Amber Enterprises, Trent among important winners of GST-driven question upswing

The Indian retail sector is ready for a revival led by consumption, because the recent decision of the GST Council to rationalize tax plates to reduce prices in a wide spectrum of goods. As of September 22, the new structure simplifies the system in two primary plates – 5% and 18% – while retaining a rate of 40% for sin and luxury items.

The most important impact is expected in categories such as clothing, footwear, consumer electronics and daily supplies. Clothing priced between £ 1,000 and £ 2,500 now draws only 5%tax instead of 12%, which increases affordability in the Middle Premium segment, while shoes up to £ 2,500 also see a steep reduction up to 5%.

Consumer electronics, including air conditioners and televisions, move to 18% of 28%, while in certain cases a wide basket with essentials has been reduced to ~ 5% or even zero. The mandatory passage of tariff reductions for consumers will probably stimulate a broad reduction in selling prices.

These shifts can in particular support the mass and central premium question. Organized players in clothing and shoes are expected to get competitive capacity against unorganized colleagues, as a result of which the resistance was reversed when GST on shoes was previously increased to 12%.

Consumer electronics can experience delays in the short term if shoppers are waiting for the new rates, but the demand from the holidays is expected to accelerate the post-implementation. Daily Essentials, meanwhile, benefit from both uptick of the volume and a tilt in the direction of brand consumption. That said, still challenges. The persistence of reverse service structures – to which input materials attract higher GST rates rates than finished goods – has long -tense working capital and margins for retailers.
Inputs such as synthetic leather, rubber soles, adhesives and fibers made by humans are still burdened with 12-18%, creating a mismatch that eats in competitiveness. The government has recognized the issue, but clarity about corrective measures is still expected.

The broader policy shift indicates a clear push to consumer-driven growth, reinforced by recent tax reductions and GST reform. With rationalized rates that reduce final prices, the organized retail is positioned to record a stronger demand in the mass and central premium segments.

In the medium term, this reset can mark a structural boost for the sector, thereby broadening the share of the formal market and deepens the involvement of consumers in different categories.

Amber Enterprises – TP: 9000

Amber Enterprises continuously increases the share of components in RACs, adds new customers to AC and consumers sustainable and expands the wallet with existing customers, which supports sustainable growth in the Consumer Durables division.

The GST 2.0 reforms completed by the Council have reduced the rate on RACs from 28% to 18%, which significantly improved affordability and stimulating a sharp rebound in RAC question, which improves Amber as an important supplier for AC manufacturers.

Furthermore, with the current Capex, acquisitions in niche electronics and diversification in new electronics segments, the company is well positioned to record the acceleration of GST-driven consumption state winds. We expect that income/EBITDA/PAT will deliver a CAGR of 24%/32%/54%compared to FY25-28.

Trent – TP: 6400

Trent’s Growth Momentum is supported by strong cost controls and disciplined implementation, which continue to deliver healthy operational performance.

The GST 2.0 reforms, which have a lower rates on clothing in the £ 1,000 – £ 2,500 price tire from 12% to 5%, is expected to significantly improve affordability and stimulate a stronger question in the most important formats of Trent, in particular Zudio.

We remain positive about Trent, given the robust expansion of the footprint, a long runway for growth in star (presence in only 10 cities), and the scaling up of emerging categories such as beauty, inner clothing, shoes and LGDs.

We expect that income/eBitda/Pat will deliver a CAGR of 20%/18%/17%compared to FY25-28E, helped by GST-driven consumption state wind and aggressive shop expansion.

(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services LTD)

(Disclaimer: recommendations, suggestions, views and opinions of experts are their own. These do not represent the views of economic times)