HSBC Maintains Bullish Stance on Trent Stock Despite 33% Post-Bonus Share Price Correction

Trent Ltd Shares Plunge 33% Following Bonus Issue

Shares of Trent Ltd, a Tata Group retailer, appeared to plunge more than 33 percent on Thursday after the company's stock turned ex-bonus for its recently announced bonus issue. Trent shares were indicated at Rs 2,830 in pre-market trade, down 33.5 percent from Wednesday's closing price of Rs 4,257.6. The sharp decline does not reflect a destruction of shareholder value but is largely due to the stock price adjustment following the bonus issue.

The ex-date for Trent's bonus share issue has been fixed as June 4, with the issue being implemented in the ratio of 1:2. Under the issue, shareholders will receive one bonus equity share for every two shares held as of the record date. This corporate action is a common practice in the stock market, where the number of shares outstanding increases while the company's overall market value remains broadly unchanged.

As a result of the bonus issue, Trent's stock price has adjusted lower on the ex-bonus date to reflect the increased share count. However, adjusted for the bonus issue, Trent's stock has delivered strong gains over the longer term. The stock had risen 15.5 percent over the past year through Wednesday's close, outperforming the Nifty 50's decline of 4.9 percent during the same period.

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Trent's market capitalisation stands at more than Rs 1.5 lakh crore. Brokerage firm HSBC remains bullish on Trent stock with a Buy rating and a target price of Rs 4,910 per share, implying a 15 percent upside. HSBC attributes this optimism to Trent's core business remaining stable, with growth at Westside, one of the company's retail formats, being driven by the expansion of larger-format stores. Enhanced disclosures for Zudio, another retail format, also provide better visibility into growth trends.

Trent operates retail formats including Westside, Zudio, and Star. The latest bonus issue is Trent's fourth such corporate action since listing, following a 1:1 issue in 1996 and two earlier 1:2 bonus issues in 1994 and 1989. The current issue comes nearly three decades after Trent's previous bonus share allotment.

Note: The growth trend comparison between Trent Ltd and Nifty 50 is represented in the table above.

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