Here's what Rakesh Jhunjhunwala asked Titan management in earnings call

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NEW DELHI: Ace investor Rakesh Jhunjhunwala, who owns over Rs 10,400 crore worth of Titan Company shares, made multiple queries around Titan’s jewellery, watch and eyewear segments in an earnings call on Wednesday.

The management was represented by Titan MD CK Venkataraman, Titan Eyeplus CEO Saumen Bhaumik and jewellery division CEO Ajay Chawla.

Jhunjhunwala said he has been owning Titan shares for 20 years but has not seen quarterly results like the one seen in the September quarter. He said the watch division’s quarterly sales were probably the highest ever and that in a non-festive season, unlike the December quarter where sales are usually high. He wondered if it was a one-off.

The ‘Big Bull’ of Dalal Street felt the eyewear division margin at 23 per cent and sales at Rs 170-odd crore was not that good and asked the management about its outlook on the segment.

He also enquired about Tanishq stores and the number of stores the company was looking to add in the coming quarters. Jhunjunwala said the company added 16 stores in the last six months and wondered how many stores the company was looking to add in next six months and 18 months.

To these questions, the management said since all cylinders are firing, all channels are doing well and consumers are coming back to the market, Titan sees good growth ahead.

Titan Eyeplus CEO Saumen Bhaumik said his division was looking to significantly add 250 stores in the next 12-15 months.

“Actually, the profitability has improved partly because it is a product mix more focussed on the house brand, the Titan brand, the Fastrack brand and so on. Second, we have somewhat altered the channel mix. Either we have done away with some of the more expensive channels or we have controlled the way sales happen today,” Bhaumik said.

Jhunjhunwala asked whether the company was pursuing a tight control over discounts.

To this, Bhaumik replied: “In the last 18 months, the company had offered no activations or discount sales. We believe this is a category which is basically a need-based category. I am not really forecasting, but 18-20 per cent would be a sustainable kind of a profit margin.”

Jhunjhunwala said the organised eyewear market in India is a nascent stage as only 10-20 per cent of the market is organised today. He asked whether the segment has a long way to go.

Titan MD CK Venkataraman said the team spent the last 18 months to transform the operations of the business mix in extracting value from the business. “In the next 18 months, we are looking at substantial growth. But investments will be required for that process as the headroom for growth is huge. This category is only going to get bigger and better. Growth will now start coming in for a greater focus and it will dilute the margins to some extent,” Venkataraman said.

Jhunjhunwala also asked about inventories in jewellery. He said gold inventories stood at about Rs 7,000-8,000 crore and ‘loan on gold’ was about Rs 4,700 crore, which suggested that Titan financed about Rs 3,300 in stock through its own money. He wondered why it did not increase the lease on gold.

To this, Ajay Chawla suggested that Titan follows the principle of targeted percentage of gold on lease as a percentage of the total inventory.

“If it becomes too high, there is a lot of lumpiness in the cash flow management. We are following a targeted proportion to optimise the cash flow,” Chawla said.

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