CARE: Trent Ltd.''s proposed PCD issue assigned CARE AA rating
By Our Banking Bureau | 08 Apr 2005
According to the agency, the rating takes into account Trent's strong brand name, management and healthy improvement in income from retail operations. The rating also derives strength from the industry prospects and Trent's strategic foray into the hypermarket format of retailing. The rating agency also says that the company's zero debt balance sheet and large cash surplus puts it in a favourable situation as compared to other players. However, the rating is constrained by the low returns on capital employed.
Trent
was formed in 1952 as Lakme Limited, a 100 per cent subsidiary
of Tata Oil Mills Co. Ltd. The company was listed in 1982.
Subsequently the company acquired 100 per cent equity
shares of Littlewoods International (I) Pvt. Ltd, UK.
With effect from January 1, 1998, the company was named
as Trent Ltd.
Trent brands its products with the same name and focuses
on building in-store brands, that is, its own labels.
The stores bear the "Westside" name. Retail
operations, which commenced with one store at Bangalore
in April 1998, have now expanded to sixteen stores in
major cities. Trent is engaged in the retailing of apparels,
household items and has recently made a foray into the
Hypermarket retailing format. The thrust area in the future
would be on the Westside stores as well as hypermarkets,
which the company has branded "Star India Bazaar".
The first store in this format was opened in late October
2004 in Ahmedabad. The pricing is MRP based with deep
discounts (2-9 per cent below MRP), coupled with regular
promotions. The company has also launched private labels
to have an edge on the margins.
According to the agency, thus far the company has registered
a good growth in sales, fuelled by the emergence of organized
retailing in India, and the launching of new stores in
major cities. PBDILT has witnessed a complete turnaround
over the time period. There are virtually no borrowings
and the interest costs are almost negligible.
The company's PAT has also been greatly aided by other
income, which includes income from current investments
(interest on short term loans and advances, dividend on
current investments), rent received, interest on long-term
loans and advances and dividend on long term investments.
The agency says that this income has been erratic
over the years, and will continue to be affected by market
forces. The liquidity position of the company however
is favourable as indicated by the current ratio. The cash
reserves have also been steadily building up over the
years.
