Titan Company Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Jewellery margin resets on one-time duty hit and gold mix: EBIT margin fell 270 bps, driven by a ₹290 crores customs duty loss and a studded mix shift as customers rushed toward gold coins and bullion. Full-year jewellery margin guidance was revised down to 11%–11.5%.
• Studded demand is healthy beneath the surface: Excluding solitaires, studded buyer growth was in healthy double digits across price bands. The weakness is concentrated in large-carat stones where investment-minded buyers are waiting for price stability.
• Wedding and H2 outlook is constructive: Wedding jewellery demand picked up post duty cut, and management expects a good run for the next two quarters. H2 is expected to be better than H1, especially for diamond studded.
• Analog watches are a quiet compounding engine: Premiumization, product innovation, and strong execution are driving sustained growth. Management sees "limitless appeal" and expects the trajectory to continue for many years.
• What to watch next quarter: Whether the studded mix stabilizes as guided, the pace of jewellery margin recovery in H2, and any concrete signal on a lab-grown diamond launch strategy.

Jewellery Margins: The 270 bps Breakdown

• Customs duty loss was the largest single swing: When the import duty fell from ₹15 to ₹6, the Gold on Lease program's natural hedge could not protect the duty already paid, creating a ₹290 crores one-time loss in Q2. Another ₹275–280 crores will hit Q3. The full-year margin guidance of 11%–11.5% is normalized and excludes this event.
• Gold rush compressed the studded mix: High gold prices drove customers toward gold coins, bullion, and higher-value plain gold jewellery, lowering the studded share. This mix effect is the main recurring drag on EBIT margin, not competitive pressure on making charges.
• Solitaires split by carat size: Large-carat stones (1 carat, 2 carat) with an investment mindset are seeing demand hold back as customers wait for international prices to settle. Smaller-carat solitaires are doing very well.
• Studded margin mechanics are structural, not competitive: The recurring margin drop reflects the product mix and the gold price component embedded in studded pieces' material cost. Management declined to quantify the split between studded weakness and gold business pressure.
• H2 margin improvement is expected but not yet proven: Management cited initiatives in early or advanced stages and expects diamond jewellery gold content and inherent margin to stabilize. Q3 and Q4 are likely to perform better, including CaratLane with an improved margin trajectory.

Venkataraman: "Certainly LGDs are far superior to ADs in any other form, because optically, chemically, physically, they mimic, they are diamonds in a sense, right? And they are just grown in the lab."

Demand & Consumer Behaviour

• Sentiment was good, calendar helped: Consumer sentiment was positive in Q2. Last year Shradh fell entirely in October; this year 13 of 15 days were in September, shifting demand into the quarter.
• Wedding demand unlocked post duty cut: Fence-sitters from Q1, who had held back partly due to election-related factors, returned once gold prices corrected after the customs duty reduction. A good run is expected for the next two quarters.
• Gold price is reshaping, not shrinking, demand: Higher-value gold jewellery continues to do well with no indication of a shift to only lightweight pieces. In diamond studded, lower price bands have performed very well across Tanishq, CaratLane, and Mia.
• Gold exchange dipped in Q2: Possibly because consumers saw a good value on their gold and preferred to hold on. Solitaire exchange also reduced, especially at the higher end.
• Competitive intensity on gold rates was met with tactical discounting: High gold prices led local and national players to offer gold price discounts. Titan responded by distributing discount payouts across making charges, gold rate, and other offers, which helped psychologically and made exchange more attractive.

Studded Jewellery: The Solitaire Overhang

• Ex-solitaire, studded is growing well: Buyer growth has been in healthy double digits across price bands, including the sub-₹1 lakh segment. The weakness is isolated to large-carat solitaires where investment considerations dominate.
• Small diamond pricing is stable: Prices rose post Ukraine war due to Al-Rosa sanctions causing supply shortages and have been stable since. There is no softness in small diamonds; Rapaport data is not relevant for very small stones.
• 14 carat vs 18 carat is a regional, not secular, trend: High-value diamond jewellery in northern and western regions has moved to 14 carat over time, but for ₹5,00,000+ pieces in certain markets, customers insist on 18 carat. No clear trend is emerging.

Venkataraman: "CaratLane is so famous for good looking affordable jewellery. Tanishq is so famous for exquisite jewellery. And the first thing you think of Tanishq is not good looking affordable. That is not Tanishq."

Lab-Grown Diamonds: Watching, Testing, Not Yet Launching

• No launch yet, no strategy shared: Management declined repeatedly to discuss its lab-grown diamond strategy, timing, or which brand might carry it. The only concrete step is a pilot with De Beers' smaller detection devices in some cities, plus testing other jewellers' product for natural vs mixed content.
• Titan frames its approach as distinct from big-box retail: Management drew a contrast with Trent, describing Titan as a category expert that creates brands and exclusive brand outlets, while a big-box retailer naturally considers fashion jewellery with LGDs. Both are free to pursue their own paths.
• On-ground adulteration data is not yet available: When asked if mixing of lab-grown and mined diamonds is increasing in the market, management said it is too early to have data.

Venkataraman: "Why do you think anything is stopping us from getting into this? We have not yet launched."

Watches & Emerging Businesses

• Analog watches are on a premiumization tear: Strong product design, innovation, and premiumization across Titan brand, Helios chain, international brands, and sub-brands like Nebula and Edge are driving growth. Well-designed collections with good value and strong execution in stores and online support the trajectory.
• Wearables correction is lifting analog share: After a couple of years where wearables share rose, the wearables market is now in correction mode, and analog share is higher.
• Watches margin commitment held at 13%–14%: Management reaffirmed the range.
• Emerging businesses are in investment mode: Growth is far more important than margin. As scale grows, some gross margins are improving. EyeCare's customer acquisition rate is at a satisfying level, and Taneira is expected to have a blockbuster FY26. IRTH's first exclusive brand outlet opened in October at Palladium Mall, Mumbai, with an explosion of stores planned over the next many months.

Venkataraman: "we expect to push the envelope on this and continue this great trajectory for many many years because this is actually a product with limitless appeal."

Store Expansion & Channel

• Tanishq: Aim to add 40–50 stores for the fiscal, dependent on finding the right property.
• Mia: Likely to reach 250 stores by fiscal year-end.
• CaratLane: Hope to add another 20 stores before March.
• CaratLane vs Tanishq overlap is acknowledged but unquantified: The portfolio is viewed holistically. Sub-₹1 lakh studded is growing double digits in buyer growth across both brands. CaratLane's higher growth rate is due to past expansion and a smaller base. Some customer flow between brands may exist but is difficult to quantify.
• International business: Store openings are by and large proceeding as per plan.

Guidance & Commitments

Key Metrics