Titan Industries: Innovation to drive growth

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Innovation in its product line, new product collections and retail expansion would fuel the growth for Titan Industries in the coming quarters. Its increasing brand penetration of watches in the market has resulted in commanding higher margin. Its operating margin in the watch segment is 14.69%, while in jewellery it is just 5.36%. The margins could go up further if the revenues contributed by watches increased than jewellery. The company’s watches volume crossed 10 million in FY08 with Sonata selling five million watches.

Its watch business has been growing at about 12-14% CAGR in the last six years against the industry growth of 8-10% per annum. Analysts expect 25% and 20% growth in the sales and volumes of its watches. It is estimated that the company is set increase prices of its watches by 4-5%.

The company’s new jewellery venture ‘Gold Plus’ is primarily targeted at the semi-urban and rural market, which is highly value-for-money conscious and prefer traditional jewellery. It is set to gain from this hitherto unexploited and uncaptured consumer base with this client focus.

Currently jewellery segment contributes 66% of the total revenues resulted in lower margins for the company. Its watches segment margins is seeing an improvement, while jewellery is almost stable. Its jewellery and watches segment sales are Rs 2028 crore and Rs 918.69 crore respectively. In the FY2007-08 it saw a sales and net profits growth of 45% and 59% respectively.

The company has also launched its eye wear range and aggressively promoting its range of products (premium). Due to lack of transparent pricing the margins is relatively high and has good potential in organised retailing. However, being a premium product and priced higher than the normal eye glasses available in the market, the company has to maintain higher inventory and debtors and a robust distribution network. It faces intense competition with Ray Ban brand, which is an established brand and a strong player in the premium category.