Titan : Board's Report

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TITAN COMPANY LIMITED

Annual Report 2021-22

Board's Report

To the Members of Titan Company Limited

The Directors are pleased to present the Thirty-Eighth Annual Report and the Audited Financial Statements for the year ended

31st March 2022:

1. Financial Results

							(` in crore)
		Standalone		Consolidated
		2021-2022		2020-2021	2021-2022		2020-2021
Revenue from Operations	27,210		20,602	28,799		21,644
Other Income	246		181	234		186
Total Income	27,456		20,783	29,033		21,830
Expenditure	23,931		18,901	25,458		19,920
Profit before exceptional items, finance	3,525		1,882	3,575		1,910
costs, depreciation and taxes
Finance Costs	195		181	218		203
Depreciation/Amortisation	347		331	399		375
Profit before share of profit/(loss) of an	2,983		1,370	2,958		1,332
associate and joint venture and exceptional
items and taxes
Share of profit/(loss) of an associate and	-		-	-		(5)
Jointly controlled entity
Profit before exceptional items and taxes	2,983		1,370	2,958		1,327
Exceptional items	51		137	54		-
Profit before taxes	2,932		1,233	2,904		1,327
Income taxes
-	Current	779		351	786		360
-	Deferred	(27)		5	(80)		(7)
Profit for the year	2,180		877	2,198		974
Attributable to
-	Shareholders of the Company	2,180		877	2,173		973
-	Non-controlling interests	-		-	25		1
Profit brought forward	4,279		3,757	4,210		3,592
Appropriations
Dividend on Equity Shares (excluding tax)	(355)		(355)	(355)		(355)
Closing Balance in Retained Earnings	6,104		4,279	6,028		4,210

1 a) Standalone Numbers:

During the year under review, the Company's total revenue grew by 32% to ` 27,210 crore compared to ` 20,602 crore in the previous year.

Profit before tax and exceptional items grew by 118% to ` 2,983 crore and the net profit grew by 149% to ` 2,180 crore.

The Watches & Wearables Division of the Company recorded revenue of ` 2,309 crore, a growth of 46%. The revenue from Jewellery Division grew by 35% touching ` 23,268 crore (excluding sale of bullion of ` 1,045 crore). The revenue from EyeCare Division grew by 38% to ` 517 crore.

New Businesses, viz. Indian Dress Wear Division and Fragrances & Fashion Accessories Division recorded revenue of ` 154 crore, a growth of 57% over the previous year. While the Indian Dress Wear Division grew by 43%, and the Fragrances & Fashion Accessories Division also recorded a growth of 65%.

All the Divisions have done very well during the year amidst various challenges.

The Management Discussion and Analysis report, which is attached, dwells into the performance of each of the business divisions and the outlook for the current year.

1. Consolidated Numbers
   At the consolidated level, the revenue stood at ` 28,799 crore as against ` 21,644 crore in the previous year. The details of the performance of the Company's subsidiaries are covered below in point 17 of this Report.

2. Company's Response to COVID- 19

The Company witnessed strong demand across its consumer businesses with the major businesses achieving significant revenue uplift and ending the year on a strong note. The underlying demand continued to be strong across all of its businesses with most segments posting Y-o-Y growth over a very strong base from the fourth quarter of the previous year. The network expansion and marketing campaigns have progressed very well during the year under reporting.

However, during the first quarter of the year, the Company's focus was back on keeping everyone safe and few stores were proactively closed in the highly impacted towns. The initiative of customer outreach that brought in sales in the previous year was also not

Board's Report

undertaken considering that the humanitarian impact on consumers was severe and widespread during the second wave of the pandemic.

The Company drove vaccination campaigns as the top priority and almost all the store staff and employees got at least their first dose during June - September 2021 period, which was an important step towards bringing back normalcy.

During the second quarter, the Company witnessed a strong recovery in demand after the second wave across its consumer businesses with sales moving swiftly above or close to pre-pandemic levels in most of the Divisions. Most stores were fully operational, barring a few in select towns having localized restrictions, with overall store operation days exceeding 90% for the quarter. Apart from its thrust on digital and omnichannel, the Company also accelerated its retail network expansion during the second quarter.

The Company finished the year on a satisfactory note despite the last quarter of the year getting disrupted twice - first due to the partial lockdowns caused by the Omicron wave in January and again during the month of March in which consumer sentiments got affected adversely due to sharp increase and volatility in gold prices and uncertainty due to a fragile geopolitical situation. The underlying demand continued to be strong across all of its businesses with most segments posting growth over a very strong base in the last quarter of the previous year.

1. Dividend
   Considering the excellent performance of the Company during the last financial year, the Board of Directors are pleased to recommend the payment of dividend on equity shares at the rate of 750% (i.e. ` 7.50 per equity share of ` 1 each), subject to approval by the shareholders, at the ensuing Annual General Meeting ("AGM") and payment is subject to deduction of tax at source as may be applicable. This payment represents a dividend payout ratio of 30.8%. The Dividend Distribution Policy, as amended by the Board at its meeting held on 29th April 2021, is annexed as Annexure-III to this Report.
2. Transfer to General Reserve
   As permitted under the provisions of the Companies Act, 2013, the Board does not propose to transfer any amount to general reserve and has decided to retain the entire amount of profit for the Financial Year 2021-22 in the profit and loss account.

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STATEMENTS FINANCIAL

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TITAN COMPANY LIMITED

Annual Report 2021-22

1. Finance
   The year saw an excellent performance by all the businesses despite challenges of partial lockdowns and uncertainty in a fragile geopolitical situation during the year.
   ICRA maintained the Company's long term rating of AAA with stable outlook. The Company continues to optimise its efficiency in inventory management and cash flow by selling excessive bullion as and when necessary.
2. Public Deposits
   The Jewellery Division of the Company was successfully operating customer acquisition schemes for jewellery purchases for many years. When the Companies Act, 2013 (the "Act") became substantially effective on 1st April 2014, the Company had around seven lakh subscribers contributing to these schemes. However, these schemes were exempt under the Companies Act, 1956 relating to acceptance of public deposits, as such schemes were not covered in the definition of deposits. Under the Act and the Rules made thereunder ('Deposit Regulations') the scope of the term "deposit" was enlarged and therefore a view was taken that the jewellery purchase schemes offered by the Company to its customers would be treated as public deposits. Thereupon, the Company discontinued fresh enrolment

of subscribers and initiated steps to close the erstwhile customer schemes, which were wound down in August 2014.

Under the Deposit Regulations as amended from time to time, a company is permitted to accept deposits subject to applicable provisions, to the extent of 10% of the aggregate of the paid-up share capital, securities premium account and free reserves from its Members & 25% of the aggregate of the paid-up share capital, securities premium account and free reserves from the Public after prior approval by way of special resolutions passed by the Members in this regard. Requisite approval was obtained from the Members of the Company and a new programme for customers to purchase jewellery (under the Jewellery Purchase Plan) was launched in November 2014 in compliance with the Deposit Regulations.

The details relating to deposits, covered under Chapter V of the Act are as under:

1. accepted during the year: ` 2,701 crore
2. remained unpaid or unclaimed as at the end of the year: ` 1,574 crore

1. whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved-
2. 1. at the beginning of the year : Nil
   2. maximum during the year : Nil
   3. at the end of the year : Nil

There are no deposits that have been accepted by the Company that are not in compliance with the requirements of Chapter V of the Act.

1. Material Changes and Commitments Affecting Financial Position between the end of the Financial Year and Date of Report
   There have been no material changes and commitments for the likely impact affecting financial position between the end of the financial year and the date of the Report.
2. Significant and Material Orders
   There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.
3. Particulars of Loans, Guarantees and Investments
   Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements.
   During the year under review, the Company had invested ` 8 crore (CHF 1 million) as application money towards equity stake in Favre Leuba AG (FLAG). The Company had also invested ` 1 crore (USD 0.15 million) as subscription to Equity Share capital and ` 160 crore (USD 20 million) as application money towards equity stake in TCL North America Inc., a wholly owned subsidiary formed during the year.
4. Integrated Report
   The Company has, over the last four years, taken steps to move towards Integrated Reporting in line with its commitment to voluntarily disclose more information to stakeholders on all aspects of the Company's business. Accordingly, the Company had introduced key content elements of Integrated Reporting aligned to the International Integrated Reporting Council Framework (IIRC) in the Annual Report of the previous years and has disclosed more qualitative data in the Annual Report of this year. Similar to earlier years, the relevant information has been provided in this year's Annual Report as well.

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1. Adequacy of Internal Controls and Compliance with Laws
   During the year, the Company has reviewed its Internal Financial Control systems and has continually contributed to the establishment of a more robust and effective internal financial control framework, prescribed under the ambit of Section 134(5) of the Act. The preparation and presentation of the financial statements is pursuant to the control criteria defined considering the essential components of Internal Control - as stated in the "Guidance Note on Audit of Internal Financial Controls Over Financial Reporting" issued by the Institute of Chartered Accountants of India.
   The control criteria ensure the orderly and efficient conduct of the Company's business, including adherence to its policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and the timely preparation of reliable financial information.
   Based on the assessment carried out by the Management and the evaluation of the results of the assessment, the Board of Directors are of the opinion that the Company has an adequate Internal Financial Controls system that is operating effectively as of 31st March 2022.
   There were no instances of fraud which necessitated reporting of material misstatements to the Company's operations.
   There has been no communication from regulatory agencies concerning non-compliance with or deficiencies in financial reporting practices.
2. Board Meetings
   During the year under review, nine Board meetings were held, details of which are provided in the Corporate Governance Report.
3. Audit Committee and other Board Committees
   The details pertaining to the composition of the Audit Committee and its role are included in the Corporate Governance Report, which is a part of this Annual Report. In addition to the Committees mentioned in the Corporate Governance Report, the Company has a Corporate Social Responsibility Committee, the details of which are covered in Annexure-II to this Report.
4. Risk Management
   Pursuant to the requirements of Regulation 21 and Part D of Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR),

the Company has constituted a Risk Management Committee (RMC), consisting of Board members and senior executives of the Company.

The Company has in place a Risk Management framework to identify, and evaluate business risks and challenges across the Company, both at the corporate level as also separately for each business division. The Company has a robust process for managing the top risks, overseen by the RMC. As part of this process, the Company has identified the risks with the highest impact and then assigned a likely probability of occurrence. Mitigation plans for each risk have also been put in place and are reviewed by the Management every six months before presenting to the RMC. The RMC has set out a review process to report to the Board on the progress of the initiatives for the major risks of each of the businesses. The Company has also engaged a reputed firm to design an enterprise level Business Continuity Plan including Disaster Recovery scenario, considering the increasing size and complexity of the various businesses of the Company.

15. Related Party Transactions

There are no materially significant Related Party Transactions made by the Company with Promoters, Directors or Key Managerial Personnel which may have a potential conflict with the interests of the Company at large. All Related Party Transactions are placed before the Audit Committee for approval of Independent Directors of the Company and the Board for approval, if required. Prior omnibus approval of the Audit Committee is obtained for transactions which are of a foreseen and repetitive in nature. The transactions entered into pursuant to the omnibus approval so granted are verified by the Internal Auditor and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval, if applicable, on a quarterly basis. The Company has developed an Internal Guide on Related Party Transactions Manual and prescribed Standard Operating Procedures for the purpose of identification and monitoring of such transactions. The Policy on Related Party Transactions as approved by the Board is uploaded on the Company's website. None of the Directors have any pecuniary relationships or transactions except to the extent of sitting fees and commission paid to the Directors and to Mr. Bhaskar Bhat to whom the Company pays monthly pension as approved by the Board of Directors consequent upon his retirement as Managing Director of the Company in the month of September 2019. The details of the transactions with related parties during the year under review are

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STATEMENTS FINANCIAL

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provided in the accompanying financial statements. There were no transactions during the year under review which would require to be reported in Form AOC-2.

16. Subsidiaries/Joint Venture/Associate Company

As on 31st March 2022, the Company had the following subsidiaries/Associate/Joint Venture:

Sl.	Name of the Subsidiary/	Relationship
No.	Associate/Joint Venture
1	Favre Leuba AG, Switzerland (FLAG)	Subsidiary
2	Titan Watch Company Limited,	Step-down
	Hong Kong	Subsidiary
3	Titan Engineering &	Subsidiary
	Automation Limited (TEAL)
4	CaratLane Trading Private Limited	Subsidiary
	(CaratLane)
5	Green Infra Wind Power Theni Limited	Associate
6	Titan Holdings International FZCO,	Subsidiary
	Dubai
7	Titan Global Retail LLC, Dubai	Step-down
		Subsidiary
8	Titan Commodity Trading Limited	Subsidiary
9	TCL North America Inc.	Subsidiary
	(from 15th April 2021)
10	TEAL USA Inc. (from 15th April 2021)	Step-down
		Subsidiary
11	StudioC Inc., USA	Step-down
		Subsidiary

During the Financial Year 2021-22, Favre Leuba AG had registered a turnover of CHF 0.23 million i.e., ` 2 crore against the previous year's figures of CHF 1.04 million, i.e., ` 8 crore and loss of CHF 1.25 million, i.e., ` 28 crore (previous year: CHF 7.34 million, i.e., ` 58 crore). During the Financial Year 2021-22, the Company has invested CHF 1 million (` 8 crore) in Favre Leuba AG as share application money.

Titan Watch Company Limited is a subsidiary of Favre Leuba AG and hence is a step-down subsidiary of the Company. It has a capital of HK $ 10,000 and no Profit and Loss Account has been prepared.

During the Financial Year 2021-22, TEAL generated an income of ` 378 crore against the previous year's figures of ` 354 crore, an increase of 7% and the profit before tax was at ` 21 crore against the previous year's figures of ` 40 crore.

CaratLane is engaged in the business of manufacturing and retailing of jewellery products and has a significant

Annual Report 2021-22

online presence. During the last year, CaratLane's performance was very good with strong double-digit growths recorded in retail sales, with great emphasis on omnichannel selling. CaratLane added 21 stores in the year to take the store count to 138. During the Financial Year 2021-22, CaratLane registered a turnover of

• 1,256 crore (previous year: ` 716 crore) and recorded profit before taxes of ` 39 crore as against the previous year's figures of ` 2 crore.

Titan Holdings International FZCO (Titan Holdings) was formed as a Free Zone Company with a view to carry out business activities and invest in the share capital of any other companies/entities either as a joint venture partner or as its wholly-owned subsidiary company for carrying out business activities. Titan Holdings incurred a loss of AED 0.87 million (` 2 crore) against the previous year's loss of AED 0.60 million (` 1 crore).

During the Financial Year 2021-22, Titan Global Retail LLC registered a turnover of AED 55.14 million (` 112 crore) (previous year AED 19.20 million - ` 39 crore) and incurred a loss of AED 11.53 million (` 23 crore) against the previous year's loss of AED 2.47 million (` 5 crore).

During the Financial Year 2021-22, Titan Commodity Trading Limited (TCTL) commenced operations of hedging of gold for Titan. TCTL registered an income of

• 5.21 crore and a profit before tax of ` 0.95 crore.

TCL North America Inc., was incorporated during the year as a wholly-owned subsidiary. However, the company has not started any operations as of 31st March 2022.

TEAL USA Inc., was incorporated during the year as

1. wholly-ownedsubsidiary of Titan Engineering & Automation Limited. However, the company has not started any operations as of 31st March 2022.

The Company holds 26.79% stake in Green Infra Wind Power Theni Limited which supplies energy to the Company.

None of these subsidiary companies declared a dividend for the Financial Year 2021-22.

The annual accounts of these subsidiary companies/JV companies were consolidated with the accounts of the Company for the Financial Year 2021-22.

The statement containing salient features of the financial statement of subsidiaries/associate company/joint venture in Form AOC-1 forms part of the Annual Report.