Titan Company Limited – Be More

Date Published: February 16, 2021

Company Overview:

Titan Company Limited (earlier known as Titan Industries Limited) is an Indian consumer goods company that mainly manufactures fashion accessories such as watches, jewellery and eyewear. Part of the Tata Group, the company is headquartered in Electronic City, Bangalore. It commenced operations in 1984 under the name Titan Watches Limited. In 1994, Titan diversified into jewellery with Tanishq and subsequently into eyewear with Titan Eyeplus. In 2013, Titan entered the fragrances segment with the brand Skinn and later that year, it ventured into the helmets category under its brand Fastrack.Also, Titan announced (during the last quarter of 2016)  launching a series of affordable smartwatches under its brands like Sonata and Fastrack soon. Titan Company Limited (Titan), a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO), commenced its operations in 1984 under the name Titan Watches Limited. Titan is the fifth largest integrated own brand watch manufacturer in the world. Over the last three decades, Titan has expanded into underpenetrated markets and created lifestyle brands across different product categories. Titan is widely known for transforming the watch and jewellery industry in India and for shaping India’s retail market by pioneering experiential retail.

Industry Overview:

The gems and jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent to country’s GDP and 15 per cent to India’s total merchandise export. It employs over 4.64 million people, which is expected to reach 8.23 million by 2022. One of the fastest growing sectors, it is extremely export oriented and labour intensive. Based on its potential for growth and value addition, the Government declared gems and jewellery sector as a focus area for export promotion. The Government has undertaken various measures recently to promote investment and upgrade technology and skills to promote ‘Brand India’ in the international market. India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. India is the world’s largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by Government policies. Moreover, India exports 75 per cent of the world’s polished diamonds as per statistics from the Gem and Jewellery Export Promotion Council (GJEPC). India’s Gems and Jewellery sector has been contributing in a big way to the country’s foreign exchange earnings (FEEs). Government has viewed this sector as a thrust area for export promotion. The Indian Government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route.

Company Operations:

Since its inception in 1984, Titan Company Ltd continues to grow and set new standards for innovation and quality. With more than 1300 retail outlets across over 260 towns, having a carpet area of over 1.8 million sq. ft., it has India’s largest retail network. Titan Company is the fifth largest integrated own brand watch manufacturer in the world. Titan is India’s largest watch retailer, with over 470 exclusive World of Titan stores and 159 Fastrack stores & kiosks. In 1994, Titan Company launched ‘Tanishq’, India’s most trusted and leading jewellery brand. Today, Tanishq operates as the largest jewellery retailer in India, has over 218 exclusive Tanishq boutiques and Zoya stores. Titan Company ventured into the eyewear category through Titan Eyeplus in 2007. The brand has a retail presence of over 467 Titan Eyeplus stores.  Titan Company is backed by over 7,000 employees and innumerable admirers’ world over.A journey of over 25 years that saw Titan Watch Project becoming Titan Watches, Titan Industries and to what’s today known as the Titan Company Limited. With hitting the 15 million mark every year in production, each year saw new technologies and innovations. Entered European market in 1993, followed by Middle East and Asia Pacific, Titan watches sold over 150 million pieces across 32 countries. Topping the charts in the share of the organized watch market with a claim of 50% share, audaciously challenging the Swiss, Titan became the world’s largest integrated own brand manufacturer of watches.The main manufacturing unit is set up at Hosur, Tamilnadu along with assembly units in Dehradun, Pantnagar and Roorkee and an electronic sub assembly plant in Goa in India.India’s gems and jewellery sector is one of the largest in the world, contributing 29 per cent to the global jewellery consumption. The sector is home to more than 300,000 gems and jewellery players. Its market size will grow by US$ 103.06 billion during 2019-2023.

Tanishq

Tanishq started its journey in 1994, challenging the established family jeweller system prevalent in India with the launch of 18K gold watches studded with precious stones. Over the years, it has evolved into one of the finest jewellery brands, synonymous with exquisite craftsmanship and superlative quality. Offering traditional and modern statement pieces in gold, diamond and platinum, Tanishq offers an experience nonpareil, taking into consideration every customer’s unique needs and preferences. Passion for the highest standards in jewellery making and design provided an impetus for Tanishq, one of India’s most trusted brands, to introduce innovations like Karatmeter which helps consumers check the purity of gold and discern the quality of the jewellery. Along with conquering the watch market, Titan made its entry to the glittering side. Expanding to jewellery in 1993, the brand Tanishq was launched in 1996 and a decade later launched Goldplus – the standardized mass marketing of jewellery. This diversification was further followed by more ventures. Fastrack – the fun and youthful brand of watches and accessories, and accessories line in 2003; Precision Engineering in 2005, and the Titan Eyewear Division in 2007 – a project of prescription eyewear, complete with specialized outlets, catering to customers’ every need.Focusing exclusively on the home market that views gold as a prime investment, with Tanishq and Goldplus Titan Company hit the right chord with their offering of traditional and designer jewellery. Tanishq offers a stunning world of exquisite, precious designer ware through over 160 stores in 89 cities across the nation. Goldplus has a proud market share of around 40% in the semi-urban and rural scenario. These two ventures are a pride to India and to Titan Company, for they certainly keep value conscious customers happy and contented.

The Titan Standard

Quality, innovation and aestheticism have always been the hallmark of Titan products. The Design Studio, ranging from trend research to product development, works together to conceptualize new ideas and craft exquisite designs.Every project starts with an in-depth market and consumer study followed by an extensive trend and forecast analysis, to decode lifestyle movements and cultural trends and understand the consumer demands. Every piece is designed with meticulous detail, creating distinctive designs spread across a definite price band and product categories.

Our View:

Pioneering innovation, international design ethos, customer-oriented values and top-notch service have always formed the cornerstones for brand Titan.India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to country’s foreign reserves. The Goods and Services Tax (GST) will steer India’s gold demand going forward.In the coming years, growth in gems and jewellery sector would largely be contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Online sales are expected to account for 1-2 per cent of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low-cost gold metal loans and likely stabilization of gold prices is expected to drive volume growth for jewelers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry. With the nationwide lockdown due to the COVID-19 situation and continuing economic turbulence, there are both challenges and opportunities. The leadership position of the Company in the market coupled with strategies led by consumer understanding and insight will be of huge advantage. Consumers are likely to show changes in their behavior including preference for online and Omni-channel.

As per the mean estimates of earnings projections made by brokers at Bloomberg, the estimated EPS for FY2021 and FY2022 stands at Rs.10.96 and Rs.21.00 respectively as compared to EPS of Rs.16.85 for FY 2020. The stock is trading at a PE of 54.63 FY 2020. Therefore, taking into consideration that this recommendation of Titan Company Ltd is being given for 1 year time horizon.

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