In this week’s Finshots Markets, we talk about Titan and it's ever-growing jewelry business.


The Story

The year is 2000. There is an eerie silence in the drawing-room as Xerses Desai, the Managing Director of Titan ponders over the company’s future. He has long been searching for a worthy successor to carry his legacy forward, but it’s no easy task picking a leader to run the burgeoning watchmaker.

He has finally boiled down his list to two candidates. On the one hand is Bhaskar Bhat, an alumnus of the IIM Ahmedabad, a veteran of the group and experience working in multiple divisions. On the other hand, there is Vasant Nangia, an IIM Calcutta alumnus, Vice President Marketing and the hands-on man at Tanishq. After much deliberation, Xerses chooses Bhaskar Bhat to lead India’s largest watch company. Nangia is asked to take charge as COO. But this decision doesn’t seem to go well with Nangia and the day after the decision,

Nangia Quits

“The entire sales and marketing team resigned on that day. The company was rocked by what happened. Many thought this would be finally the way Titan closed down its jewellery business. After all, we were in our fifth consecutive year of losses then,” says Jacob Kurian, COO of jewellery Business.

As history would have it, Bhaskar Bhat would immediately seize control, steady the ship, turn the loss-making Tanishq into a profitable entity and chart a turnaround story for the ages. For instance, Tanishq adopted Karatmeters in its stores to help customers evaluate the purity of gold. They allowed people to swap their 19-carat gold for 22-carat gold, by paying a small making charge. They adopted a customer-centric approach and became the most trusted jeweller in India. And from a mere ~700 Crores in revenues (FY 2001) to ~16,700 Crores today, Tanishq alongside Titan has gone on to become a behemoth in its own right and a darling of the investor community. Which is why the story of Titan is no longer founded on the watch company, but centred on its jewellery business Tanishq.

For people who’ve followed the stock diligently over the past decade or so, this detail might seem redundant. But for those who probably don’t follow the company as closely, know that Tanishq contributes roughly 80% to the company’s top line. The Watches business which once contributed 70% only offers a marginal contribution of 13% today. So for all practical purposes, we are talking about a jewellery company when we discuss Titan.

So how has Titan fared over the last few years?

Not bad actually. Not bad at all…

Being one of the leaders in the organized segment, they’ve had a leg up for almost a decade now. There’s absolutely no doubt about it. And with moves like GST and Demonetization, people are now forced to transact transparently. Which means organized players like Tanishq have managed to consolidate more ground over the past few years. But more importantly, India’s appetite for gold is still as strong as ever. There are 10 million weddings in India each year and people spend close to 2 lakhs on bridal Jewellery.

Elsewhere, gold is still a very lucrative investment option for many. In fact, over the past few months, when uncertainty loomed large people flocked to invest in gold. Also, Titan’s investment in Caratlane — an online jewellery company is working pretty well and with the largest network of jewellery stores in India, Tanishq is sitting on a goldmine so to speak.

However, you can’t say the same about their other businesses — eyewear and watches. The watches business was almost on the verge of extinction. But then with the introduction of smartwatches, the company has managed to consolidate some ground. The numbers from the eyewear division on the other hand look pretty impressive, at least on first reading. From just 5 stores and revenues totaling ₹5 Cr back in 2007 to 557 stores and ₹500 Cr in revenue today — It seems like the segment has been growing at a robust pace. However, they’ve only managed to turn meagre profits. So yeah, it’s not a good look either.

Also, during Covid, these stores had to shutter. People didn’t want to buy smartwatches. They didn’t want to buy perfumes and they didn’t even want to buy much else from a physical store. As a result, revenue took a hit for the period between May and June. Titan’s losses mounted to ₹291 crores and it seemed as if things were spiralling out of control.

But then, there was an unexpected recovery — once again driven by Tanishq. People started trickling in and began buying gold coins and plain jewellery. Revenue numbers normalized and the company turned a profit of ₹175 crores during the second quarter (albeit still considerably lower than the same period last year). And with the opening of the economy and the festive season incoming, this recovery was turbocharged.

The jewellery business grew by 15% in the third quarter compared to the same period last year. Some of it could be attributed to the pent up demand and some of it you could attribute to the fact that Tanishq adapted quickly during what was a very tumultuous period for Indian companies. For instance, customers could book a time slot and select jewellery designs over video calls and they could even make purchases online. Titan did all this during a pandemic and you have to appreciate the nimbleness here.

All in all, Tanishq is seeing a resurgence once again and despite the lackluster performance from other divisions, people are still betting big on Titan.

The only question is — Are you?

Let us know your thoughts on Twitter.

Until then…

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On January 1st SEBI ordered billionaire Mukesh Ambani and his conglomerate Reliance Industries Ltd. to pay a combined penalty of ₹40 crores for alleged manipulative and fraudulent trading in the month of November 2007. And if you’re wondering why the regulator imposed such a harsh penalty, here’s our simplified take from the Finshots Daily section on what happened during the fateful month.

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