Trent shares gain 3% on reports of GST threshold hike for garments

Trent was the top gainer in the Nifty index, rising 3 per cent, amid reports of changes in the threshold for readymade garments

Shares of Trent were the top gainer in the benchmark Nifty and Sensex indices, surging over 3 per cent on Friday amid reports of changes in the threshold for readymade garments attracting 5 per cent Goods and Services Tax (GST). 

 

The fashion retailer's stock rose as much as 3.35 per cent during the day to ₹5,411 per share, the biggest intraday rise since August 18 this year. The stock pared gains to trade 2 per cent higher at ₹5,343.5 apiece, compared to a 0.05 per cent advance in Nifty 50 as of 10:31 AM. 

 

Shares of the company snapped a two-day losing streak and currently trade at 2.9 times the average 30-day trading volume, according to Bloomberg. The counter has fallen 25 per cent this year, compared to a 3.7 per cent advance in the benchmark Nifty 50. Trent has a total market capitalisation of ₹1.89 trillion. 

 

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Why are Trent shares rallying?

The gain in share price came after reports showed that the Group of Ministers (GoM) had finalised the revamp of GST slabs. The GoM's proposal is likely to hike the price threshold for readymade garments, attracting 5 per cent GST to ₹2,500 from ₹1,000. 

 

Currently, readymade garments of sale value not exceeding ₹1,000 per piece attract 5 per cent GST, while the same garments of sale value exceeding ₹1,000 per piece attract 12 per cent GST. If the threshold price for the 5 per cent is increased to ₹2,500, the prices of the products could reduce, driving up sales.  

Trent Q1 results 

In the June quarter, Trent’s net profit rose 8.5 per cent year-on-year (Y-o-Y) to ₹424.7 crore from ₹391.2 crore. Revenue grew 19 per cent Y-o-Y to ₹4,883 crore, while Ebitda surged 38 per cent Y-o-Y to ₹848 crore. Margins improved to 17.3 per cent, up from 15 per cent a year ago. 

 

The company attributed this margin improvement to gains from technology and automation, improved cost efficiency, and stable gross margin profiles across key brands, including Westside and Zudio. Operating Ebit margin for the quarter came in at 11.4 per cent, compared to 10.6 per cent last year. 

 

As of June 30, Trent operates over 1,000 large-format fashion stores across 242 cities, including 248 Westside, 766 Zudio (including two in the UAE), and 29 other lifestyle concept stores. The company noted a healthy revenue trajectory despite early monsoon and geopolitical disruptions. Like-for-like growth for the fashion portfolio, however, was in low single digits.