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Business News/ Companies / News/  Titan is slowly reinventing itself to keep up with the times
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Titan is slowly reinventing itself to keep up with the times

Medium term seen as a challenge for Titan as demand for watches dips and policy changes affect jewellery business

Titan is looking at a 15-20% revenue growth in fiscal year 2017, primarily driven by its Golden Harvest purchase scheme in jewellery, said managing director Bhaskar Bhat. Photo: Ramesh Pathania/MintPremium
Titan is looking at a 15-20% revenue growth in fiscal year 2017, primarily driven by its Golden Harvest purchase scheme in jewellery, said managing director Bhaskar Bhat. Photo: Ramesh Pathania/Mint

Mumbai: Titan Co. Ltd, India’s largest jewellery and watch retailer is slowly reinventing itself by adding new channels of trade and diversifying to cater to a larger segment of consumers. However, the medium term will continue to be challenging for the company as demand for watches slide and the jewellery business gets impacted by changing government policies, according to top executives at the company and analysts.

In May, Titan acquired online jewellery chain Carat Lane Trading Pvt. Ltd, which runs a portal Caratlane.com as it looks at gaining online supremacy in India’s fast growing etail market. Earlier, in December, the company marked its presence in India’s luxury market with a joint venture with global luxury brand Mont Blanc International, a subsidiary of Richemont Group SA whose brand include Van Cleef & Arpels, Chloé and Baume et Mercier. Later this year, it will launch its first premium Swiss collection of watches under Favre Leuba, a Swiss brand it acquired in 2011.

Over the past five years, the company has also diversified into eyewear, accessories and even perfumes which now account for 5% of its total revenue. Nonetheless, these are high-growth opportunities that represent a changing consumer. For instance, availability of international watch brands on sites like Flipkart, Amazon and Snapdeal has impacted Titan.

“The company is looking at leadership in the online space," said Bhaskar Bhat, managing director, Titan, adding the CaratLane acquisition is expected to be completed in a few weeks and that Titan will own 60% share in the company. Titan also has a presence in marketplaces like Tata Cliq, Amazon and Flipkart and expects online sales will account for 5-7% of the company’s revenues by the end of fiscal 2017.

The joint venture with Mont Blanc took the company a few years to formalize. Its journey from mass to premium happened with jewellery and the foray into the luxury segment was led by Zoya in 2009 which has two stores.

Now with Montblanc, “this is only the beginning of the establishment of a formal relationship with Richemont Group. It will open up more avenues," said Bhat, who is looking at building its presence with a mix of its own brands like Zoya, besides partnerships. A majority of its offerings are in the mid-market space with World of Titan, Tanishq, Titan Eye+, Watch Care Centres and Fastrack.

Meanwhile, the company along with peers Gitanjali Gems Ltd and PC Jeweller Ltd has been listed among the world’s 100 largest luxury goods companies in a May 2016 report by consulting firm Deloitte, in which Louis Vuitton SA, Richemont and Estee Lauder are the top three companies.

“Titan has managed to build a large brand primarily on the basis of its jewellery sales now. Whether it can make the transition to a lifestyle luxury brand on its own is to be seen," said Anil Talreja, partner at consulting firm Deloitte Haskins and Sells.

To be sure, it will be a while before these new initiatives benefit the company. “These steps are very long term, the benefits will be seen in 10 years," said Adhidev Chattopadhyay, analyst, Elara Securities (India) Pvt. Ltd.

Expansion is also expected to bring growth. In fiscal 2017, Titan will add another 150 stores—100 in eyewear, 25 Titan and 25 Tanishq stores—to its existing network of 1,283 exclusive stores in 247 towns built across 1.72 million square feet.

Yet, the compounded annual growth rate (CAGR) in the mid-term will be lower than that seen in the past. “The CAGR for next 2-3 years will be lower than what was seen in the past as it is also driven by the Indian economy recovery. We are not seeing demand pickup in any exciting manner," said Bhat on the sidelines of the opening of its sixth Mont Blanc showroom in Mumbai since forming the joint venture with Richemont Group in December. Moreover, jewellery which contributes close to 80% of its overall revenues will continue to be impacted as consumers need to furnish permanent account number (PAN) for all transactions above 2 lakh, besides the levy of 1% additional excise duties. “The next 2-3 years will be full of turmoil in jewellery, because of excise duty, GST. The face of the jewellery business will change because of the government’s rightful thrust on accountability. It has hit us," said Bhat who, however, is of the opinion that in the long run, this will benefit the company as the face of the jewellery business will change with the economy moving towards white money.

To be sure, even the financial year 2016 was a little bit of a struggle for the company. Net profit for the fiscal year 2016 dropped by 14% to 706 crore from 823 crore a year-ago. Revenues also declined by 5% to 11,177 crore from 11,791 crore in the financial year 2015.

All the same, the company is looking at a 15-20% revenue growth in fiscal 2017, primarily driven by its Golden Harvest purchase scheme in jewellery, said Bhat. Golden Harvest is an installment scheme where the investor or customer will be eligible for a special discount, which will vary from 55% to 75% of the total installment amount. Growth in the watches unit which accounts for about 16% of its overall revenues will be marginal, he added.

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Published: 27 Jun 2016, 12:39 AM IST
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