Trent could grow to 10 times its current size, Noel Tata says

Mumbai: Trent Ltd could grow to "10 times" its current size, chairman Noel Tata said on Wednesday, on a day the company's stock hit a 52-week high, but refused to commit to a timeline for achieving this, in keeping with his restrained personality.

"Trent has the opportunity to be 10X its size, but don’t ask me by when," Tata told Mint in an interview.

Rising investor interest has led to the Tata Group's retail company's shares appreciating 250% in the past one year to Wednesday's closing price of ₹6,776.70 apiece on the BSE. Trent's market capitalization of more than ₹2.40 trillion makes it the fourth-most valuable Tata company, behind Tata Consultancy Services Ltd, Tata Motors and Titan Ltd.

Tata Steel, the oldest group company, is valued at about ₹1.9 trillion, and is in the fifth place.

"All our group companies are doing exceptionally well, and each one is constantly raising the bar," said Noel, who also sits on the board of Titan, Tata Steel, Voltas and Tata Investment Corporation.

Also read: The Noel Tata interview: Why Trent boss thinks selling apparel online is hard

Investor's interest

Investor enthusiasm mirrors Trent's financial performance: Revenue jumped 54.2% to ₹12,669 crore in the year ended March 2024, and profit swelled 82% to ₹1,029 crore.

At the heart of this impressive growth is Trent's success with its smaller-format apparel store, Zudio. Many organized retail giants, including Reliance Retail and Aditya Birla Fashion Retail, are still searching for their homegrown apparel brands, which is driving them to make expensive acquisitions and alliances with foreign brands and well-known designers.

Trent has stayed away from acquisitions and Tata denied the market chatter of acquiring Indian ethnic wear Fab India.

Zudio was launched in 2016 as a large-format store, but the model had bombed by 2020, before its revival began. Learning from the mistakes made during its initial phase helped Zudio get the size of the format and offerings right. It is now on an overdrive, with 559 stores across 169 cities at the end of June 2024.

Analysts admire the perseverance displayed by Noel Tata in building and scaling Trent.

"Noel Tata has done a version of the Asian Paints strategy in India. He's opening a new store, almost one a day. He's pulling it off because of the rapid inventory turns and the speed at which the clothes fly off the shelf. Credit to the team at Trent. They worked hard at it for ten years, with lots of trial and error and patience, and finally, they hit the right note," says Saurabh Mukherjea, founder and CIO of Marcellus Investment Managers.

"…the price point is incredibly low. So, while they say the average selling price is ₹500, when I visit the store, I find most items to be well below ₹500 apiece," Mukherjea, whose funds and his parents own Trent in their portfolio, added.

It has democratised department store shopping in a way that no other retailer has ever managed, he said.

Zudio's second coming

Noel, 67, who steers the business from his office at Vios Towers, an upscale office complex near Sion, located between Tata headquarters Bombay House and Bandra-Kurla Complex, explained Zudio's second coming.

He has bulge-bracket businessmen like Mukesh Ambani and Kumar Mangalam Birla competing in the same market, but Noel, the half-brother of Ratan Tata, remains unfazed.

"India makes up one-sixth of the world's population, and there is huge headroom for all current and future competitors to address this market," he says.

However, his company's strategy will remain focused, even as his peers make acquisitions, sign up designer labels, and form alliances with global brands.

"Launching a private label brand is very different from launching a multi-brand store format. With Westside, we chose to be completely branded; we had to develop the entire product portfolio and constantly evolve it to meet our customers’ acceptance and find (real estate) properties. Back in 1999, the required competencies for this did not exist, so we had to train and learn on the go. Retailers who today try to pivot to be predominantly private labels will realise how difficult it is," said Noel.

Also read: DMart vs Trent: Which is the best retail stock?

Grocery, the next growth engine

Star Bazaar, its grocery retail vertical, is breaking even, and Trent will accelerate this journey by adding more stores, confident that it has finally found the right model.

"Look at DMart's success. Grocery retailing is a very difficult and competitive business, but if the customer proposition and execution are right, DMart has shown that it can be substantially value-accretive to shareholders," he said.

In succession planning, Noel confirmed that his son Neville was recently promoted to managing director of its joint venture with British retail giant Tesco.

"I enjoy mentoring our next generation of leaders, including Neville," he said.