Why Titan’s lab-grown diamond bet looks carefully crafted
There are concerns that customers of CaratLane and Mia (Titan’s lower-end jewellery brands compared to Tanishq) would shift to beYon. However, the management believes that beYon is unlikely to cannibalize the existing customer demand significantly
Titan Co. Ltd’s shares are up around 6% in the past two trading sessions, hitting an all-time high of ₹4,312.10 apiece on Wednesday, mostly led by the solid growth in its jewellery business, as per its December quarter (Q3FY26) update.
It also held a conference call to lay out the initial roadmap for lab-grown diamond (LGD) studded jewellery under the brand name of ‘beYon’. The call offered interesting insights into the management’s thought process.
Its strategy is a well-crafted one, having realized that LGD may become commoditised, while LGD-studded jewellery may not. Therefore, it has no plans to enter into LGD manufacturing for backward integration and would rather source them from trusted suppliers.
The management notes studded jewellery, wherein diamonds and precious stones are used along with gold, is under-penetrated in India with its share estimated at about 12-15% of overall jewellery market.
Within that, the share of LGD-studded jewellery is only 2-4%. This can increase if the price point is brought down using LGD instead of natural diamonds. The jewellery pricing of beYon is competitive at ₹23,000-25,000 per carat versus ₹30,000 per carat for many rivals.
Titan plans to offer exchange schemes on beYon as well, but it is clear that the offer will be limited to the gold content in a jewellery item, not the LGD portion.
beYon, which opened the first physical store in Mumbai last month, will be sold both online and offline. Here, the management isn’t too aggressive and initially plans to open stores only in metro cities of Mumbai and Delhi.
About 10 such stores are planned over the next few months. Eventually, the stores will be expanded to non-metro cities, too, depending on the response.
True, there are concerns that customers of CaratLane and Mia (Titan’s lower-end jewellery brands compared to Tanishq) would shift to beYon. However, the management believes that beYon is likely to attract a new segment of customers, and thus unlikely to cannibalize the existing customer demand significantly.
“We believe beYon expands Titan’s addressable market by tapping incremental demand in lab-grown diamonds and fulfills a gap in Titan’s portfolio," said analysts from PL Capital. “Titan’s LGD strategy appears measured and strategic, balancing near-term investments with long-term optionality in a small but evolving category."
The brokerage has raised Titan’s earnings estimates after the Q3 update.
Growth levers
Robust growth in Q3 jewellery sales is set to translate into healthy absolute Ebit growth, prompting a few brokerages to raise their estimates even before results are announced.
Q3 jewellery sales grew by 41% year-on-year with 47 new store additions. The growth rate should not come as a surprise, with average gold prices in Q3 being higher by 55%, as per Bloomberg data.
The management acknowledges that growth was led by the substantial jump in average selling price, offsetting flattish buyer growth.
Notably, higher margin studded jewellery sales growth was in the mid-20s year-on-year versus 16% in Q2 and 11% in Q1. While the Q3 Ebit margin will be known when the results are announced, a higher growth rate in studded jewellery should help management meet the standalone FY26 Ebit margin guidance (excluding bullion sales) of 11-11.5%.
PL Capital has increased its EPS estimates by about 5-7% for FY26-28, forecasting about 20% CAGR during this period. However, Titan’s valuations are pricey, with the stock trading at 54 times FY28 estimated earnings, according to Bloomberg.
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