Trent Limited, the retailing arm of the Tata Group has shown an encouraging performance in the first nine months of FY01. The company's turnover has improved 26% YoY. As a result its operating margins have nearly doubled to 14%.
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What is good to see in Trent is its consistently improving topline. In the December quarter too, the company has shown a remarkable 36% jump in its topline. It bottomline has also shown signs of improvement, in sync with the topline growth. The only area where Trent is showing a decline is its net margins, but this is because the other income is on a decline.
Trent is headed by Ms Simone Tata, who was earlier the head-honcho of cosmetics major Lakme Limited. After the Tatas' divested from Lakme in favour of Hindustan Lever Limited (HLL), the Group decided to invest in retailing and thus Trent was born . Trent now operates the 'Westside' chain of stores.
Intially, the company saw a huge proportion of income coming in as other income. The company received a lot of cash (Rs 6 bn) from HLL in lieu of Lakme. So Trent's huge other income was a result of interest the company received from the investments it made. But now the company's operations are picking up and the share of other income is going down.
The company plans to increase the number of such stores to over 15 in the next one year. This again, is likely to see a surge in its topline and a further decline in its other income.
With the retailing market still at a nascent stage, Trent has a good potential. The company's stock trades at reasonable P/e multiple of 7.6 times its annualised nine month FY01 earnings.
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