Rakesh Jhunjhunwala isn’t impressed with Titan’s accounts; wants it explained to him

By: |
August 11, 2020 4:07 PM

A visibly agitated Rakesh Jhunjhunwala did not hold back in the post results earnings call of Titan Company Ltd, as he investigated the hedging practice of the jewellery and watch manufacturer.

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A visibly agitated Rakesh Jhunjhunwala did not hold back in the post results earnings call of Titan Company Ltd, as he investigated the hedging practice of the jewellery and watch manufacturer. The big bull of the domestic stock markets asked Titan’s management about unrealised large hedges that have pulled the company’s number down into the red in the first quarter of the current fiscal year. Titan reported a net loss of Rs 270 crore, whereas revenues slipped 74% on-year basis to just Rs 1,251 crore against Rs 4,885 in the same period last year.

Rakesh Jhunjhunwala’s questions related to the unrealised hedges. “When I unwind that hedge and I provide for a profit-loss account? I also raise the value of the gold. We don’t keep any non hedged. All our gold is hedged,” the big bull asked. Titan’s management looked to assure Jhunjhunwala that ineffective hedges would revert. “Whatever loss has been booked now will give. But what happened is because of this unusual gold rate increase, we’ve also got a stock gain in the quarter, which is very substantial,” Titan’s management said. Rakesh Jhunjhunwala is the biggest individual investor in Titan Ltd, holding 3.93 crore shares or 4.43% of the total equity share capital at the end of June this year.

Further, Rakesh Jhunjhunwala requested the management to provide investors with a note on the company’s accounting procedure with an example of how it is done. “If you could please send us a note on what is accounting and what it is? As I understand, I haven’t hedged gold. Just because this is going to continue for the next 2 or 3 quarters, at some moment, all that I’ve lost in ineffective hedges, I will get back even in my profit-loss account,” he added. 

For Titan Company, inefficient hedges resulted in a hedge loss which further increased other expenses of the company. According to brokerage and research firm Motilal Oswal, impact of higher-than-expected depreciation and interest costs along with impact of ineffective hedges has led to 6% decline in EPS forecasts for the current fiscal year.

Another issue that Rakesh Jhunjhunwala raised during the quarterly earnings call brought forward his concern about the company’s cost cutting efforts. The ace investors asked Titan’s management why they, unlike other Tata Group companies, were not being transparent about cutting expenses, or as he put it the — war on waste. “ I see no reason why the quantification of the war on waste should not be done with the investor community, the way the other Tata companies are doing this, or we are feeling shy to commit ourselves. We don’t want our performance to be examined, what we promised and what we achieved. That’s not how Mr. Chandra is doing it in Tata Motors. They are doing it from the front foot,” he said.

Titan’s management again tried to assuage the big bulls fears telling him that the company has stuck its neck out and claimed that sales would recover by the last quarter of this fiscal. However, Rakesh Jhunjhunwala was not impressed. “I’m asking that you should make war on waste public, share it, monitor it every quarter with the investors because in accordance with our tradition of transparency,” Jhunjhunwala said.

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