Titan Industries, a Tata group company with R9,000-crore revenues in FY12, for whom gold now contributes 80% to its topline, is facing increasing competition from other organised?jewellers in the country. Titan?s chief financial officer, S Subramaniam talks to FE?s Anand J on the customs duty increase, growth and the plans to take on the competition in a sector which is getting organised rapidly.
How do you rate the company?s Q3 performance? How do you think the current year will shape up?
The performance was good with our topline growing 23% and bottomline by 24%. Considering the environment we are in, with significant pressures on distribution, sales etc, it is decent. Our cash position is healthy and we invested around R140 crore for expansion.?At 12% overall customer growth, the demand environment is healthy under the circumstances of slowdown.?The same store growth of 10% is a result of slowdown in the segment and the consumer spending is also down. Same store growth reflects industry growth and it might have been less than our growth as we usually do better than the industry growth. Hopefully it will get better.
The market was not happy with the margins in your watch division. Please comment.
It is a tough phase for watches. 50% of the inputs are imported. The margins there depend on the currency fluctuations. With the rupee devaluation, we can?t do much. We have undertaken some price increases, we have not passed on the full costs to the consumers, but there is a limit to which we can do that. We are hoping to gradually get back to the 14-15% margin.
Tanishq, your jewellery brand, grew by 26% for you in Q3.?How will the additional 2% customs duty impact the demand?
The price has been going up significantly over the past two years. ?A 2% duty?doesn?t?affect?the demand that much ? we will pass it on to the consumers, it will not affect our margin. Consumers may only see it as a normal fluctuation of gold rates.?The rupee?s devaluation is also causing the price to rise over the past few months. Usually when rates are high, the topline remains the same but the volumes decline. Volumes have come off the peak this financial year for the country as a whole.?Consumption may come down.?Our only concern is how much it will affect demand, then there would be a hit on our topline.?Speculation will come down. People who buy gold for investment will be deterred. We have seen that happen in the past.
The industry is becoming more organised. How will it impact Titan?
Clearly 75-80% of our topline and bottomline is coming from jewellery, so it will have an impact. The industry size is R2 lakh crore, but it is just a question of time. At present more than 70% of the sales happen in the unorganised?sector and it is an extremely fragmented industry. The industry becoming organised is a welcome step, as you have more compliance with law and paying taxes, and that is a major issue for the industry. It will help bring better practices and better quality ? in terms of purity ? for the consumers. It will bring a level playing field. Then everybody will do business the way we do business.
A lot of local?jewellery?retailers are gaining scale now. How do you view competition?
The organised sector is essentially taking market share from the unorganised sector. The competition is with the unorganised sector and that will continue for a long time. All the retailers can grow, it really gives us an edge. It will bring transparency and we have been?benefited?from that whenever we go to places where there are no organised players. We are expanding our network significantly and will be adding about 1.5 lakh square feet this fiscal. We have 176 outlets, though our focus is more on the square foot increase as the store sizes are getting bigger these days.?The southern market, though, is very tough with Kalyan Jewellers,?Malabar Gold, and various Alukkas Groups. In Kerala we?don?t?do much. There is a 5% VAT in Kerala which is an issue for us, and we won?t?expand there.
