Titan Company Ltd Q4 FY2023 Concall Summary

Key Takeaways

• Jewellery demand whipsawed by gold price: March and early April softened sharply as gold price spikes kept buyers on the fence, but Akshaya Tritiya brought a strong rebound. Volatility is the new normal, with demand excellent during festive and wedding windows and nervous when prices move fast.
• Same-store growth is real, not just gold inflation: 19% value growth was built on ~10-11% more buyers and richer product mix (studded ratio, complexity), not price alone. Management is targeting "good double-digit" same-store growth independent of gold price moves.
• Jewellery margins got a ~1pp one-off boost that won't repeat: FY23 EBIT margin of 13.7% included custom duty gains and diamond inventory stock gains; normalized run-rate is 12.5-13%, and that is the FY24 expectation.
• Eyecare Q4 was a cleanup quarter, not a structural reset: Sales slowdown, lens stock write-offs, channel destocking for a product relaunch, actuarial costs, store openings and closures, and an ₹8 crore franchisee wealth-sharing payment all hit at once. Adjusted for one-offs, underlying performance was mid-teens.
• What to watch next quarter: Whether the Akshaya Tritiya demand momentum carries into the strong May-June wedding calendar, the pace of the 40+ new jewellery store rollout, and any normalization in studded margins now that lower-cost diamond inventory is fully consumed.

Jewellery: The Demand Engine

• Gold price as a demand switch: Sharp gold price rises in March pushed customers to the fence; demand softened through the first half of April. The Akshaya Tritiya festive period and associated offers triggered a strong recovery, confirming that latent demand releases when sentiment stabilizes.
• Same-store growth anatomy: 19% value growth was driven by ~10-11% buyer growth plus ticket size expansion from product mix enrichment (higher studded ratios, more complex products), not merely gold price inflation. Management explicitly targets "good double-digit growth" for same stores going forward, decoupled from gold price.
• Wedding jewellery underperformed but ambition is rising: Wedding contribution dipped to 19% of total jewellery vs 20% last year, largely because Q1 FY23 did not fire well for weddings. Management has set a much more aggressive growth target for FY24 and the next 3-4 years, aiming for contribution to be "a couple of percentage points higher in the coming year."
• Wedding inventory is turn-dilutive and still sub-scale: The wedding business requires more inventory and is turn-dilutive; the company has not yet reached optimal inventory levels and is phasing the build selectively across communities and markets.
• Gold exchange as a growth lever: Management sees a correlation between higher gold exchange program share and total brand growth, driven by upselling when customers discover the value of Tanishq exchange and products. Directionally expected to rise, but magnitude is uncertain.

Venkataraman: "The more we are able to increase the share of the gold exchange program, the GEP, actually it will push the growth of the brand because the size of the exchange, the extent of upselling that happens with, when people discover the value of Tanishq exchange itself as well as the products and all that, the upsell potential is also high."

Jewellery Margins: One-Offs vs. The Run-Rate

• FY23 margin benefited from ~1pp of non-repeatable gains: Custom duty gains from CEPA gold imports contributed ~0.6-0.7pp, and diamond inventory stock gains from consuming older, lower-cost inventory added further uplift. Both are now exhausted: diamond gains ended by Q3, and CEPA benefits are now part of the base.
• Normalized margin band is 12.5-13%: Management expects to sustain this range in FY24, balancing competitive intensity against growth opportunities. The 13.7% FY23 print is not the new baseline.
• Studded ratio recovering but not fully back: Activation was good in the quarter; studded mix is better than last year but still slightly below pre-pandemic levels, though the company has come close. With lower-cost diamond inventory fully consumed, studded margins are now normalizing.
• Melting is stable and not a margin concern: Melting as a percentage of net sales value has been fairly stable over the last 4-5 years and is not significantly changing upward or downward.

Eyecare: A Quarter of Cleanup

• Multiple one-off hits converged in Q4: Sales slowed in the second half of the quarter; accumulated and discolored lens stock from franchise stores was cleaned up; the distribution system was destocked ahead of a product portfolio change; annualized employee-related actuarial costs hit; 18-19 company stores were opened unbudgeted (rent and employee cost impact); ~22 underperforming stores were shut down; and an ₹8 crore one-time wealth-sharing payment was made to franchisees who supported during difficult times.
• Underlying performance was mid-teens: Adjusted for these one-offs, the eyecare business was closer to its mid-teens margin profile. The product portfolio restructuring required a month's gap to destock the trade channel before introducing new products with restructured margins.
• Store expansion plan is aggressive but city-contained: The company will open another 100 stores in the coming 8-10 months, hopefully within the first 6 months of FY24, and will not go beyond the top 20-21 cities. The store count should reach the number spoken about 1-1.5 years back by October-November FY24.

Franchisee Economics & Terms of Trade

• A 15-year-old structure was refreshed: The franchisee terms-of-trade structure for Tanishq jewellery was restructured during the quarter after being unchanged for ~15 years. The change aligns incentives between the company and franchisees toward a more profitable product mix and introduces new categories of complexity.
• Impact on company profitability is very limited: Many franchisees are expected to gain depending on the mix they sell. Management characterized the change as an operating aspect, not a strategic or business model shift.
• Franchisee returns are best-in-class: Management stated that Tanishq franchisees make "exceptionally good profits and returns on investment," with most wanting second, third, fourth, and fifth stores, and the company unable to fulfill that desire.

Chawla: "It is purely about aligning towards a more profitable future."

Venkataraman: "It's an operating aspect of the business. And frankly, the questions are sort of ending up making it look like a strategic or a business model kind of subject which it is not. It is an operating aspect."

Watches, Wearables & Emerging Formats

• Watches and wearables margin in the 12-13% range: Strong revenue growth came with investments; actuarial calculations impacted overall profits. The margin for the year is in the 12-13% range, in line with previous guidance, and FY24 is expected to stay in that band.
• Wearables are scaling fast at a margin discount: Q4 turnover share reached ~13% and full year ~10%. Margins are slightly lower than watches but at a premium to comparable products from other brands. Long-term, wearables present a huge business opportunity but carry an inherently lower margin profile than watches; margins are expected to improve over time with decisions including Make in India.
• Mia nearly tripled revenue to ~₹730-740 crores: ~40% came from standalone stores, the rest from Tanishq stores, with negligible online contribution. FY24 target is ₹1,300-1,350 crores.
• Golden Harvest enrollments at all-time highs: Enrollment-to-buyer ratio reached record levels, with very healthy double-digit enrollments in Q2, Q3, and Q4.

International & Bullion

• International response has been overwhelmingly positive: The first US store opened in December; the company now has 7 international stores total and plans to expand to roughly 25 stores cumulative by end of FY24 across GCC (UAE, Qatar, Bahrain, Oman) and the US. A franchisee partnership with Sharaf Group was announced for Tanishq-branded stores in the UAE.
• Strategy is Indian-consumer-first, with adjacencies: The primary focus is developing a strong competitive offering for Indian consumers. The company is also working on product lines for non-Indian needs of Indian consumers to maximize share of wallet.
• Bullion sales spiked in Q4 for balance-sheet reasons: Nearly 50% of the full year's bullion sales occurred in Q4 because of substantial CEPA gold imports (several tonnes) in the last 4-5 months. To manage capital employed, the company did more bullion sales to maintain gold-on-lease as a proportion of overall inventory at a certain percentage. Some proactive spot buying in Q3 due to CAD deficit worries also contributed.

Venkataraman: "We want to become a one-stop shop for all Indians... With the product lines that we are currently going with from the non-Indian needs of the Indian consumers is also a pretty decent opportunity."

Guidance & Commitments

Key Metrics