The stock of the Tata Group company has rallied 18 per cent in the past three trading days after reporting 38 per cent year on year (YoY) growth in its standalone net profit at Rs 56 crore in December quarter (Q3FY20). Revenue from operations jumped 32.5 per cent to Rs 870 crore on YoY basis.
In Q3FY20, Trent has displayed strong 13 per cent/35 per cent beat on EBITDA/PBT (post Ind-AS116) with 10 per cent same-store sales growth (SSSG), at a time when other retailers are facing the brunt of slowing consumer spends. Trent, though expensive on headline multiples, is expected to command premium valuations given its continued stellar growth coming from its moat – the apparel segment, analysts at Motilal Oswal Securities said.
In August 2019, Trent's promoter, Tata Sons, invested Rs 950 crore in the company by acquiring 23.17 million shares at a price of Rs 410 per equity share on a preferential basis.
The company had said it is witnessing positive traction for its lifestyle retail concepts and consequently pursuing a substantially accelerated growth programme across the Westside, Zudio and Star formats. The foregoing fund raising proposal was considered by the board in the context of the company's funding requirements given the growth plans.
Trent is likely to mobilize about Rs 600 crore through qualified institutional placement (QIP) issue. On June 13, 2019, the company's board of directors appointed a committee of the board to explore options to raise additional funds not exceeding Rs 600 crore in FY 2019-20 by issue of equity shares or other securities including through qualified institutional placement, rights issue or any other permissible mode or a combination thereof.
Since then, the stock has zoomed 76 per cent from level of Rs 396, as compared to 3 per cent rise in the S&P BSE Sensex.
“Westside continues to be one of the most successful, established franchises, deriving 97 per cent of share of revenues from private label brands. Over the last six years, Westside has sustained its same stores sales growth at 7 per cent plus, outperforming peers in the industry. Exceptional ramp up in store addition in non-metro cites, mainly through Zudio format (value fashion business) is one of the major growth drivers in coming years,” analysts at ICICI Securities said.