“Actually, the intrinsic opportunity for the jewellery business of Titan is very-very strong. And I think post the election, there will be a certain stable demand as well,” says CK Venkataraman, MD, Titan Company.
If I put the numbers in perspective for our viewers and looking at what brokerages have said, brokerages are of the view that for Titan it is an okay quarter, it is not like a grand quarter. Perhaps, they were expecting a bit more. They are of the view that gold prices and competition has increased which in a sense was the problem point for Titan for the quarter gone by and could linger along for next couple of quarters. Is that true?
Actually, we have certainly been investing a fair amount in growth. Growth has been our focus mantra for a while. And yes, the kind of sales growth that the quarters saw and what was announced also a few weeks back, the margin growth, I guess was not in line with that expectation.We heard it on the call. We saw it in the reports. But we also shared on the call that our focus continues to remain and yes, margin pressure does come because of competition, because of general consumer sentiment where we have to woo customers to overcome their reservations in a sense, whether it is gold price or general share of wallet and all that.
Yes, there was a lower growth in the margin compared to the sales growth. But we are pretty confident about the coming quarters and the coming year.
Would you maintain your guidance of the jewellery EBIT margin then, the band of 12% to 13% which you have earlier highlighted?
That is what Ajoy spoke on the call two days back. Yes, that is what we would like to deliver.
And where do you see growth coming from? I mean, do you expect that margin will normalise or you will get better pricing power because if you are confident of growth coming back in coming quarters, that means either pricing will come back or demand will come back or both?
Actually, the intrinsic opportunity for the jewellery business of Titan is very-very strong. And I think post the election, there will be a certain stable demand as well. So, we are quite confident from a market share opportunity point of view, from a medium-term income class the Titan company caters to point of view as well as our own execution, very-very confident about the sales growth. And we certainly need to manage our margin growth better and more effectively in the coming quarters. And the other thing is, if you look at the full year, as opposed to just the quarter, businesses like watches have done very well and we need to continue that growth and deliver the margin that comes with the growth.
The businesses like eyecare in the last few months have really picked up and we are very bullish on those as well. Taneira continues to do well, international business is doing well. So, from a growth side, everything is really doing well and we just need to execute to generate the profit growth. We are all committed to that and we will know when the results actually come out, of course.
Just because people always try and make that connect between gold prices and jewellery sales, so do you expect this to be largely just a postponement of demand owing to high gold prices and not lost demand?
When the price rises very fast, then there is a lot of worry about. They will wait to buy and all that. But when it stabilises, people come back in. It is just that they adjust the number of grams they buy because their budgets are broadly fixed.
So, if it is a 1 lakh rupee budget, then they buy 15 grams or 12 grams if the price has risen substantially and things like that.
Overall if you see, historically the gold price continues to drive demand and even recent asset class reports place gold pretty high in the overall spectrum of assets and that gives further confidence to the households on that.
And what about the studded ratio because that has moved a little bit unfavourably. Just wondering what the outlook is, any material changes that you are seeing when it comes to even customer preferences?
See, the thing is that for a long time we have never focused on the studded share. We have certainly focused on the growth in the studded category of a decent order upwards of 15 or close to maybe even 20%.
But when gold outperforms diamond jewellery because of intrinsic favouring of that or even overall our market share and opportunity in the gold jewellery business, in the wedding business is much higher because we are predominantly a diamond jewellery brand if you go back in time and therefore when gold jewellery sales outdoes diamond jewellery sales the share drops but as long as we have achieved our sales targets and sales growth for diamond jewellery we are not that fussed about the share of diamond jewellery. We are more focused on the sales of diamond jewellery.
Where would you say that your jewellery market share currently is at? For Titan the longest time the real appeal has been unorganised moving to organised. But what was your unique appeal now seems to be the general narrative by just about everybody in the industry.
That is true. That is because even the notion of organised has significantly changed, I would think. There are many independents with one city presence or maybe a part of the state presence who really up their game in terms of product design, store presentation, store experience and all that and they can well be called organised in that manner and they are pretty respectable in their overall operations.
All of them would certainly talk about the formalising, the organising of the industry. But all of them together are also accelerating the overall share of the organised to the total.
In a way the opportunity, our share is still less than 10%, very difficult to exactly estimate, but it may be eight or nine or something like that and in a sense the opportunity continues to be large because it is still not double digit. But the intensity of competition is much higher and therefore it is a different game.
I also want to talk about what is happening within the watches or wearables segment because I understand that that is seeing some pricing pressure because of excess inventory. How is it that you plan on tackling this and when do you see this settling?
See, the watch business has done very well and the Titan brand in particular has done exceedingly well in very intense competitive places like even the department stores, online and all that.
The Titan brand is powering the growth of the watches business. So, the analogue watch business is actually in a very-very good position. We just need to extract value through operational effectiveness, which we are all committed to doing and you would see it in FY25.
The smart wearables business is different. We were a late entrant. We have now become a prominent name. We have a decent share. But it is also a little bit of a polarised market with global brands right at the top and a huge gap and then you have a lot of activity below Rs 5,000 kind of thing, which is being like a commodity market.
So, we have come in with better quality, better features and styling and all that and it has certainly taken us a little longer because we came in late, but through a more differentiated value proposition and overall customer experience, we expect to get a better grip on both sales growth as well as margin control through this year and then next.
And what do you believe will be the outlook when it comes to the store addition plan? Will growth largely be driven by that? Can you give us a sense as well, in terms of how the market share is shaping up?
Actually, our store expansion ambition continues to be very-very strong across all businesses, whether it is Tanishq outside India or Taneira in India. Tanishq in small towns, big cities. Mia, CaratLane, Titan World, Helios, Eye Plus the opportunity is very strong everywhere and we are pushing the numbers. There is no let up in the expansion at all, I would say.
What would you prioritise in the near term, growth or a margin because when things are changing and competition is increasing, you will have to choose one?
No, we have actually been focusing more growth than margin, honestly, because if you look at the intrinsic profitability return on capital profile of Titan Company, they are very-very good and therefore, they give us a little bit of breathing space to focus on growth and not worry about margin so much because of the strong financial position we are in.
And while the near-term opportunity in India is very strong, we are talking about very good growth in the top two income classes of this country, which cater to Titan’s businesses, but that is near term.
But as we speak in a particular month or a quarter, both owing to share of wallet reasons, consumer sentiment reasons, as well as competitive intensity in a particular category, margins do come under pressure.
But, we become stronger in sales and share and customer acquisition so that the margin can be actually created a little down the road. So, sales growth is certainly the focus.
We understand that your term is getting over in December 25. Assume that you are looking at a reappointment or not?
No comments really on that. I mean, people have to retire and go. So, my time is that, the rest of it we will know as things unfold.
If I summarise our today’s interaction, let me just summarise it. Point number one, yes, the quarter gone by was tough because of competitive intensity. But the management of Titan is confident in the jewellery business, margins would be in early teens. You are also confident that the demand which in a sense was low, will come back and in the near-term the company will continue to prioritise on growth rather than margins, which means that unlike what we have seen in the previous good cycles for Titan where margins were north of 15%, they may struggle to get back there.
When was it north of 15%?
No, I am looking at EBIT 14-14.5% that kind of margin.
Quite some time back at a different scale also.
Yes, yes. I mean, I am saying once upon a time.
One refinement, actually the sales, the demand side has been very good. I mean, one of the points that you said was about demand, the demand side has been, the whole of last year was, Titan standalone was about 19% growth and consolidated was more than 20% growth.
So, the demand side is very-very strong and we are confident that it will continue to be strong and we will focus on that demand and extract value more than what we have done in the past.
