Trent Limited – The retail biggie from the house of Tatas

About Trent Limited

Trent Limited is one of the largest retail chains in India. The company operates retail stores under a number of renowned brands in different segments. The company is promoted by Tata Sons and it has footprints in Grocery and Fashion segments. The company was originally incorporated on December 5, 1952 as Lakme Limited. After divesting its cosmetics business to Hindustan Unilever in 1998, the company forayed into retailing of readymade garments and allied merchandise. Trent Limited was formed after merger of Littlewoods International Private Limited and Lakme Exports, a subsidiary of Lakme. On July 1, 1998 Trent Limited was amalgamated into Trent Limited and the merged unit was named as Trent Limited.

Since the establishment of the first Westside store in Camac Street, Kolkata, the company has come a long way. The company now operates several brands of stores across India.

Shareholding Pattern and Management

The shareholders of Trent Limited

The promoters of the company hold 37.01% of the shares. The promoters are Tata Sons Private Limited, Tata Investment Corporation Limited, Ewart Investments Limited, Titan Company Limited, AF-TAAB INVESTMENT COMPANY LIMITED and PANATONE FINVEST LIMITED. While 32.45% of the shares of the company are held by Tata Sons, about 4.28% of the outstanding shares are held by Tata Investment Corporation.

Public shareholders own about 62.99% of outstanding shares of the company. 8.5% of the shares are owned by Mutual Funds. Axis Mutual Funds owned 1.08% shares of the company at the end of June 2024. Insurance companies own 3.89% of shares, SBI Life Insurance with 2.31% is the largest among them. FPIs and FPIs together owned 27.87%. Resident individual investors owned 14.55% of the outstanding shares.

The management of Trent Limited

The board board of Trent Limited consists of one Executive Director, three non-Executive directors and five Independent directors. Mr. Venkatesalu Palinisamy is the Chief Executive Office (CEO) of the Company and the board is chaired by Mr. Noel N. Tata. There are two women independent directors on the board.

Mr. Venketasalu Palinisamy has got a bachelors degree in Commerce from Madras Christian College followed by Certified Financial Analyst program offered by ICFAI. He further pursued a diploma in Masters in International Business from Symbiosis which was followed by a program on Advanced Management from Harvard University. Mr. Venkatesalu P. joined Tata group in 2001. He became the Chief Financial Officer (CFO) of Trent Limited in May 2008. Mr. Venkatesalu P. was appointed as the CEO of Trent in October 2021.

The Business Model of Trent

Each of the retail store brands have their own sets of sub-brands. The company operates retail stores under the following brands:

• Westside: Westside has labels such as STUDIOWEST, Luna Blu, Lit, Gia Curves, diza:, Vark etc. Westside has over 22 in-house labels across women’s wear, men’s wear, kids wear, footwear, cosmetics, perfumes etc. At the end of March 2024, there were 232 Westside stores in 91 cities.
• Zudio: The chain of stores offer affordable fast fashion for men, women and kids. If you are looking for t-shirts for ₹299 or shirts for ₹599, then this is the place to visit. There were 545 stores in 164 cities.
• Star: The grocery chain from Trent. Star sells fruits, vegetables, meat & fish, dairy products, home decor, home care, health & beauty products, and staples at very competitive prices. There are three inhouse labels under Star: FABSTA, KLIA and SKYE. There were 66 Star Market stores in 10 cities. Star is a 50:50 joint venture between Trent and TESCO. The online shopping brand is called Star Quik.
• Samoh: The stores offer traditional Indian designs and motifs to its customers. The products sold in the stores are classified as luxurious and premium. 2 stores in 2 cities were being operated by the company.
• Utsa: The company operated 22 stores in 12 cities.
• MiSBU: The stores offer trendy beauty and fashion accessories for the Gen Z. At the end of March 2024, the company operated 10 stores in 6 cities.

The company also operates Zara and Massimo Duti stores in India under a partnership with Inditex group of Spain. Inditex has 51% of shareholding and Trent holds the remaining 49% in this partnership. The company also operates Booker Wholesale, a cash and carry store, in partnership with TESCO.

Financials of Trent

Highlights of financials

• The company has seen tremendous growth in revenue and PAT in the last couple of years.
• In FY23-24 the revenue grew by 49% over revenue of FY22-23, the PAT also jumped by 336%. ‘
• The company had a Gross Profit Margin of 44% in FY23-24 which was in line with the previous two financial years.
• The stock of Trent Limited is trading at a TTM PE multiple of 130.82.
• The Price to Book Value ratio is 54.69
• The Debt to EBIT ratio has come down drastically in the last year from 121% to 24%
• The inventory number of days has also come down from 128 in FY22 to 83 in FY24
• Receivables as a percentage of net sales was 0.66% in FY23-24
• Operating Cash Flow was ₹1,348.98 core in FY23-24
• The ROE stood at 41.84
• The company had a debt of ₹499 core and reserves of ₹4.03K crore

Peers and Competition

The company faces competition from both unorganized and unorganized retailers. While in the garments and accessories segment, the company faces competition from the likes of the big retail chains, small brick-and-mortar and large and small online retailers, in the grocery segment the company faces stiff competition from neighbourhoud Kirana stores, large retailers such as: DMart and JioMart and large and small online retailers with dark stores in almost every part of the city.

A few competitors are:

• Reliance
• DMart
• V Mart
• Aditya Birla Fashion
• Arvind Fashions

A very exciting future ahead

The company is in the right space at the right time. The Indian middleclass is growing as the household income is rapidly increasing. Indians are spending a good chunk of their income on consumer discretionary items like clothes, perfumes, shoes, furniture etc. The company, like its peers has just touched the surface. As the network of stores grows, the revenue of the company is likely to increase at a higher rate. Trent has a track record of shutting down a line of business quickly if the segment does not become profitable within a pre-estimated period.

We have made detailed analysis of Jyothy Labs and Varun Beverages.

References

1. Trent Limited website
2. Annual Report of Trent for financial year FY23-24
3. The Westside story
4. Website of Tata Quik