Trent Share Price Faces Sharpest Drop Amid Block Deal and Earnings Miss

Trent Ltd Stock Takes a Hit Following Q2 Earnings Miss

Trent Ltd, a prominent Tata Group company, witnessed a significant drop in its share price on November 7, 2024, as the stock fell over 6%. This marks the company’s sharpest single-day decline since the pandemic, reflecting market reactions to quarterly earnings that fell short of heightened expectations.

Earnings Highlights: Revenue Growth Outshines Profit Expectations

For the quarter ending in September, Trent’s revenue grew impressively by 39%, reaching Rs 4,157 crore compared to ₹2,982 crore in the same period last year. Despite this strong growth, the revenue figure narrowly missed analyst expectations of Rs 4,295 crore, casting a slight shadow over what was otherwise a robust revenue performance.

However, the company’s net profit was considerably lower than the expected Rs 428 crore, registering at Rs 335 crore. Although Trent’s profit grew by 47% year-over-year, the market had anticipated higher earnings.

Profitability Impacted by Decrease in Other Income and Increased Expenses

A reduction in other income significantly impacted Trent’s bottom line, with other income slipping to Rs 48 crore from Rs 80 crore in the previous year. Added to this, higher depreciation and increased taxes further ate into profitability. Depreciation expenses rose to Rs 197 crore from Rs 152 crore, while the profit contribution from joint ventures dropped sharply to Rs 5.7 crore, down from Rs 25 crore last year. Additionally, tax expenses increased from Rs 86 crore to Rs 132 crore, further affecting net profit.

EBITDA Margins in Line with Expectations

Despite challenges, Trent’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at Rs 643 crore, close to the estimated Rs 675 crore. Margins also stayed in line with predictions, clocking in at 15.5% against last year’s 15.3%, suggesting stable operational performance amidst external pressures.

The management highlighted seasonal factors and subdued consumer sentiment as key headwinds in their recent investor presentation, indicating potential impacts on Trent’s retail performance in upcoming quarters.

Block Deal Insights: 13.7 Lakh Shares Exchanged

The trading session also saw a substantial block deal involving 13.7 lakh shares, representing 0.4% of Trent’s equity. The transaction was valued at Rs 881.7 crore, with shares exchanged at ₹6,445 each. The notable buyer in this deal was Siddhartha Yog, a global investor and founding partner of Xander Group Inc., acquiring shares from Dodona Holdings Limited. Yog, through Xander and Virtuous Retail, maintains a significant presence in emerging markets, adding further prominence to this high-stakes transaction.

Key Takeaways

The recent developments reflect both internal and external pressures impacting Trent Ltd., with quarterly earnings missing elevated market expectations. The company’s robust revenue growth was overshadowed by lower-than-expected profits, leading to a sharp share price decline. The sizable block deal underscores the ongoing interest of global investors like Siddhartha Yog, potentially stabilizing market sentiment toward Trent in the near future.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.