the Stock Story of Titan Company

TITAN

Titan Company Limited (formerly known as Titan Industries Limited) is an Indian consumer goods company manufacturing mainly fashion accessories such as watches, jewellery, and eyewear. It started operations under the name Titan Watches Limited in 1984. The firm was founded in 1984 as a joint venture between Tata Group & Tamil Nadu Industrial Corporation. Titan diversified with Tanishq into jewellery in 1994, and then with Titan Eyeplus into eyewear. Titan entered the fragrances segment with the Skinn brand in 2013, and later that year, under its Fastrack brand, it ventured into the helmets category.

    From a mere 700 Crores in income (FY 2001) to 16,000 Crores today, as history would have it, Titan would have been a ghost in its own right and a favourite of the investor world, thanks mainly to Tanishq.

 

Company History

The Company was Incorporated at Chennai on July 26, 1984. The company's primary goal was to develop analogue electronic watches with a choice of more than 150 designs. Questar Investments, Ltd., a Tata Company with its associates Tata Sons, Ltd., and Tata Press, Ltd., and Tamil Nadu Industrial Development Corporation, Ltd. (TIDCO) jointly promoted the company.

 

Financial Performance

Titan stock prices have fallen by 1.19 per cent in a month, by 15 per cent year-to-date, and by 19 per cent year-round. Net income in the January-March period increased 21.11 per cent year-on-year to Rs 356.79 crore, Titan said in an exchange filing. However, overall sales declined to Rs 4,468.84 crore at 5.46 per cent year-on-year (YoY). Over the quarter under examination, the standalone profit before tax stood at Rs 516 crore versus Rs 465 crore last year.

    In the quarter ended March, Titan's earnings before interest, tax, depreciation, and amortization rose 32.5 per cent year-on-year to Rs 603.7 crore. Its EBITDA margin rose from 9.8 per cent a year ago to 13.6 per cent. This came as revenues decreased year-on-year during the announced quarter in its jewellery division, accounting for 80 per cent of the company's revenue. It is the first time the jewellery market has seen a decline in eight quarters.

 

Dividend Payment

Titan Company has announced a 400.00 per cent equity dividend amounting to Rs 4 per share for the year ending March 2020. This results in a dividend yield of 0.41 per cent at the current share price of Rs 984.25. The firm has an excellent report on dividend track and has regularly announced dividends over the last five years.

 

Bonus

The last bonus declared by Titan business was in a 1:1 ratio in 2011. The share has been quoting ex-bonus from June 23, 2011.

 

Splits

In 2011, Titan Company had last divided the face value of its shares from Rs 10 to Rs 1. From June 23, 2011, the share was quoting on an ex-split basis.

 

Efficiency of Management

The top management of the company includes Mr N Muruganandam (Chairman), CK Venkataraman (Managing director), N N Tata (Vice-Chairman), Mrs Hema Ravichandar (Independent director), Mrs. Ireena Vittal (Independent director), Mr Ashwani Puri (Independent director), Mr B. Santhanam (Independent director), Mr Pradyumna Vyas (Independent director), Dr Mohanasankar Sivaprakasam (Independent director), Bhaskar Bhat (Director), Mr Arun Roy (Director), Ms Kakarla Usha (Director), Dinesh Shetty (Company secretary).

    In 2002, Bhaskar Bhat took power, steadied the ship, transformed Tanishq's loss-making into a profitable company, chartering a turnaround story for the ages. All sales and earnings have seen steady growth, and Titan's prospects are still considered positive.

 

Factors which affected the stock price

➢     In collaboration with Casio Computer Company of Japan, the company proposed to produce 2 million digital and analogue-digital watches. In November 1986, the Company and Casio signed an MOU.

➢     In December 1989 a new line of watches called 'Aqua' was launched.

➢     More than 150 new models were launched, of which 'Raga' launched in June and in August 1992 re-introduced a range of watches in steel and gold plated with a new look called 'Spectra'.

➢     The company's name was changed from Titan Watches, Ltd. to Titan Industries Ltd. with effect from September 21, 1993, given that the company's products consisted not just of watches but also of jewellery.

➢     The company launched the 'Tanishq' series of watches from 18-carat gold and studded with precious stones during the year 1994.

➢     In 1995 the company proposed to set up a joint venture with Hour Glass of Singapore to set up watch boutiques for the selling of luxury watches in leading Indian cities.

➢     In 1996 the company launched a new economical range of watches called Sonata and the 22 Karat ethnic Jewellery of Tanishq.

➢     In 2000 Titan Industries announced the launch of Cyber, a series of digital clocks. The company has also launched a new line of wrist-watches for Corporate Executives, named the Classique series.

➢     Titan Industries Ltd. released three new collections of its iconic kids' watch brand Dash — Popeye, Digital, and Lumibrite — in 2001.

➢     In 2003 Titan floated for aviation and auto equipment for automotive and aerospace precision mechatronics. Tanishq moved into a new Silverware chapter.

➢     On June 18, 2004, Tommy Hilfiger Licensing Inc. licensee GVM International Ltd. and a member of the Murjani Group entered into an exclusive sub-licensing agreement with Titan Industries Ltd to market and distribute Tommy Hilfiger watches in the country. Titan relaunched 'Raga' the same year, the watch range for women. For the launch of sunglasses, Titan forayed into the fashion accessories industry and rolled out a new line of jewellery watches under Nebula's name. In the same year, Titan also collaborated with the LVMH Group.

➢     Titan re-introduced the Fastrack range of several watches and launched the Raga coordinate series in 2005.

➢     Titan Industries unveiled Xylys Watches in 2006.

➢     In 2010, Titan Eye Plus opened the Lens Manufacturing Unit of world-class.

➢     In 2011 Titan acquired Favre-Leuba from Swiss watchmaker and entered the European market.

➢     In 2013 Titan joined the category of fragrances with the Skinn brand. It had changed its name to Titan Company Ltd in the same year.

➢     In 2014, Titan Company entered into a joint venture agreement with Montblanc Services BV, Netherlands, to create a single-brand retail operation in India.

➢     In 2016, by launching its smartwatch, Juxt, made through a partnership with Hewlett Packard, Titan entered the Wearable Devices business.

➢     In 2017 Titan switched from network. Gold Plus to Tanishq network.

 

Titans Gold Story

The jewellery industry at the company occupies a whopping 82 per cent share of revenue and is the primary driver of growth. So while Titan is famous for being a watchmaker with the masses, it's Tanishq that drives the company forward. Titan doesn't buy any of his gold directly, but buys them on lease and makes payment only after the gold was sold that day based on the quoted market price. This means they don't have to think about fluctuating gold prices and concentrate on producing and selling jewellery, their primary business. It also happens that leasing gold is a much cheaper alternative to purchasing gold straight away. When you lease gold, you pay a much smaller fee, so you need less cash to make those transactions, helping ease the financial burden.

In 2013, India's Reserve Bank released a circular saying company were no longer able to buy gold-on-lease but had to pay the full sum upfront. Tanishq and the other jewellery firms could no longer profit from the gold-on-lease scheme once the notification was made public. Imports started to plummet, the current account deficit decreased, and the Titan's stock price was tanked by 25%. The decision has had a substantial effect on the finances of the company, and most experienced investors who have compensated for this have instantly sold their shares, causing the fall in stock price.

    Titan currently has a market share in the Jewelry segment of around 4–5 per cent. It wants the amount to double by 2023.

Conclusion:

The Covid-19 pandemic significantly impacted the company with the shutdown of all stores in the second half of March 2020. Notwithstanding high gold prices, the jewellery sector had a strong quarter until lockdown. At the end of June, Titan said it had reopened about 83 per cent of its stores across all industries. The group's jewellery division has reopened about 95% of its Tanishq stores.

    Titan's Jewellery division decreased by 5 per cent in March 2020 due to loss of revenue. January & February month's sales growth was about 16.5 per cent. The activation of the diamond-studded in the quarter did well, and sales of wedding jewellery remained strong before the disruption. The business announced a 20 per cent decline in revenue for the quarter ended March 31, 2020, in the segment of Eye Wear due to a fall in the channel of trade. Other Titan businesses witnessed a 42 per cent growth over the same period last year during the quarter. In January 2020 and February 2020, Titan's CaratLane subsidiary reported phenomenal growth of 48 per cent. Yet the instability in March resulted in a quarterly rise of just 18 per cent. Titan Engineering and Automation (TEAL) reported a 39 per cent growth for the quarter and 35 per cent growth for the financial year for its subsidiaries. The organization said the division of automation and the aerospace and defence divisions performed exceptionally well throughout the year.

    The company said the fastest-growing channel for both Q4 and FY20 was e-commerce. Valentine's activation sales and new product introductions have improved the retail sales in large format stores or LFS.

~ By Alex Thomas