Titan expects demonetisation to prove positive from FY18 onwards

Modi’s demonetisation move could benefit the Tanishq brand as the jewellery industry consolidates and becomes more organized, according to Titan’s top executives


Titan’s sales, both in the jewellery and watches segments, took an immediate hit in the days following the government’s demonetisation announcement on 8 November. Photo: Pradeep Gaur/Mint
Titan’s sales, both in the jewellery and watches segments, took an immediate hit in the days following the government’s demonetisation announcement on 8 November. Photo: Pradeep Gaur/Mint

Bengaluru: Watchmaker and jeweller Titan Co Ltd’s top executives expect the Indian government’s demonetisation move to prove positive for the company in the longer run, especially for its Tanishq brand as the jewellery industry consolidates and becomes more organized.

But the company struck a more cautious tone about the current and next quarter as discretionary purchases are not on the mind of the average consumer who is still queuing up in front of banks and ATMs to withdraw cash for daily needs.

“From a near-term, which I’ll call FY 18, and medium term which is FY 19 point of view, we are clearly going towards getting a better share of the market,” said C.K.Venkataraman, chief executive officer of Titan’s jewellery division, on a conference call with analysts on Friday to discuss the impact of demonetisation.

“In the short-term, obviously because of reduced cash flow, because of the mood itself being not so great, all of us are still on the backfoot. We expect the impact of that on Q3 (of FY 2017),” he added.

Titan’s sales, both in the jewellery and watches segments, took an immediate hit in the days following the government’s demonetisation announcement on 8 November. But sales in both divisions picked up and are now back to pre-demonetisation and post-festive season levels, the company said on the call.

While many smaller jewellers in the unorganized sector are liberal in their collection of legally required documents and deal more with cash than other modes of payment, Tanishq has a higher ratio of purchases made using credit or debit cards.

The company said the non-cash payments are likely to be a ballpark 40% of all sales while cash is around 60%. But even among those who buy using cash, 60% are done using money that can be accounted for.

Hence, the maximum impact that Titan expects on its jewellery sales could be around 16% it estimated.

Titan executives, including managing director Bhaskar Bhat, expect this mix to stand them in good stead and help them tide over the near-term impact of demonetisation while also garnering customers from unorganised jewellers over time.

And Rakesh Jhunjhunwala, one of India’s best known stock investors in Titan who had also dialed into Friday’s analyst call, appeared to be of a similar view. “My perception is that everything will come back to normal. And therefore, as a company, let us do what we were doing, (the) customer is going to come back to normal within the next 30 days. Long-term this is very advantageous for Tanishq,” Jhunjhunwala said on the call.

As of September 2016, Rakesh Radheshyam Jhunjhunwala had 6.58% stake in Titan while Rekha Rakesh Jhunjhunwala had 1.55% stake in Titan, according to BSE shareholding data.

“Demonetisation is unprecedented. It’s never happened in the history of any country. So I think trying to predict, all of us are trying to predict how consumer behaviour will be after two months and I think all of us are going to be surprised,” he added.

Early last month, Titan Co reported a 23.51% year-on-year increase in net profit to Rs180.76 crore in the September quarter as it benefited from cost cuts, improved margins and festive season sales.

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