Titan : Quarterly Reporting Document

"Titan Company Limited Q1 FY23 Earnings

Conference Call"

August 05, 2022

MANAGEMENT:	MR. C. K. VENKATARAMAN	- MD, TITAN COMPANY LIMITED
	MR. ASHOK SONTHALIA	- CFO, TITAN COMPANY LIMITED
	MS. SUPARNA MITRA	- CEO, WATCHES & WEARABLES
	DIVISION
	MR. SAUMEN BHAUMIK	- CEO, EYECARE DIVISION
	MR. AJOY CHAWLA	- CEO, JEWELLERY DIVISION
	MR. MANISH GUPTA	- CEO, FRAGRANCES AND FASHION
	ACCESSORIES DIVISION
	MR. AMBUJ NARAYAN	- CEO, INDIAN DRESS WEAR DIVISION

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	Titan Company Limited
	August 05, 2022
Moderator:	Ladies and gentlemen, good day and welcome to Titan Company Limited Q1 FY23 Earnings
	Conference Call. As a reminder, all participants' lines will be in the listen-only mode and there
	will be an opportunity for you to ask questions after the presentation concludes. Should you need
	assistance during the conference call, please signal an operator by pressing '*' then '0' on your
	touchtone phone. Please note that this conference is being recorded.
	I now hand the conference over to Mr. C.K Venkataraman - Managing Director, Titan Company
	Limited. Thank you and over to you sir.
C. K. Venkataraman:	Thank you very much. Thank you all for joining in. It has been an exceptional quarter for the
	company and I must thank all customers of the Company, all employees, all partners and their
	employees and all the leaders and managers of Titan Company and its subsidiaries CaratLane
	and TEAL for meeting all the external challenges head-on and delivering a very very satisfying
	result on all fronts including of course financial performance that we are here to discuss and I
	would like to straightaway jump into the Q&A. So please start with the first person in line.
Moderator:	Thank you very much. We will now begin the question-and-answer session. The first question
	is from the line of Avi Mehta from Macquarie. Please go ahead.
Avi Mehta:	Hi sir, congratulations on this performance. I had two questions. First was after this sharp custom
	duty increase there has been a lot talk about the consumption scenario as well as the competitive
	landscape changing. Do you see that as a risk in your ability to reach that 2.3-2.4 times over
	FY18 to FY23 that you were earlier kind of gunning for?
Ajoy Chawla:	Hi Avi, Ajoy here. We are not seeing too much of a sharp impact of that. Gold prices have kind
	of remained in the 5,000-5,100 range and that is what matters to the customer. I do not even see
	any significant change on the nature and structure of competitive framework. I think everybody
	is facing it. It is okay, the larger piece if at all that we need to think about going forward over
	the next few months, how is the entry point customer who is possibly more inflation challenges
	etc., that may be more important than this gold price increase because gold price increase has
	not been significant. It has not been a big jump.
Avi Mehta:	Okay. The custom duty is not a big deal and sir you said I did not understand how the entry
	customer so is there any signs of concern that you are witnessing is that what you are
	highlighting.
Ajoy Chawla:	We've seen the buyer growths have been very good but we are seeing a greater traction on the
	higher ticket sizes and higher values and also greater traction on studded on the lower price
	points on gold specially those who are looking at below 10 grams, below 15 grams, everyday
	wear. There is some creeping level of, there is still growth there, there is no question but yes, it
	is not as high as the rest of the segments have shown, but it is very early days because we are
	not sure how that, because during Akshaya Tritiya these customers came in good numbers, then

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	Titan Company Limited
	August 05, 2022
	it has been a little muted. I think they will come whenever there is festive season and there is a
	reason to purchase that is the understanding that we are getting. And therefore, hopefully August
	month where there is a lot of, many festivals, we are expecting those customers to also come in
	and again during season we will expect them to come. This is largely on the low-price band in
	gold, otherwise everywhere it is a, but it is still a growth, I must just clarify it is still a growth, it
	is not that there is a serious stress and all that.
Avi Mehta:	And sir what share would this be? Sorry just trying to understand this is something that you
	think can tilt the growth in a reasonable manner,
Ajoy Chawla:	No, it will not tilt the growth.
Avi Mehta:	And sir the second question was across the segments this quarter has been very healthy in terms
	of margins, has there been any one-off in the margins that we should be aware of or is this more
	structurally better more a margin profile that we should be witnessing because of the initiatives
	that you have taken post COVID.
Ashok Sonthalia:	Avi, across businesses I would say, all the businesses have different operating leverages and
	Watches and EyeCare have very high operating leverage and which is getting reflected with the
	growth. As far as Jewellery is concerned, there is I would not say one-off but there is some gain
	which came through 2-3 elements. One is of course, the diamond prices, the other one is of
	course in this quarter, we had some spot gold purchase and forward contango which is sitting in
	AGC but through other income, it gets compensated and of course operating leverage in
	Jewellery business also. The Jewellery business could have the benefit of I would say 80-90
	basis point because of that rest all businesses have performed well, grown well and that is what
	is getting reflected.
Avi Mehta:	Sir, if I may just try to understand this forward contango, we hedge, so logically, there should
	be from other income including there should be no margin benefit, right sir?
Ashok Sonthalia:	Other income, I do not know which level of margin you are looking at, other income including,
	yes, you are right. There are sometime differences between contango and opportunity cost but
	that is very minimal. There should not be any difference, you are right.
Avi Mehta:	So, it is more leveraged and diamond price based which is what you are still seeing.
Ashok Sonthalia:	Yes.
Moderator:	Thank you. The next question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy:	My question is on EyeCare, very high margins, so are you seeing benefit of liquidity drying up
	for the startup businesses which compete with you, not just for EyeCare across your other
	businesses also and so good margins is that sustainable for these kind of businesses?

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	Titan Company Limited
	August 05, 2022
Saumen Bhaumik:	Hi this is Saumen. As far as our margin structure is concerned, I think over the several quarters
	we have kind of demonstrated 64%-65% gross contribution works and to us it seems sustainable,
	combination of house brand focus, channel mix, in-house production, India sourcing are the
	factors that give us that view and as far as the PBT percentage is concerned and that I think in
	the ballpark of 15+ is what we anticipate. It is the sale swing of 10% kind of significant swing
	of your PBT percentage as you saw some quarters between 15%-20% but 15+ is what we believe
	is sustainable and frankly I have nothing really to say about what is happening in the other side.
Abneesh Roy:	On the Jewellery margins, you have done very well, my question is what is driving this because
	your studded has grown in line with your other segments but if you could elaborate why wedding
	jewellery has grown a bit slower, any concern that you see there. So here again, if the advertising
	spends for the category now lower because in general the advertising rates are lower or the
	industry has gone to a lower level. So, if you could elaborate on the margin front.
Ajoy Chawla:	Better margin delivery first and foremost is on account of operating leverage, what we are seeing
	in terms of the EBIT margin. Second, I would I say in terms of a richer product mix and when I
	say product mix, it is not just studded and gold. We look at all different categories, there are
	many categories, we look at even within studded there are slightly differential margins for
	different product categories. And third piece I would say which Ashok shared in the previous
	one, there is what he said about 80-90 basis points which is a one-off in the sense that it may not
	remain forever, it is there in this particular quarter. So, these are three main reasons. On
	advertising we have not cutdown, in fact our advertising to NSV is pretty much where it is in
	fact, we have been very very prominent and very visible so we are not holding back on
	advertising and neither it is that the rates have come down. It is pretty much, what it was.
Abneesh Roy:	One last, follow up and that is the last question, so 23% CAGR in jewellery is extremely good
	and of course this is one of the highest growth rates in any consumption segment. So wanted to
	understand if you could comment on market share in three years in your view how it would have
	moved and is it coming out because of any region-specific successes or is it because of Pan India
	activation campaign because you have been very aggressive on innovation also. So could you
	elaborate on these points on a three-year basis.
Ajoy Chawla:	On a three-year basis, I think our market share earlier we used to quote 4-5%, roughly, right now
	we are quoting at 6-7%. Also, the base has gone up, I remember, we used to talk about around
	300,000 to 350,000 crores. Now the latest figures that I am hearing is 4.2 lakh crores. So
	suddenly, I think market share gain in a market which has also grown is one piece. Of course,
	part of the growth in a market is also being fueled by gold price gain, we should not ignore that
	and in the recent past also even diamond prices have gone up. So, there is a certain ticket size
	sitting there. But even buyer growth has been good in terms of, if I were to look at the absolute
	value growth over FY19-20 quarter 1 is around 80% and the volume, that is buyer growth, the
	way we look at volume is buyer growth or bill growth, if you are to take it is sitting at 26%. So,
	it is a fairly healthy growth in transaction itself. Two things, I think, the engine that were outlined

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	Titan Company Limited
	August 05, 2022
	earlier by Venkat in the previous forums that he has done, last five years. Those engines most of
	them are firing very well. During COVID period there was a disruption in the golden harvest
	related pieces and therefore to that extent there has been a +/- but again enrollments have picked
	up very well and going forward we should therefore see a good progress on that. The only
	additions that we have added in the last couple of years. One is we brought in a renewed focus
	on the lower ticket size what we are calling as the core. So, focusing on the lower price points
	and lower ticket size, so that the funnel is strong because it is those people only over a period of
	time will migrate on to becoming the high value customer. The second piece is digital that has,
	last two years has built up as a solid engine, even now it is contributing about 6% of our topline
	and the third piece which is helping us. It is a slightly modified form of an earlier engine which
	is winning in low share markets now we are in fact taken up many more markets and we are
	working across many different states. So South for example, we have seen very good traction,
	parts of East, we have seen exceptionally good traction as well. So yes, in the three-year period
	if I would say, South has really pulled up because of these strategic initiatives and also parts of
	East.
Moderator:	Thank you. The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises.
	Please go ahead.
Rakesh Jhunjhunwala:	My question is, how is Fastrack growing, you have introduced handbags and all that.
C. K. Venkataraman:	The women's handbags?
Rakesh Jhunjhunwala:	Yes, in the Fastrack products.
Suparna Mitra:	Hi Rakesh, Suparna here, Fastrack watches have grown quite well in the quarter when
	comparison to the previous quarter 1 of last year, we have grown by 120% and the big thrust has
	been in the lower price economy entry price products in fact we did a big campaign with
	Stunnerz which is the entry price product. Fastrack Smart watches continues to do very well.
	We have a big winner in Fastrack Vox as well as we have two new Fastrack Smart watches in
	this quarter 1. So, it has been a very good run for Fastrack Smart watches. They have really
	picked up a lot of traction.
C. K. Venkataraman:	And Rakesh we are also very excited about the Fastrack brand in the EyeCare category.
Saumen Bhaumik:	We have just opened our second Fastrack prescription eyewear store, specifically to address the
	youth segment, I think I mentioned it last time around and very soon we are going to 5-6 in the
	city and 25 stores across the country. So, this is purely for youth segment prescription eyewear
	like Titan EyePlus for the rest.
Manish Gupta:	Hi Rakesh, Manish here, I think Fastrack Girls bags, we are seeing a very good response, we
	launched Spring Summer Drop 1, Drop 2 and while growth have no logic here because 2.5-3

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