Trent is a different story. We are invested in Dmart and Nykaa for their leadership position in the disruptive way they are positioned, which gives a strong sense that their growth will be sustained.
Trent is a different story. If an investor cannot identify a special thing, then he could asume that the business will face challenges on a regular basis, executional or financial challenges. This will hamper growth. A good management will work around it, but will be hampered nonetheless.
For ex.Trent is heavy on Assets. It’s Sales to Gross Block is around 1. Means, Trent’s growth is directly a function of the money they pour into the buildings and inventory.
And that is alright, I am not saying that it is not a good investment. Trent might be more profitable than Dmart for a retail investor. But, the real fun is in assessing the risk reward ratio.
The RR in these disruptors is good, once they get their footing. I mean no debt, no cash burning and leadership position. Nykaa and Dmart have these features. Therefore, I feel they won’t find any roadblocks for many years. And I want to see that in every quarterly report.
Nykaa is a little more special, because it is NOT ONLY disrupting and aggregating the established flow of revenues in BPC. But, also has tailwinds, in that, the demand, the TAM for BPC is increasing due to urbanization general increase in Per Capita income.
Some other investments I have made offer a good RR, but they are just a play on PE or demand reviving, like Muthoot.
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