Tesco is seeking a nod to buy around 50 percent stake in the Trent hyper market joint venture, which would be around a USD 110 million. Abhishek Ranganathan of PhillipCapital India Research sees this JV as a positive for the organised retail sector. He, however, maintains the current earnings estimate on Trent and is waiting for the final approvals before tweaking the estimates.
Below is the edited transcript of Abhishek Ranganathan interview on CNBC-TV18
Q: Your first take on this likely investment and what would it mean for Trent in particular?
A: Yes this is definitely a positive development and this is good for the sector and the company per se. Obviously we have said that we have a quality company coming into the country, getting more involved in the business of retailing, and this should auger well with everyone.
Q: Your EPS going ahead in FY15 was almost doubling on a year-to-year basis so after this particular deal are you going to revise anything on that front?
A: No nothing. This deal is for the long-term where benefits would accrue over a period of time so I would not believe that it should affect any of our estimates for now.
Q: So you will maintain a price target of around Rs 1209?
A: Yes for now. We haven’t changed it yet.
Q: We have seen many disappointments in the past with regard to this particular deal, what are the challenges you are seeing for this particular deal?
A: Basically they have made an application and it is up to the Foreign Investment Promotion Board (FIPB) to approve this. So they are confident of complying with the current policy. So it is in the hands of the government. It is more of a government approval, thus, it is very difficult to comment on that.
Q: What is Trent in terms of your pecking order within the retail segment that you cover and how would you value the remaining part of the business for Trent?
A: We have a buy recommendation on the company. We vary all the businesses on a separate parameter, all put together, and that’s how we arrive on our target price. We are confident that his business will improve, and overall, with this particular transaction, we will have a better clarity on the prospects of the hypermarket business also.
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