Ace Investor Saurabh Mukherjea Adds Stake in Multibagger Tata Group Stock

Last week, Indian benchmark indices reached an all-time high, but this euphoria was short-lived.

Yesterday, the Sensex experienced a substantial setback, plunging by 796 points, equivalent to a 1% decline, and slipping below the 67,000 level.

Simultaneously, the Nifty50 saw a notable drop to 19,901, marking a 1.15% decrease or 232 points.

This downturn led to a significant reduction in the market capitalisation of all listed companies on the BSE, with a decline of Rs 2.4 trillion (tn), bringing it down to Rs 320.6 tn.

Today again, markets are down nearly 1%.

The primary factors contributing to this decline include surge in US bond yields, which reached a 16-year high, occurring just before the US Federal Reserve's meeting outcome.

Meanwhile, the India-Canada tensions heating up also had some impact on stocks.

Investing in this type of volatile market is no easy task. Consequently, many investors are turning to the portfolios of renowned investment experts with a proven track record of consistently outperforming the market.

For investors seeking such news, there's a big development which needs your attention.

Saurabh Mukherjea, an ace investor, has recently added this Tata Group stock in his portfolio.

A word about Saurabh Mukherjea

Endorsing the coffee can approach to investing, Saurabh Mukherjea is the founder and chief investment officer of Marcellus Investment Managers.

Mukherjee is known for his bold, often bearish, stance on the markets and the economy. Being a most erudite equity analyst, he is one of the most followed money managers on Dalal Street.

Living by his thumb rule of 'sustainable growth', Mukherjea is often heard talking about entry barriers, market share potential, and at times, people running the show.

To know more about Saurabh Mukherjea, watch Equitymaster's Investor Hour podcast, where he discussed his personal goals, successful calls, failures, and more.

In the hour-long podcast, he also shared the investment mistakes to avoid and the one question he would like to ask Warren Buffett.

Which Tata Stock Did Saurabh Mukherjea Add and Why?

The stock in question is Trent.

Saurabh Mukherjee added retail company Trent in his portfolio in August 2023.

It is one of the largest departmental store chains in India, with over 200 stores in 90 cities.

While we do not know the exact reason why the investing guru decided to buy the counter, there are some explanations.

Robust Financial Performance

Trent reported a strong set of numbers for the June 2023 quarter.

During this quarter, the total revenue amounted to Rs 26.3 bn, showing a 45.8% increase compared to Rs 18 bn in the same period of the previous financial year.

At the operational level, EBITDA saw a notable rise of 26.2% to Rs 3.6 bn in the first quarter of this fiscal year, surpassing the Rs 2.9 bn recorded in the corresponding period of the prior fiscal year.

The net profit for the quarter reached Rs 1.5 bn, marking a significant 45.1% increase. In the same quarter of the previous year, Trent had reported a net profit of Rs 1 bn.

The adjustments in the revenue distribution across different formats remain consistent with our expansion strategy.

As of 30 June 2023, Trent's portfolio included 221 Westside stores, 388 Zudio stores, and 23 outlets encompassing other lifestyle concepts.

In the quarter, the company introduced seven new Westside and 40 Zudio stores, extending its presence across 35 cities.

Apart from this, it has showcased progressive financial performance over the years.

Furthermore, the company has exhibited consistent financial growth over the years, boasting a remarkable compound annual growth rate (CAGR) of 47.6% in revenue over three years, while it turned profitable in past three years.

This impressive growth was due to the company's successful sales expansion efforts.

Financial Snapshot (2021-23)

Particulars	21-Mar	22-Mar	23-Mar
Revenue (Rs bn)	23.5	41	75.6
Revenue Growth (%)	-	74.5	84.4
Net profit (Rs bn)	-1.8	0.3	3.9
Net Profit Margin (%)	-7.7	0.8	5.2

Data Source: Equitymaster

Going forward, Trent is expected to deliver a consolidated revenue CAGR of 26% over FY23-25.

Aggressive Expansion Plan

Going forward, the company plans to expand its reach to be more proximate and convenient for customers.

The same strategic playbook continues to be applied to the Star business. This has fostered a growing belief in their ability to expand this growth catalyst in the food and grocery sector.

The company believes this sector is well-prepared to accelerate its momentum, ultimately delivering significant value to both customers and shareholders.

The company has plans to launch an online marketplace for its products and services. It's also planning to invest in its e-commerce platform.

The company also plans to invest to open 200 new Zudio stores, 30 new Westside stores, and 10 new Samoh stores in the current year.

What Next?

Trent sets to thrive as discretionary demand bounces back and new product categories and online sales grow.

The company is expected to benefit from the resurgence of discretionary spending, driven by factors such as easing inflation following the Russia-Ukraine war.

As consumer confidence returns, the demand for apparel and related products is anticipated to rebound, presenting a favourable opportunity for Trent.

Trent's brand, Zudio, positioned as a value-centric apparel brand with budget-friendly offerings, has consistently performed well in the value proposition apparel segment.

It is poised to maintain its leadership in this category, leveraging the advantages of scale and product differentiation.

With a promising outlook, a strong financial foundation, and a favourable position within the retail industry, Trent is well-prepared to capitalise on the recovery of discretionary consumption in the Indian market.

How Trent Shares Have Performed Recently

Trent shares have gained 55% in the past 6 months. So far in 2023, the stock is trading up by 52%.

The company touched its 52-week high of Rs 2,131.6 on 8 September 2023 and its 52-week low of Rs 1,155 on 27 January 2023.

At the current price, the stock is trading at a PE multiple of 122.1 and a price-to-book value multiple of 23.8.

About Trent

Trent is part of the Tata Group and is engaged in business of retailing. In the year 1998 Tatas acquired Littlewoods - a London-based retail chain. Later, Tata group established Trent and renamed the Littlewoods as Westside.

Trent operates 61 Westside department stores and a dozen hypermarkets under the Star Bazaar brand. It also runs Landmark book-stores and stores of Spanish brand Zara.

Westside is one of India's largest and fastest growing chains of retail stores.

For more details, see the Trent company fact sheet and quarterly results.

For a sector overview, read our retailing sector report.

You can also compare Trent with its peers.

Trent vs Aditya Birla Fashion & Retail

Trent vs Avenue Supermarts

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