CMP (Rs) 1075.00

Target Price (Rs) 1166.00

ISIN: INE849A01012

JUNE 1st

, 2013

TRENT LIMITED Result Update: Q4 FY13

BUBUBUBUYYYY

Stock Data

Sector Retail

BSE Code 500251

Face Value 10.00

52wk. High / Low (Rs.) 1345.00/861.25

Volume (2wk. Avg ) 17330

Market Cap ( Rs in mn ) 35724.40

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY13A FY14E FY15E

Net Sales 9358.04 10696.24 11872.83

EBITDA 1075.48 1200.46 1334.24

Net Profit 622.59 740.54 831.40

EPS 18.73 22.28 25.02

P/E 57.38 48.24 42.97

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX TRENT LTD

SYNOPSIS

Trent Ltd is operates WESTSIDE, one of India’s

largest & fastest growing chains of retail

stores.

The company’s net sales registered a 15.41%

increase and stood at a record Rs. 2295.92

million from Rs. 1989.33 million over the

corresponding quarter last year.

During the quarter, 4 Westside stores were

opened taking the total number of Westside

stores to 68 and the total number of stores

under various formats to 72.

The Company has approved to purchase from

TVS Shriram Growth Fund I, its entire

shareholding of 18,25,074 Equity Shares of Rs.

10/- each of Landmark Ltd., for a

consideration of Rs. 84 crores.

Trent Ltd has recommended payment of

dividend @ 70% i.e. Rs. 7/- per Equity Share of

Rs. 10/- each on 3,32,31,544 Equity Shares.

A subsidiary company Zara plans to open

more stores in India over the next three to

four years in the major metro cities.

Net Sales and PAT of the company are

expected to grow at a CAGR of 13% and 21%

over 2012 to 2015E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Trent Ltd 1075.00 35724.40 18.73 57.38 2.33 65.00

Pantaloon Retail Ltd 136.05 31506.80 10.89 12.49 0.95 45.00

Shoppers Stop 376.45 31240.90 4.72 79.76 4.48 15.00

Store One Retail India Ltd 36.15 838.70 16.23 2.23 0.94 0.00

Investment Highlights STANDALONE

Results updates- Q4 FY13,

Trent Ltd is operates WESTSIDE is one of India’s

largest & fastest growing chains of retail stores,

reported its financial results for the quarter ended

31st MARCH, 2013.

Months MARCH-13 MARCH-12 % Change

Net Sales 2295.92 1989.33 15.41%

PAT 195.08 195.29 -0.11%

EPS 5.87 7.17 -18.09%

EBITDA 312.28 150.40 107.63%

Trent Ltd achieved a turnover of Rs. 2295.92 million for the 4th quarter of the current year 2012-13 as against Rs.

1989.33 millions in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs.

312.28 millions and a net profit of Rs. 195.08 million against Rs. 195.29 million reported respectively in the

corresponding quarter of the previous year. The company has reported an EPS of Rs. 5.87 for the 4th quarter as

against an EPS of Rs. 7.17 in the corresponding quarter of the previous year.

Expenditure :

Break up of Expenditure

Rs. Millions

Q4 FY13 Q4 FY12

Cost of Material Consumed 3.49 7.35

Purchase of Stock in Trade 1219.13 1004.25

Employee Benefit Expenses 181.26 179.97

Depreciation & Amortisation Expenses

43.73 42.19

Advertisement & Sales Promotion

40.19 78.89

Other Expenditure 742.66 698.04

Latest Updates

• Trent Ltd has recommended payment of dividend @ 70% i.e. Rs. 7/- per Equity Share of Rs. 10/- each on

3,32,31,544 Equity Shares.

• Trent Ltd has approved the Scheme of Amalgamation and Arrangement (The Scheme’) between Landmark

Limited (‘Landmark’), Fiora Link Road Properties Limited (‘Fiora’) and Trexa ADMC Private Limited (‘Trexa’)

with the Company under the applicable provisions of the Companies Act, 1956.

• The Company has approved to purchase from TVS Shriram Growth Fund I, its entire shareholding of

18,25,074 Equity Shares of Rs. 10/- each of Landmark Ltd., a subsidiary of the Company for a consideration of

Rs. 84 crores. Further, it has been agreed between the parties that the Fund would retain an option to invest

in a minority stake in Westland Limited (also a subsidiary of the Company) at a future date.

• During the quarter, 4 Westside stores were opened taking the total number of Westside stores to 68 and the

total number of stores under various formats to 72.

• During the quarter, Trent Ltd has issued 8,00,530 Equity Shares of Rs. 10/- each for Rs. 980 per share

aggregating to Rs. 78.45 crores to the promoter on preferential basis as approved by the shareholders.

• Franchise

Trent Hypermarket Ltd has franchise & wholesale supply arrangement with Tesco Plc and wholly owned

subsidiary Tesco Hindustan Wholesaling Pvt Ltd in India.

• Joint Venture

The Company has a Joint Venture with Inditex group of Spain with a shareholding of 51 %( Inditex) 49%

(Trent) & entity currently operates eight Zara stores in Delhi, Mumbai and Bangalore, Pune.

• Stores of Zara

A subsidiary company Zara plans to open more stores in India over the next three to four years in the major

metro cities.

Company Profile

Trent Ltd was established in the year 1998 as part of the Tata Group & operates WESTSIDE, one of India’s largest

& fastest growing chains of retail stores. The story began circa 1998 when the Tata’s acquired Littlewoods a

London based retail chain. This acquisition was followed by the establishment of Trent Ltd.

Trent ventured into the hypermarket business in 2004 with Star Bazaar, providing an ample assortment of

products made available at the lowest prices, aptly exemplifying its ‘Helping you spend less’ motto. At present

Star Bazaar has 7 stores in 5 cities located in Ahmadabad, Chennai, Mumbai, Pune and Bengaluru.

Westside stores

The Westside stores have numerous departments to meet the varied shopping needs of customers. These include

Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics, Perfumes and Handbags, Household Accessories,

lingerie, and Gifts. The company has already established 49 Westside departmental stores (measuring 15,000 -

30,000 square feet each) in Ahmadabad, Bangalore, Chandigarh, Chennai, Delhi, Gurgaon, Ghaziabad & Noida (to

be considered as 1 city), Hubli, Hyderabad, Indore, Jabalpur, Jaipur, Kanpur, Kolkata, Ludhiana, Luck now,

Mangalore, Mumbai, Mysore, Nagpur, Nasik, Pune, Raipur, Rajkot, Surat, Vadodara and Jammu. The company

hopes to expand rapidly with similar format stores that offer a fine balance between style and price retailing.

Offers

This store offers customers an eclectic array of products that include staple foods, beverages, health and beauty

products, vegetables, fruits, dairy products, consumer electronics and household items at the most affordable

prices. Star Bazaar also includes a large range of fashionable in-house garments for men, women and children,

exclusively available at the store.

M&A

The company operates in four formats namely Westside, Star Bazaar, a hypermarket chain, Landmark, books and

music chain, and Fashion Yatra, a complete family fashion store. It also acts as a franchisee to the Benetton group.

In a move to improve backend activities like sourcing, the company's hypermarket business entered into a

franchise agreement with UK's Tesco to develop wholesale cash-and-carry business in India. The company has

also entered into a JV with the Inditex group of Spain to open Zara brand stores.

In addition, Trent acquired a 76% stake in Landmark, one of the largest books & music retail chains in the

country. Landmark began operations in 1987 with its first store in Chennai with a floor space of 5500 sq. ft.

At present Landmark have 14 big stores , 7 hotel bookstores and 6 Airport stores, varying in size from 12,000 sq.

ft. to 45,000 sq. ft in Chennai, Bengaluru, Gurgaon, Mumbai, Vadodara, Gurgaon, Pune, Lucknow, Ahmedabad and

Hyderabad. Until 1996, Landmark’s product portfolio comprised books, stationery, and greeting cards. It was

later that music was added to it. Landmark also sparked the trend of stocking curios, toys and other gift items.

What separates Landmark from other stores of its kind is the range and depth of its stock.

In a rapidly evolving retail scenario, Westside has carved a niche for its brand of merchandise creating a loyal

following. Currently, the company has 49 Westside stores measuring 15,000-30,000 square feet each across 28

cities.

OPERATIONS – WESTSIDE

The Westside stores, the predominantly private label fashion apparel format, continue to be the mainstay of the

retailing business of the Company. In the year under review, thirteen stores were opened including the following

- Bhopal (DB City Mall),Pune (Phoenix Market City), Mumbai (Infinity Mall), Varanasi (Dhanushree Complex),

New Delhi (Moments Mall), Mumbai (R-City Mall), Bilaspur (City Mall), Udaipur (Rkay Mall) and Bangalore

(Orion Mall).

OPERATIONS – STAR BAZAAR

Star Bazaar, the discount hypermarket format, has continued to receive augmented commitment of resources in

the period under review & there are now fifteen operational stores [ three in Mumbai (Andheri, Dahisar &

Thane), four in Bangalore, two in Ahmadabad and Pune, one each in Aurangabad, Surat, Chennai and Kolhapur].

Each Star Bazaar is modeled to be a one stop shop offering a wide range of products including fresh foods – fruits,

vegetables & non vegetarian products, dairy, home care, health and beauty products, apparel, home décor, gifts

and household items. During the year the sales growth of Star Bazaar stores was 5.4%. This was down from

strong double digit growth rates witnessed in the preceding three years.

Trent Hypermarket Limited has a franchise and a wholesale supply arrangement with Tesco Plc and its wholly

owned subsidiary Tesco Hindustan Wholesaling Pvt Ltd in India respectively. The exclusive franchise agreement

is allowing the Star Bazaar business access to Tesco’s extensive retail expertise and technical capability including

world class IT systems, processes and best practices in functions like marketing, stock management, retail

information systems, supply-chain infrastructure & front-end services.

OPERATIONS – LANDMARK

Landmark stores - the format retailing inter-alia books, music, toys and gaming – are managed by a subsidiary of

the company, Landmark Ltd. As of date, there are 19 operational stores across the country

Financial Highlight STANDALONE

Balance Sheet as on 31st March 2012

FY-12A FY-13A FY-14E FY-15E

Rs. In Millions

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 387.00 402.31 332.32 332.32

Share application money pending allotment 0.00 0.00 0.00 0.00

Reserves and Surplus 13154.80 14987.92 15728.46 16559.86

Total Net worth 13541.80 15390.23 16060.78 16892.18

Non Current Liabilities

Long term borrowing 2250.00 2250.00 2373.35 2529.99

Other Long term liabilities 15.50 0.00 0.00 0.00

Long term Provisions 1086.70 1081.24 1200.18 1296.19

Total Non Current liabilities 3352.20 3331.24 3573.53 3826.18

Current Liabilities

Short term borrowings 150.00 0.00 0.00 0.00

Trade payables 1060.10 1191.66 1370.41 1581.45

Other Current liabilities 471.10 547.95 646.58 756.50

Short term Provisions 290.80 310.22 342.48 373.31

Total Liabilities 18866.00 20771.30 21993.78 23429.62

APPLICATION OF FUNDS

Non-Current Assets

Fixed Assets

Tangible assets 3047.10 3087.20 3148.94 3243.41

Total Fixed Assets 3047.10 3087.20 3148.94 3243.41

Deferred Tax Asset 124.70 58.30 58.30 58.30

Non- Current Investments 6484.30 9889.67 11669.81 13303.58

Long Term loans and advances 2704.90 2024.96 1619.97 1328.37

9313.90 11972.93 13348.08 14690.26

Current Investment 567.20 514.71 478.68 437.99

Inventories 1792.30 1852.30 1898.61 1936.58

Trade receivables 34.20 29.42 30.60 31.59

Cash and Bank Balances 2696.10 1433.34 888.67 595.41

Short-terms loans & advances 1348.60 1835.23 2165.57 2468.75

Other current assets 66.60 46.17 34.63 25.62

Total Current Assets 6505.00 5711.17 5496.75 5495.95

Total Assets 18866.00 20771.30 21993.78 23429.62

Annual Profit & Loss Statement for the period of 2012 to 2015E

Value(Rs.in.mn) FY12 FY13 FY14E FY15E

Description 12m 12m 12m 12m

Net Sales 8217.93 9358.04 10696.24 11872.83

Other Income 902.52 603.88 676.35 740.60

Total Income 9120.45 9961.92 11372.59 12613.42

Expenditure -8438.05 -8886.44 -10172.12 -11279.18

Operating Profit 682.40 1075.48 1200.46 1334.24

Interest -77.08 -78.77 -81.13 -84.38

Gross profit 605.32 996.71 1119.33 1249.86

Depreciation -159.48 -166.24 -173.55 -183.97

Exceptional Items 0.00 -22.77 0.00 0.00

Profit Before Tax 445.84 807.70 945.77 1065.89

Tax 26.84 -185.11 -205.23 -234.50

Net Profit 472.68 622.59 740.54 831.40

Equity capital 272.50 332.32 332.32 332.32

Reserves 13154.80 14987.92 15728.46 16559.86

Face value 10.00 10.00 10.00 10.00

EPS 17.35 18.73 22.28 25.02

Quarterly Profit & Loss Statement for the period of 30th SEP, 2012 to 30th JUNE, 2013E

Value(Rs.in.mn) 30-Sep-12 31-Dec-12 31-Mar-13 30-June-13E

Description 3m 3m 3m 3m

Net sales 2302.68 2576.68 2295.92 2525.51

Other income 135.32 115.08 219.87 224.27

Total Income 2438.00 2691.76 2515.79 2749.78

Expenditure -2260.06 -2342.86 -2203.51 -2416.91

Operating profit 177.94 348.90 312.28 332.86

Interest -21.14 -18.49 -17.99 -18.53

Gross profit 156.80 330.41 294.29 314.33

Depreciation -40.84 -41.59 -43.73 -45.48

Exceptional Items 0.00 0.00 -22.77 0.00

Profit Before Tax 115.96 288.82 227.79 268.86

Tax -26.00 -78.90 -32.71 -61.84

Net Profit 89.96 209.92 195.08 207.02

Equity capital 324.31 332.32 332.32 332.32

Face value 10.00 10.00 10.00 10.00

EPS 2.77 6.32 5.87 6.23

Ratio Analysis

Particulars FY12 FY13 FY14E FY15E

EPS (Rs.) 17.35 18.73 22.28 25.02

EBITDA Margin (%) 8.30% 11.49% 11.22% 11.24%

PBT Margin (%) 5.43% 8.63% 8.84% 8.98%

PAT Margin (%) 5.75% 6.65% 6.92% 7.00%

P/E Ratio (x) 61.97 57.38 48.24 42.97

ROE (%) 3.52% 4.06% 4.61% 4.92%

ROCE (%) 5.32% 7.07% 7.46% 7.84%

EV/EBITDA (x) 42.49 33.98 30.99 28.19

Book Value (Rs.) 492.74 461.01 483.29 508.31

P/BV 2.18 2.33 2.22 2.11

Charts

Outlook and Conclusion

� At the current market price of Rs.1075.00, the stock P/E ratio is at 48.24 x FY14E and 42.97 x FY15E

respectively.

� Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs.22.28 and

Rs.25.02 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 13% and 21% over 2012 to 2015E

respectively.

� On the basis of EV/EBITDA, the stock trades at 30.99 x for FY14E and 28.19 x for FY15E.

� Price to Book Value of the stock is expected to be at 2.22 x and 2.11 x respectively for FY14E and FY15E.

� We expect that the company surplus scenario is likely to continue for the next years, will keep its growth

story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.1166.00 for Medium to Long term investment.

Industry Overview

The Indian retail segment accounts for 22 per cent of the country's gross domestic product (GDP) and

contributes about 8 per cent to the total employment. India continues to be among the most attractive

investment propositions for global retailers.

India has emerged as the fifth most favorable destination for international retailers, outpacing the UAE, Russia,

Indonesia and Saudi Arabia, according to A T Kearney's Global Retail Development Index (GRDI) 2012. "India

remains a high potential market with accelerated retail growth of 15-20 per cent expected over the next five

years," highlighted the report.

Market Size

India's retail sector is worth US$ 350 billion and is growing at a compound annual growth rate (CAGR) of 15 per

cent to 20 per cent at present, as per a PricewaterhouseCoopers (PwC) research report titled, 'Winning in India's

retail sector: Factors for Success'.

Mass grocery and apparel are the two most favored segments for foreign direct investment (FDI) in multi-brand

retail in India, according to a study titled 'Indian Retail Market-Opening More Doors' by Deloitte Touche

Tohmatsu India.

The FDI inflows in single-brand retail trading during April 2000 to December 2012 stood at US$ 42.70 million, as

per the data released by Department of Industrial Policy and Promotion (DIPP).

E-tailing

The Indian retailers are using a mix of formats, of which a relatively new but rapidly growing retail format is the

online channel, which offers consumers convenience, price benefits and the ability to shop around the clock.

Though in a nascent stage, India's online retail market is growing at double-digit rates and is likely to be the next

format that retailers will incorporate into their array of channels.

The Indian digital consumer industry, e-tailing is set to become a Rs 53,000 crore (US$ 9.71 billion) market by

2015 from the current Rs 3,600 crore (US$ 659.34 million), as per a November report by Avendus Capital Pvt

Ltd.

Edukart.com, an online education company is planning to extend its franchise network across India. The

company aims to open more than 50 centers in the coming year. The focus of such expansion will be metro cities,

tier I and tier II cities.

Retail in Rural India

Rural chains in India are focusing on hinterlands in a big way. For many companies, a large portion of their

revenues comes from rural sales. The companies thus are aligning their marketing strategies in accordance to the

requirements of their customers in rural areas.

Turtle, one of India's leading men's lifestyle brands unveiled their limited edition collection of Khadi menswear

with the theme "Ecological Weave". This is an initiative which not only hopes to revive the khadi industry and the

livelihood of its weavers and their families in rural India, but is also poised to revolutionalise menswear fashion.

Investments

• Interem, relocation and warehousing company, plans to invest Rs 200 crore (US$ 36.63 million) over the

next three years, as part of its plan to increase its business in the consumer retail segment in India

• Tesco Plc has set up an Indian subsidiary to buy fresh and processed foods from the country for its global

stores, a move that could help the world's third largest retailer to develop local expertise before opening

shops in India

• Italian luxury clothing and accessories brand Versace 19.69 has announced its entry in India in

partnership with fashion apparels and leather exporter, Majgenta Fashions. Versace plans to open about

70 stores in the country with an investment of US$ 25 million over the next three years. "India is a very

important luxury market for us that is growing at a rapid pace... We are here to bridge the luxury and

affordability gap," said Mr Theofanis Papadas, CEO, Versace 19.69

• L'Oreal SA plans to invest Rs 970 crore (US$ 177.65 million) in India, a market that the French cosmetics

giant considers amongst the top five in the world

• Swedish fast-fashion giant Hennes & Mauritz (H&M) has asked leading mall developers to block space for

its initial stores in India, as the world's second largest fashion retailer hopes to open a local office in the

next three months

• British billionaire Philip Green owned Topshop is finalising plans to enter the Indian retail space through

a local joint venture, as global biggies revive interest in India on the back of recovering consumer

sentiments and the recent reform push

• Promart Retail, a value format concept in lifestyle, is looking for pan-India expansion that will cover

cities. For extending its retail presences the brand has planned to open 100 stores by the end of 2013

• The World of Titan, India's largest watch retail chain, plans to expand its presence via franchising in high

traffic areas, including high streets and malls with small format stores

Government Initiative

• The Government of India has approved nine foreign direct investment (FDI) proposals amounting to Rs

1,140.14 crore (US$ 208.82 million), based on the recommendations of Foreign Investment Promotion

Board (FIPB)

• Foreign retailers can enter India by forming a joint venture (JV) company that could have multi-brand

retail stores. "Alternatively, the foreign investor may also consider acquiring 51 per cent stake in the

existing business set-up of the potential Indian joint venture partner," added Mr Gaurav Gupta, Senior

Director, Deloitte Touche Tohmatsu India

• The Government has passed a cabinet note and permitted FDI up to 51 per cent in multi-brand retailing

with prior Government approval and 100 per cent in single brand retailing, further liberalising the sector.

This policy initiative is expected to provide further fillip to the growth of the sector

• Opening up of FDI in retail and insurance sector will generate lakhs of additional jobs in India, as per

global human resource consultancy, Mercer

• In a major step aimed to boost the Indian civil aviation sector, the Cabinet Committee of Economic Affairs

(CCEA) has relaxed the FDI norms in aviation, which will allow foreign aviation companies to invest in

Indian aviation companies. The foreign carriers can now pick up to 49 per cent stake in domestic Indian

aviation firms

Road Ahead

The Indian retail sector is evolving rapidly and those who enter the market now can learn about local dynamics,

develop market insights and establish leadership positions. Domestic and global retailers who have entered the

Indian market are learning about consumer wants, preferences and needs.

Powered by strong internal demand, the country has displayed robust growth which is likely to be sustained in

the coming years. Research and development (R&D), innovation and new product development are emerging as

key drivers of success. As part of this effort, product localisation has emerged as a driver of sales, customer

excitement, customer interest, etc.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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