Trent soars to record high on fundraising plan; stock rallies 10% in a week

Shares rallied after the board approved raising up to Rs 1,550 crore through a mix of issue of shares to its promoter Tata Sons on a preferential basis, and other options to fund its expansion.

Trent shares jumped 2 per cent to hit a new high of Rs 436 apiece on the BSE on Tuesday, extending Monday's rally of 5 per cent, after the company said it was seeking shareholders' approval to allot up to 24.65 million equity shares to Tata Sons.

The Tata group retail chain's subsidiary has outperformed the market by surging 10 per cent in the past week, after its board approved raising up to Rs 1,550 crore through a mix of issue of shares to its promoter Tata Sons on a preferential basis, and other options to fund its expansion. In comparison, the S&P BSE Sensex was up a marginal 0.15 per cent during the same period.

"Total amount to be raised from issuance of shares to the promoter is about Rs 950 crore, which the company plans to utilise to finance its expansion and reduce debt," Trent said.

After the transaction, the stake of Tata Sons, holding company of Tata Group, in Trent will increase to 33 per cent from the current 28 per cent.

The company was betting on "positive traction" under the lifestyle retail concept to pursue growth programme across the Westside, Zudio and Star formats.

Accelerated store addition in the Westside format, right-sizing of Star Bazaar stores coupled with consistent growth in Zara are further expected to accelerate Trent’s financial performance, according to analysts at ICICI Securities.

The brokerage firm expects a sustained revenue growth coupled with expansion in consolidated revenues at a compound annual growth rate (CAGR) of 20 per cent in FY19-21E. It also estimates earnings before interest, tax, depreciation and amortisation (EBITDA) margin expansion of 150 bps to 10.1 per cent by FY21E.

"The management plans to increase its presence in Tier II, III cities through the franchise route, which currently comprises around 10 per cent of overall stores. It opened 20 Westside stores, which is the highest ever store addition in a single year. We expect the aggressive store expansion to further accelerate to around 190 stores by FY21E," analysts said in Q4FY19 result update.