Rationale

 The rating factors in Trent's strong parentage, extensive experience of its management team as well as financial flexibility for being a Tata Group entity. ICRA expects its parent, Tata Sons Private Limited (TSPL; rated {ICRA]AAA(Stable)/[ICRA]A1+), to provide need-based fund infusion to Trent. The rating derives strength from Trent's established track record in the domestic retail industry, its widespread geographical presence through more than 500 stores as well as its diversified product offerings across various segments viz. apparel, footwear, accessories, groceries, among others. ICRA notes the established presence of Trent's flagship format, Westside (accounting for over 60% of revenues at the consolidated level in FY2022), which reported healthy recovery and touched pre-Covid level salesin FY2022. The same was led by improved consumer sentiments, Westside's continued high share (~100%) of private label brands in total sales mix and its improved same-store sales growth (SSSG) in H2 FY2022. The rating also derives strength from the strong financial profile of the company, characterised by its net cash surplus position as well as strong liquidity position, with cash and liquid investments of Rs. 608.5 crore as on March 31, 2022. The rating is, however, constrained by the loss-making operations of some of the owned non-apparel formats (Landmark, Booker India) as well as those operated through joint ventures (JVs), including Star Stores, necessitating regular investments to support growth as well as for loss funding. The rating also factors in the intense competition in the Indian retail industry due to the presence of numerous unorganised as well as organised players in the brick-and-mortar as well as online segments. The retail sector's recovery post the second wave of the pandemic was strong, aided by relaxation in Covid-19 related restrictions, improved customer sentiments led by the festive season and growing vaccination coverage. Revenues recovered on a month-on-month basis, though the same was impacted by the third wave of the pandemic in Q3 FY2022. Trent witnessed a strong uptick in revenues of Zudio, led by improved SSSG and rapid store expansion during FY2018-FY2022. Besides healthy recovery in Westside's sales, this led to consolidated revenues of Rs.4,498 crore in FY2022, reflecting a YoY growth of 73% and 29% (over FY2020). The operating margins also improved on a YoY basis to 14.2%, though the same remained lower than FY2020 levels due to intermittent impact of Covid waves and normalisation of overhead expenses. Going forward, Trent's continued focus on store additions and improving the SSSG of its formats are expected to adequately support its revenues. The possibility of any subsequent wave of the pandemic, however, remain a downside risk and a key rating monitorable. The Stable outlook reflects ICRA's opinion that Trent will maintain its strong liquidity profile and would continue to benefit from its established presence in the apparel segment as well as operational and financial support from TSPL.