Trent gains on buzz Tesco gets FIPB nod

Trent rose 2.73% to Rs 1,292.10 at 9:57 IST on BSE on reports the Foreign Investment Promotion Board has approved the UK-based retailer Tesco's proposal to purchase 50% stake in Trent Hypermarket.

Meanwhile, the BSE Sensex was up 44.28 points, or 0.21%, to 21,187.29.

On BSE, so far 22,000 shares were traded in the counter, compared with an average volume of 7,093 shares in the past one quarter.

The stock hit a high of Rs 1,339.80 and a low of Rs 1,284.60 so far during the day. The stock hit a record high of Rs 1,345 on 14 January 2013. The stock hit a 52-week low of Rs 902 on 1 November 2013.

The stock had outperformed the market over the past one month till 30 December 2013, rising 20.93% compared with the Sensex's 1.69% rise. The scrip had also outperformed the market in past one quarter, gaining 35.48% as against Sensex's 9.10% rise.

The mid-cap company has an equity capital of Rs 33.23 crore. Face value per share is Rs 10.

According to media reports, the Foreign Investment Promotion Board (FIPB) on Monday, 30 December 2013, approved UK-based Tesco Plc's proposal to enter the Indian multi-brand retail segment in joint venture with Tata Group company with an initial investment of $110 million. After the approval, Tesco will pick up a 50% stake in Trent Hypermarket (THL), a wholly-owned subsidiary of Trent, a Tata group company.

Earlier this month, Trent announced that it was in discussions with Tesco regarding an investment by Tesco in THL, which operates the Star Bazaar business and is engaged in multi-brand retail trading. In this context, Tesco made an application to the FIPB to enter into a partnership where Trent and Tesco will each own a 50% stake in THL.

THL currently operates 16 stores across the Southern and Western regions of India. The proposed partnership will operate and build on the existing portfolio of Star Bazaar stores in Maharashtra and Karnataka. The application envisages a minimum FDI in line with the applicable multi brand retail trading policy, the company said.

In September 2012, the Government of India had allowed 51% FDI in the multi-brand retail sector, but the sector has failed to see any investment so far due to stringent rules set by the government.

The government on 6 June 2013 clarified that the foreign supermarkets entering India must invest in new supply chain infrastructure, such as warehouses and cold-storages, rather than buying existing assets. The government had stipulated that at least 50% of the investment made by the foreign company must be in supply chain infrastructure.

Trent's net profit rose 73.3% to Rs 15.60 crore on 24.9% growth in net sales to Rs 267.10 crore in Q2 September 2013 over Q2 September 2012.

Trent, a part of Tata Group, is engaged in operating retail chains in India.

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