for fiscal 2022.  The capital structure and debt protection metrics are expected to remain strong with absence of debt funded capital expenditure and steady accretion to reserves.

 

Weaknesses:

Exposure to intense competition: GFIL faces intense competition from unorganised and regional players in the women's ethnic bottom wear sector. Increasing market penetration of various ethnic players with presence in both top and bottom wear and presence of various private label brands in large format store leads to increased competitive pressure.

 

Large working capital requirement: Gross current assets (GCAs) were 328 days as on March 31, 2022, driven by sizeable inventory and receivables of 210 and 54 days, respectively and also driven by considerable cash and bank balances and marketable securities. Nevertheless, the company has funded the working capital requirements majorly through internal accruals.  Owing to a large number of stock keeping units (SKU’s) across its outlets, working capital requirements are expected to remain at similar levels over the medium term.

LiquidityStrong

Cash accrual is expected to be in the range of Rs.90-100 crore over the medium term; however the company does not have any repayment obligations. The fund-based bank limits have been utilised sparsely over the last 12 month ended December 2021. The liquidity is further supported by ample unencumbered cash and cash equivalents of more than Rs.100 crore and absence of debt funded capital expenditure over the medium term.

Outlook: Stable

CRISIL Ratings believes GFIL will maintain its business performance over the medium term, supported by its operational efficiency and strong brand recall.

Rating Sensitivity factors

Upward factor

* Sustainability in revenue growth and operating profitability sustained at more than 25%

* Sustenance of the financial risk profile and ramp up of operations in newly opened outlets


Downward factor

* Decline in cash accrual to less than Rs.65 crore

* Any large debt funded capital expenditure or working capital stretch adversely impacting the financial risk profile.

About the Company

Incorporated in 2010, GFIL sells ethnic bottom wear products for women through its retail stores, distributors, and large fashion outlets under the ‘Go Colors’ brand. Mr Gautam Saraogi and Mr Rahul Saraogi are the promoters. The company was listed on the national stock exchange on 30th November 2021.

Key Financial Indicators

As on / for the period ended March 31

 

2022

2021

Operating income

Rs crore

411.33

269.94

Reported profit after tax

Rs crore

30.30

-3.54

PAT margins

%

7.37

-1.31

Adjusted Debt/Adjusted Net worth

Times

0.57

0.82

Interest coverage

Times

5.86

3.79

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of

allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs crore)

Complexity

level

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

140

NA

CRISIL A/Stable

NA

Cash Credit & Working Capital Demand Loan

NA

NA

NA

30

NA

CRISIL A/Stable

NA

Letter of Credit

NA

NA

NA

5

NA

CRISIL A/Stable

NA

Letter of Credit

NA

NA

NA

5

NA

CRISIL A1

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 170.0 CRISIL A/Stable 06-01-23 CRISIL A/Stable 25-02-22 CRISIL A-/Stable   -- 05-11-20 CRISIL BBB+/Stable CRISIL BBB+/Stable
      --   --   --   -- 14-01-20 CRISIL BBB+/Positive --
      --   --   --   -- 03-01-20 CRISIL BBB+/Positive --
Non-Fund Based Facilities ST/LT 10.0 CRISIL A1 / CRISIL A/Stable 06-01-23 CRISIL A1 25-02-22 CRISIL A2+   -- 05-11-20 CRISIL A2 --
      --   --   --   -- 14-01-20 CRISIL A2 --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 30 RBL Bank Limited CRISIL A/Stable
Cash Credit 30 ICICI Bank Limited CRISIL A/Stable
Cash Credit 50 RBL Bank Limited CRISIL A/Stable
Cash Credit 30 ICICI Bank Limited CRISIL A/Stable
Cash Credit & Working Capital Demand Loan 30 Axis Bank Limited CRISIL A/Stable
Letter of Credit 5 RBL Bank Limited CRISIL A1
Letter of Credit 5 Axis Bank Limited CRISIL A/Stable

This Annexure has been updated on 07-Jan-2023 in line with the lender-wise facility details as on 06-Dec-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Bank Loan Ratings
The Rating Process
Rating criteria on Financial risk framework for manufacturing and services sector companies
Understanding CRISILs Ratings and Rating Scales

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