Titan : Quarterly Reporting Document

"Titan Company Limited

Q4 FY23 Earnings Conference Call"

May 3, 2023

MANAGEMENT: MR. C. K. VENKATARAMAN - MANAGING DIRECTOR, TITAN COMPANY LIMITED

MR. ASHOK SONTHALIA - CFO, TITAN COMPANY LIMITED MR. AJOY CHAWLA - CEO, JEWELLERY DIVISION

MS. SUPARNA MITRA - CEO, WATCHES AND WEARABLES DIVISION MR. SAUMEN BHAUMIK - CEO, EYECARE DIVISION

MR. MANISH GUPTA - CEO, FRAGRANCES AND FASHION ACCESSORIES DIVISION

MR. AMBUJ NARAYAN - CEO, INDIAN DRESS WEAR DIVISION

MR. KURUVILLA MARKOSE - CEO, INTERNATIONAL BUSINESS DIVISION

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	Titan Company Limited
	May 3, 2023
Moderator:	Ladies and gentlemen, good day and welcome to the Titan Company Limited Q4 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
	touch-tone 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, Mr. Venkataraman.
C. K. Venkataraman:	Thank you very much and good evening to everyone on the call. It was a very satisfying quarter
	Q4 FY23. We passed many milestones through the quarter; Rs. 30,000 crore milestone for
	Jewellery, Rs. 5,000 crores for Watches & Wearables, Rs. 1,000 crores for EyeCare, Rs. 500
	crores for International business, Rs. 200 crores for the Perfumes business; all in all, a very very
	satisfying quarter. All the mature businesses continue to grow at a very satisfactory and
	ambitious rate. All the emerging businesses growing at a scorching pace including the women's
	bags and the Taneira business establishing themselves strongly; internationally becoming very
	prominent in the NRI/PIO space in the GCC and in the United States. All in all, a fantastic
	quarter and I would like to thank all the employees of Titan Company, TEAL, CaratLane, and
	all other subsidiaries as well as all our partners in the manufacturing side, their employees, all
	the partners in the retail and distribution side and their employees, and all other partners who
	work in some way or the other in support of Titan Company and its subsidiaries for continuing
	to deliver exceptional standards in customer experience, innovation, operational excellence, and
	through all that to deliver great sales and profit growth. And of course, my thanks to all of you
	on the call, as always challenging us, wishing us well, encouraging us, and asking the sharp
	questions that you ask all the time. My part in this part of the call is concluding and we can move
	into the Q&A.
Moderator:	We will now begin the question & answer session. Ladies and gentlemen, we will wait for a
	moment while the question queue assembles.
	The first question is from the line of Avi Mehta from Macquarie. Please go ahead.
Avi Mehta:	Sir, my first question was on the jewellery side. Has the moderation seen in customer demand
	in March because of the sharp gold price rise? Has that weaned off in April? And could you give
	us some sense on how the growth trends are behaving?
Ajoy Chawla:	You are right. March saw a softening and it continued into the first half of April. I think gold
	price volatility has usually kept many people on the fence, but as soon as the festive period
	started and the offer started for Akshaya Tritiya, we saw a lot of people coming to the market
	and thereafter, it was very good. I think the volatility piece in demand linked to gold price
	volatility continues. In the festive season and wedding season, and let's say there are
	opportunities and occasions to buy, it's very good. And then, if there is some nervousness, it

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	Titan Company Limited
	May 3, 2023
	tends to fall. But overall, I would say it was a very good Akshaya Tritiya for us and it's in line
	with what we think, what our plans are for the year.
Avi Mehta:	And would you be able to share some plans for the year or what your thoughts are? Any numbers
	over there?
Ajoy Chawla:	No, I don't think we can share numbers, but you guys are well aware of our longer-term plan,
	and in some ways, our annual plans are pegged to the long-term plan that we had set out during
	the investor day. And in that context, therefore, we are on line with that.
Avi Mehta:	The other bit, sir, there is this change in the franchisee rates which was carried out during the
	quarter. If you could give us some sense on what exactly it was and give us an idea of what is
	the impact that we should expect on margins and growth?
Ajoy Chawla:	This is a very operational matter. Terms of trade between the principal and the franchisees are
	typically to ensure healthy returns and good profitability for the franchisee. Just so that all of us
	are clear, when it comes to the jewellery and Tanishq franchisees, we are best in class returns
	and in fact people make exceptionally good profits and returns on investment, so much so that
	most of the franchisees want the second, third, fourth, fifth store and we are unable to fulfill their
	desire because we have…. Even they are happy to take the next store 100 km away or 200 km
	away in another city, even international. We have actually had a huge request from all our
	franchisee community to give higher things. Just to share with you, best-in-class returns across
	all forms of retail that might be there and I won't be surprised if it's across the world. This old
	structure was about 15 years old and the nature, scale, product mix of the business has
	significantly changed in the last 15 years; the slabs have changed, everything has changed. So,
	we needed to align and, in a way, update it and the other important piece is the product mix
	which is profitable, which works well for the company, as well as works well for the franchisees
	needs to be aligned in the same way so that all of us are firing in the same direction. And that is
	something which we wanted to structurally change. We also wanted to introduce new categories
	of complexities of products, because we are seeing that opportunity to in a way gain in different
	complexities of gold. So, many structural changes, all driven towards aligning growth and
	profitable growth for both the associate and us.
	Also, during the last couple of years, the division has invested significantly in both inventory as
	well as gold rates to deliver terrific growth and this investment has come significantly from the
	organization as well. So, in a way, this was kind of a restructuring. Absolutely very limited
	impact in terms of profitability to us. In fact, many franchisees have gained, and some may have
	lost. But actually, we don't know because the mix they will sell in the current year or in the next
	year will determine the exact gains or losses. And in our estimate, many of them will actually
	gain. And there is no significant impact on the company in terms of sheer margins or whatever.
	Nothing much. It's an operational piece actually.

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	Titan Company Limited
	May 3, 2023
Avi Mehta:	If I may summarize or paraphrase the way it is, that this is to modify the incentives to move
	product mix upwards and should not result in any impact to the franchisee profitability. Would
	that be a fair statement to make, sir?
Ajoy Chawla:	It is difficult to conclude because we have some 200 odd franchisees in the system. Some may
	lose depending on what mix they sell, and many others may gain. So, it's very difficult to
	conclude it in one line. And in any case, we have been a very fair partner. Even if somebody
	actually loses, we will invest a lot more in ensuring growth. So, that's not something we worry
	about.
Avi Mehta:	And sir, if with your permission, just one last bit on the watch side. We saw very strong growth,
	but margins were below the range that we were looking at of 13-14%. Would you revisit this
	target, or could you share with us how you see this internally?
Suparna Mitra:	The strong revenue growth was also because of a lot of investments, etc., and there were some
	actuarial calculations which came and hit our overall profits. But we are quite satisfied with the
	margin, and it is in line with what I have indicated in previous investor calls also, that margin
	for the watches business this year for example is likely to be in the 12-13%. It is in that range.
Moderator:	The next question is from the line of Nitin Jain from Fairview Investment. Please go ahead.
Nitin Jain:	My first question is on the jewellery business. Some of your national competitors like Kalyan
	and Malabar, have moved to one nation, one gold price policy. Does that lead to any change in
	the gold rate premium that Tanishq has been charging historically? And what would be the
	impact on EBIT margins going forward? And my next question is on the dividend payout. While
	the quantum has increased this year, the payout ratio has actually declined. Comments on that
	please.
Ajoy Chawla:	On the one nation, one gold rate, actually this is now a 16-month-old story. Malabar had started
	it around Diwali the year before last in FY22 and thereafter many local players, maybe not one
	but lowest gold rate offering. That is actually for the customer it will be in the lowest gold rate
	offering if that is more relevant. The one India, one gold rate is more of a broader statement.
	Kalyan also responded in many markets in that way and has eventually figured out that he wants
	to stick to one because the Kerala Jewelers Association had some kind of conversation and for
	some reason, their gold rates were much lower than the rest of the market. We have chosen not
	to go down that path. We have instead looked at what is a relevant competitor in different
	markets. Historically, we have seen there is a wide dispersion of gold rates across the country.
	Local jewellery associations actually declare the gold rate, and everybody plays according to
	that. And therefore, we have chosen to optimize along those routes. Some of those are getting
	rationalized over a period of time and we are in a way ensuring that we remain competitive
	market by market. So, consequently, I have mentioned in previous investor calls we have
	therefore seen a gradual reduction in the gold rate markup side of the gold jewellery margin, but

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	Titan Company Limited
	May 3, 2023
	we have been managing it through product mix, through making charges, and through other
	initiatives to try and ensure that we still continue to live up to good GCs and therefore good
	EBIT margins. That process is on. So, I won't be able to comment much on GCs further. We
	have already taken fair amounts of corrections in the past and yet been able to deliver the EBIT
	margin that we have been committing to and we still stay by that. Irrespective of the competitive
	intensity, we are expecting to sustain our EBIT margins. We are not too worried about any
	further dilution even if there is here and there mix related and product engineering related as
	many other operating leverage related initiatives are in place to ensure that we continue to deliver
	healthy margins in this business.
Ashok Sonthalia:	Our dividend policy suggests that we will maintain a dividend payout between a band of 25% to
	40% and this year dividend declaration while it is substantially increased over the last 2 years,
	is about 26.6% of the profit margin and Board consider every aspect of our requirement and
	growth, and what kind of investment plans we have, and what is the cash balance on the balance
	sheet, etc., and then accordingly decide a number which is within the band. It's a decision
	keeping all these considerations in mind.
Moderator:	The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Percy Panthaki:	My question is for Ajoy. Ajoy, congrats. This quarter, you have done a 19% same-store sales
	growth in the jewellery division. My question is that a large part of this 19% is coming because
	there is a big inflation in the gold price. If let's say the gold price going ahead were to stabilize
	and at some point, of time the Y-o-Y gold price inflation if it comes close to zero, in that kind
	of a scenario, what would be a sort of normal or a stereotypical target SSSG that you would tend
	to have in a flat gold price scenario? That's my first question.
Ajoy Chawla:	We have had these conversations a couple of times - once in person and a couple of times on
	the call. We would still like to suggest that for us, volume is not linked to grammage and
	therefore, gold price inflation is equal to…. The way we look at it is the number of customers
	and the average ticket size. Just because there is a 19% like-to-like growth and even if there was
	technically a very high gold price related inflation, it doesn't translate it exactly that way. Just
	to give you a sense, if I look at 19% same-store growth in value, we have had overall buyer
	growth of around close to 16%. On same store, that number would be closer to maybe 10-11%.
	Typically, if gold price was not to inflate, there is nothing to say that we can't continue to gain
	number of customers because we continue to gain a significant number of new customers. Even
	in quarter 4, our new-to-repeat is 50-50. We have grown pretty equally in both segments. Gold
	price inflation may be helping in ticket size but it's not necessarily so. People also enrich in
	terms of product mix. As long as we are continuing to get more customers and there is customer
	growth for every store, especially same-store growth and then there is a ticket size increase which
	may happen due to product mix enrichment; not just only because of grammage but the kind of
	products they buy, studded ratios, and more complex products, etc. We are not worried about
	this. Therefore, same-store growth, it is our endeavor we should continue to deliver double-digit

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