Titan Company Ltd
NSE:TITAN
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
3 120.85
3 866.65
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Titan Company Ltd
Earnings Call Analysis
Q2-2025 Analysis
Titan Company Ltd
Titan Company Limited reported a strong quarter with positive growth signs following a successful Diwali. Despite these positives, the company faced challenges in margins, especially within the jewelry segment. This indicates a conflicting scenario where growth exists alongside pressure on profitability, highlighting the complexities in the current market landscape.
The jewelry segment experienced a significant margin drop of 270 basis points due primarily to a one-time custom duty loss amounting to INR 290 crores. This substantial loss affected the EBIT margins which moved from 14.1% last year to 11.4% this quarter. The lower studded jewelry mix, characterized by increased gold coin purchases and a softer demand for high-carat solitaires owing to market uncertainties, also contributed to this decline.
Within the studded jewelry category, there was notable strength in demand, excluding high-carat stones, which appear to be affected by investment hesitations amid fluctuating prices. Interestingly, the overall buyer growth in studded jewelry remained positive, indicating a robust interest among customers in lower price bands.
Looking forward, Titan has adjusted its consolidated jewelry EBIT margin guidance from a previous range of 11.5%-12.5% to 11.0%-11.5% for the fiscal year. The company expects its second half earnings to perform better, projecting an improvement in margins due to ongoing efficiencies and stabilization in diamond jewelry pricing. H2 is anticipated to outperform H1 as the market absorbs the recent custom duty adjustments.
In response to the rising competition in gold and diamond pricing, Titan has taken strategic precautionary measures to maintain competitive pricing while protecting its margins. The company is also keenly observing changes in consumer behavior regarding lab-grown diamonds, which are gaining traction, especially in the lower price segments. However, Titan remains committed to its core offerings of natural diamonds.
Titan continues to expand its physical footprint, having opened 22 new Tanishq stores recently. The company aims to add between 40 to 50 new stores across its brands by year-end, reinforcing its growth strategy in both traditional market settings and expanding e-commerce platforms like CaratLane, which has demonstrated impressive performance with over 300 locations.
Consumer sentiment remains strong, particularly in the festive season leading to anticipated robust wedding jewelry sales. The company has observed an inclination towards higher-value jewelry instead of a shift to more affordable options, setting the stage for a strong performance in the upcoming quarters, especially as gold prices stabilize.
While overall prospects appear optimistic, potential risks remain in the form of fluctuating gold prices, competitive pricing pressures, and uncertainties regarding consumer adaptation to lab-grown diamonds. Thus, investors should monitor these dynamics closely as they could significantly impact Titan's financial performance.
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Q2 FY '25 Earnings Conference Call of Titan Company Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. C.K. Venkataraman, Managing Director from Titan Company Limited. Thank you, and over to you, sir.
Thank you very much. Good evening, everyone, on the call. It's good to join you immediately after a wonderful Diwali. Happy Diwali belated to all of you. And we are also happy to do this call on top of good growth quarter in Q2.
I would like to circle back at the end of the call to give my broader comments on the company and the various facts. Now I can hand over to the people who would like to ask us questions, please.
[Operator Instructions] The first question is from the line of Devanshu Bansal from Emkay Global.
Congratulations on a good growth performance in Q2. My first question is on margins, sir. In the jewelry segment, there has been a 270 bps margin drop. I just wanted to understand if you could segregate this into various margin brackets. Is it like due to pressure in gold price margin, weaker revenue mix or higher promotions on making charge marketing, et cetera? So broadly, if you could help us understand the breakup of this.
This is Ajoy here. We had two, three impacts on margin this quarter. One was a substantial part of it is on account of the onetime custom duty loss, which has flown in already part of it in this quarter and partly in the next, that's a substantial part of it.
Beyond that, it is to do with the studded mix being lower than the expected one, again, on account of two factors. One is there was a gold rush of sorts in quarter 2. Therefore, the gold component was much higher, including a substantial rise in gold coins and bullion purchases. And the other is in studded, the solitaire, particularly the large carat stone demand has been under pressure due to price uncertainties in the market linked to international demand supply situation.
So all these three factors actually contributed to most of the reasons for the margin drop. Some amount of marketing investments for the brand, et cetera, to drive growth would have contributed, but that's not substantial. That would be a very small impact.
And maybe we can just quantify, Ajoy, custom duty impact in the quarter is INR 290 crores.
Yes, that's mentioned in the PPT, sir. Ajoy, I also wanted to understand the reason behind this weak sort of growth in studded. Obviously, solitaire you mentioned. So if we have to divide it into two broader reasons. One is from a studded perspective, the other competition is sort of giving a relatively better pricing on studded, that is one. And the second, obviously, is the growing noise around the lab-grown diamonds. So what do you attribute this to as of now, among these two reasons?
So as I said, solitaire demand has been a big contributor to the impact on overall studded. If I exclude solitaire and look at the growth without solitaire, actually, the studded growth is quite healthy. Okay? And even within solitaire, I can further specify that the biggest stones where price uncertainty is high and where there is a certain investment mindset which exists for those people who are buying higher carat stones, 1 carat, 2 carat and so on and so forth, they have been holding back because they're waiting for prices to settle now.
Now it is not entirely clear, is it because of lab-grown, but it is also true that international demand in China and many other markets which have nothing to do with lab-grown has also been on the back foot. And therefore, there is a demand supply issue on large-size solitaire stones.
Competitive pressure-wise, I don't see a big issue because, as I said, studded jewelry demand has been good, and in fact, buyer growth have been in healthy double digits across price banks. So even the sub INR 1 lakh price band, which some people might ask. So actually, we are very happy with the buyer growth in studded. Therefore, more customers are in the market for studded.
Just a small follow-up. What would be qualitatively, the margin difference between solitaire within studded and the other smaller pieces that we sell under the studded jewelry?
No significant difference.
The next question is from the line of Tejash Shah from Avendus Spark Institutional Equities.
Ajoy, the first question is with most categories, consumer category that lags -- being soft this quarter, except jewelry has actually done well at large even as a sector, how do you gauge consumer sentiment? Any early read on festive or wedding demand trends also?
I think the consumer sentiment was good, I would say, in this quarter. The only slight, let's say, adjustment we have to make. Last year, Shradh was in October, most of Shradh -- all of Shradh. This year, 13 days out of the 15 days of Shradh was in September. So it kind of shifted quarters. And that -- while we factor it into our business plans that when you look at it from a calendar perspective, may not strike you. And therefore, I see sentiment to be very good, even festive sentiment has been excellent. So I think it's fantastic.
And the same view would extend to wedding jewelry demand also?
Yes, wedding jewelry demand started picking up post the custom duty reduction announcement because there were many fence sitters, which we believe from first quarter and election and all of those factors which impacted first quarter overweighting. Once gold prices corrected, many people came in. And as we speak also, because festive is a good period to also pick up jewelry -- festive -- wedding has picked up, and we think it's a good run ahead for the next 2 quarters.
Yes. A small follow-up there. So with high gold prices, are you seeing any shift towards lighter or more affordable jewelry or any preference trending across price points or regions you can share?
Actually, no. We have seen that higher value jewelry and gold especially if I look at it, has continued to do well. In the lower -- very low price points because of the price of gold having gone up, some products have moved price bands. So on gold, I would say there is, in fact, no indication that it is only lightweight which people entered. It's pretty much what it is.
In the diamond studded, there was some, but I think I'm not sure with the consumer sentiment. I think the ticket size in studded was impacted partly on account of solitaires and partly on account of a delayed launch from our side in certain price banks. But I don't see any correlation coming out there. Lower price bands in diamonds have done very well, whether you look at CaratLane, whether you look at Tanishq or Mia. So not seeing any trends.
Sure. And the last one on lab-grown diamonds. So we have been in a wait and watch or monitoring phase for the last few quarters, as you called out. Any early findings on consumer interest now or any pilot initiatives underway that you can share?
No, we continue to observe. We are not seeing inquiries across our stores other than clarifying that all the diamonds we are selling are natural, et cetera. We continue to observe and study the customer and keeping a close track of it. So as of now, nothing more to report.
The next question is from the line of Avi Mehta from Macquarie.
Just on the margin front. First, we have seen the first half at almost about 11.3% adjusted for this custom duty. Could you -- would you still look at 11.5% to 12.5% for the year? Is that a range that we can kind of -- how should we look at FY '25, if you could give us some sense?
Okay. Ashok here, I think given what we have done in H1 and the likely attraction of gold continuing, I think FY '25 looks like more between 11% and 11.5%. And then maybe we can come back that are we going to go back to our original guidance for the next year.
Got it, sir. Perfectly clear. And just a second question is on, again, sorry, on lab-grown diamond. I hear you clearly on the consumer adoption. I just wanted to appreciate that within the Tata Group, some of -- one other company has launched lab-grown diamond. Does that indicate or preclude our -- any possible entry by us? Or how should we look at that? Or would love to hear your thoughts on the same.
Avi, Venkat here. Trent is big-box retailer and Westside sells multiple categories. So they sell perfumes, Titan sells perfumes, they sell women's bags, Titan sells women's bags and salwar kameez and so on. So in a way, the -- it is natural for big box retailer to consider fashion jewelry and the introduction -- use of the lab-grown diamonds in the fashion jewelry.
We are a category expert. We create brands, we create EBOs and we play the game very differently. And both of us are free to pursue our own destinies. I think because the lab-grown diamond is a strategic subject in the jewelry industry, obviously, this question is raised as opposed to perfumes and bags, I understand that.
But it certainly does not preclude us at all from doing anything that we want. It is just that we choose to do our business in a particular way, and this is a matter of such strategic importance that we would announce it when we are ready to announce it, that's all.
Got it, sir. And sir, just to clarify, if I heard your comment correctly, the current performance of non-solitaire studded jewelry reaffirms our expectations. That's the right read-through on how would you look at lab-grown.
Yes, yes. The non-solitaire side of the demand is very good and healthy, even solitaire, the smaller carats are actually doing very well. The bigger carats where the investment-oriented buyer is there who is waiting and watching. And that's what customers have also told us.
And sir, any share that you could share of how roughly it would be salience for us than the large diamonds because I would assume it would be a little your smaller share.
It is a fairly small share. But in the recent past, we had upped the game in the last 2, 3 years. So we had clocked in very, very good growth. So the base effect has played a role. Otherwise, it's a small share.
The next question is from the line of Jay Doshi from Kotak.
Just clarifying on the guidance for EBIT margin, the earlier guidance was 11.5% to 12.5% at the consol jewelry EBIT margin. So has that now changed to 11% to 11.5%, basically, it's consol jewelry EBIT or stand-alone?
So yes, you must appreciate that still Titan jewelry is the significant part of that. So whatever applies to Tanishq would actually hold true for the consolidated also. So, yes, it is overall.
Overall. So if I look at the first half numbers, recurring consol EBIT margin is 10.5% for jewelry business. And for you to sort of deliver 11.5%, it means the second half should be -- 11% at a lower end, second half should be 100 bps better than first half.
So are there any sort of efficiency levers or any trends that you're sort of seeing in the market that gives you confidence of improvement in second half -- margin improvement versus what we've seen in first half? And I'm referring to recurring, excluding onetime impact of import duty.
No, I understand. So some of the initiatives which have been taken on and they are in the early stage or some are slightly advanced stage, kind of makes us believe that some improvement we can do. Even like diamond jewelry where the gold content and the inherent margin of that stuff have gone down slightly, may slightly stabilize. And even quarter 3 and quarter 4 likely performance, which we think including CaratLane, CaratLane also margin trajectory would be slightly better in H2 for sure. And that is -- that's what gives us confidence in quarter 2 -- H2, we will be slightly better off than H1.
Yes. I'll just supplement on the demand side, we have always maintained that this year, quarter 1 would be the weakest because of the many, many factors at play, we spoke about it. H2 is, therefore, expected to be certainly better than H1. And certainly for diamond studded even more so, and that gives us the confidence that it would be a better margin play in H2.
Sure. And is it possible, so when we look at this quarter's margin of 11.4% versus 14.1% last year, there is a 270 basis point drop. And when we look at 1Q, the drop was actually not that much on a Y-o-Y basis. And 1Q was a much weaker quarter from top line growth or operating leverage perspective.
So is it possible to break down this 270 basis point recurring EBIT margin drop this quarter? How much of that is attributable to, let's say, weakness on the studded side or mix? And how much of that is basically competitive pressure in the gold business?
Most of it is studded product mix, and studded product mix and gold coin mix also being -- and some of it, as Ashok pointed out, the gold price component in the total material cost of the studded piece also adds up into that. And therefore, it's really linked to studded share, not so much on the competitive margin. Competitive margin will get impacted, therefore, on the gold price going up and product mix on account of studded share and gold coin share. These are the three factors beyond...
As a thumb rule, my understanding was 100 bps drop in studded share would account for about 20 bps impact on margin. Is that correct? Or you think it should -- it will be much higher?
We can't confirm that because product level margin discussion, we don't...
The next question is from the line of Percy from IIFL.
Just a question on consumer behavior. So supposing if there is a consumer with a budget of, let's say, INR 1 lakh to INR 1.5 lakh who wants to buy a diamond jewelry, and supposing this customer is now saying that, okay, let me evaluate a jewelry made from lab-grown diamonds. Then what does he do in this situation? Does he buy similar type of jewelry by slashing his budget or does he more or less maintain his budget and upgrade the quality or rather the caratage of the diamonds?
It's a very hypothetical question. I'll try to answer it in the most factual way I can. INR 1 lakh to INR 2 lakh price segment has seen fantastic buyer growth for Tanishq in this quarter. So -- and it continues. So I sense that customer is not swinging too much, okay? If it was, we would have started seeing some weakness.
Second piece of information that I have picked up from whatever consumer understanding and market work is, the moment lab-grown jewelry goes beyond INR 1 lakh, the customer interest significantly falls. In fact, most of the players are selling products largely in the sub INR 1 lakh space and maybe INR 50,000, INR 60,000, INR 70,000.
There is a segment of people at the very top end, who might be asking the jeweler to give them a lab grown in big stone, which may be in that INR 10 lakhs, INR 15 lakhs. That's -- it's difficult to estimate that demand. But most of the players that you see in the marketplace are selling pretty much sub INR 1 lakh. So I think beyond an like, there is a barrier in the customer's mind is my understanding from whatever happened.
Understood, understood. So let's say, supposing there is a customer who wants to buy in that INR 1 lakh to INR 1.5 lakh ticket size. And supposing, I know you said that he is unlikely to go to lab-grown diamonds. But supposing he wants to buy a very, very similar piece made through lab-grown diamonds, then how much does we actually save on his budget? Does that INR 1.5 lakh become INR 50,000? Or does it become INR 1 lakh, what is the rough ballpark here?
It will be below INR 50,000.
Okay. So basically, even at a INR 1.5 lakh ticket size, which is a studded jewelry, which means that there are multiple pieces of diamonds in it, even at that point, he saves like 65% of his cost.
I don't know whether we can get the same piece with the same stone configuration. He may be able to get something at INR 50,000, INR 60,000, which may not have exactly the same stone config. It's a very difficult hypothetical question. But by and large, I think he would not -- the person would bring it -- the budget would come down to INR 50,000, INR 60,000, maybe max INR 70,000...
And for what it is worth, to answer your first question, in the American market, the general tendency of people is to buy a much bigger product for the budget that they came with. So INR 1 lakh -- if you look at $10,000, so I would buy a much bigger stone for the $10,000, and in a way, make myself and my bride to be happy with that bigger stone. And that's the tendency in the U.S. as opposed to buy a similar product at 1/3 the price.
So if that is the case, Venkat, then what stops us from getting into this segment? Because my understanding is what's stopping us is the value depletion that if we start offering LGD, the top line itself will suffer even if the volume goes up. But if the top line is more or less maintained and the gross margins anyways are quite healthy on LGD, then what is the detriment in you launching this product?
Why do you think anything is stopping us from getting into this? We have not yet launched.
The next question is from the line of Nihal Mahesh Jham from AMBIT Capital.
I have my first question on the demand, Ajoy. The press release mentioned that there was strong momentum till mid-September. Just wanted to clarify that after the initial spurt that you saw post duty cut, has the demand trends sustained or there has been a sharp moderation? Just wanted to clarify that part first.
No, it's sustained. I would only say that there was a pause during the Shradh period, which started around the 17th of September till the end of the month and actually till 2nd of October, from 3rd onwards, again, it picked up. Of course, this excludes Bengal because they start their Pooja purchases. But after that, it's continued well into the season.
Understood. That's clear. The second question was again on the LGD bit. As you also highlighted, based on what you've discussed on this call that the demand for LGD is mainly in the sub INR 1 lakh price point at this point in time. And more than Tanishq, I think CaratLane operates in that price point with a very high share of solitaires. So is it right to say the kind of a customer that a CaratLane serves and also say if LGD becomes more fashion oriented, that is the brand which could see maybe more migration of customers and maybe that's the brand where LGD launch would make sense, just your thoughts on that?
Actually, we would like to share anything about our strategy, whatever that is, when it is going to be on this. So it would be -- it is -- actually, if you really think about it, it's a natural strategy that you're asking us to reveal before we actually launch anything like that, right? So like I said earlier on the call, we would speak about it in detail when we are ready to speak about it.
Just one factual correction that CaratLane doesn't have -- it looks like you said that they are selling a lot of solitaire. That...
Not solitaire. Studded, I mean, studded, I'm sorry.
Yes, Studded, yes.
The customer match.
So let me also just reiterate another point. CaratLane growth has been fantastic in this quarter. Mia growth has been fantastic in this quarter. Tanishq sub INR 1 lakh studded growth has been fantastic this quarter. And overall buyer growth also has been in early double digits, which is very good for studded. So there is no current sense that this is getting impacted, if that's the hypothesis you have.
Sir, just correct me, maybe it is not about this quarter and not about the impact, but just that would that customer be more relevant from an LGD perspective, let's put it that way, rather than a Tanishq customer?
Very difficult to comment because right now, there is no data to give evidence on that front, not just now, over the last several quarters. And this question has been coming and this hypothesis seems to be alive since the last several quarters almost continuously. And currently, the data is not showing up.
[Operator Instructions] The next question is from the line of Shirish Pardeshi from Centrum Broking.
Ajoy, just two observations. Our studded ratio has come down to 30% and in Tanishq, it has grown about 12%. While in the CaratLane, what I'm reading is about -- the growth is about 41%. So is the nature of the business -- what I'm trying to understand, is there any overlap of the customers between CaratLane and Tanishq? And what you mentioned is the shift which is happening from, say, a particular customer who is buying say less than INR 1 lakh studded at Tanishq is now moving to CaratLane?
So we do look at it as a portfolio. And in sub INR 1 lakh studded, as I said, the portfolio is growing double digits in terms of buyer growth and the growth in CaratLane is certainly high because of the expansion that has happened in the past, and we'll continue to be showing higher growth. It's also a much smaller base.
In the case of Tanishq, there is no reason to believe because even Tanishq has a large dependence on the sub INR 1 lakh studded number of buyers. And we have seen actually good buyer growth even for Tanishq and Mia, which is there in Tanishq stores as well as Mia as a channel by itself. So there may be some flow here and there that keeps happening, but it's very difficult to quantify that. We have not really got into that level of depth. We do look at it as an overall portfolio. Yes, I think Saumen wants to add.
Saumen here. CaratLane play is by and large in the sub INR 50,000 if you look at the real price point-based segment. So it is not even at INR 1 lakh, it is significantly below INR 1 lakh. INR 50,000, INR 30,000 to INR 50,000 is the max of our product that we sell, yes.
The reason why I'm saying I had a first-hand experience around Diwali. So we want a nearby store and which is next CaratLane. And we saw a lot of people around CaratLane and people were completely buying only gold from Tanishq. So is there is a segmentation happening within the consumer minds? That's my fear.
Actually, just -- there are multiple angles sitting here. First of all, CaratLane is Tanishq. Secondly, CaratLane is so famous for good looking, affordable jewelry, Tanishq is so famous for exclusive jewelry, and Tanishq is, the first thing you think of Tanishq is not good looking, affordable, just Tanishq. Tanishq price, when you ask so much about the wedding, for example, or if you take the campaign of Tanishq for Diwali, which is now running, which is exclusive, big jewelry.
Natural place for customers to go for affordable, good-looking jewelry would be a CaratLane or a Mia. And therefore, you will see a lot more people sort of crowding in that store and in a small store, 10 people will look crowded. In a big store, 20 people will look not so crowded. So that's also there. But the more important thing is what the brand is famous for and why people buy, a lot of gifting happens in CaratLane, all these are there as dimensions.
And gold, season time, gold is a very big draw. The play of gold in Tanishq will -- is far higher than the play of gold in CaratLane or Mia for that matter. It's completely the other way, so there will be a trust for gold always.
Okay. Just one quick follow-up on jewelry. Venkat, what is the new buyer contribution or new buyer growth? Because you have given total buyer growth is at 12%.
Total -- the contribution of new to repeat in the current quarter continues to be similar as last year. The growth is around the same, around the same percentage that we have seen. So both have grown at the same rate.
Okay. My second and last question to Suparna. What is -- we are seeing that analog is doing much faster. In last 2, 3 quarters, it's double digits. So is there a particular trend or is there a particular product innovation or mix we have tried to showcase to the consumer? And how long this growth will continue? Or do you think this is now in the base?
Yes, so Suparna here. You're right, analog is seeing good growth in the last few quarters. And it's on the back of very strong product design and innovation. Also on premiumization, so if you see Titan brand or the Helios chain or, say, international brands doing very well, the premium sub-brands like Nebula, Edge, et cetera, doing very well.
So this has been going on for a while, and it is -- this trend is becoming stronger, and it is really getting manifested in very well-designed collections with very good value for the consumer for that price point and also supported by very good execution, both in our stores, on ground stores as well as in the play that we have in online.
So it's a combination of many things coming together. And we do believe that our product pipeline and the overall product strategy will keep delivering good results for the next few quarters.
Yes, I got that. Does that mean that, that 14.9% EBIT margin what we have shown, there is upside to this margin?
Difficult to say, I would go back to what we had said during the Investor Day that 13% to 14% is definitely in the range that we will commit to.
The next question is from the line of [ Krish Shanbhag ], an individual investor.
Sir, my question is on the loss due to import duty cut. Historically, you have always said that you hedge your gold. So there is no impact of falling gold prices. So why is there a loss when you have hedged for -- hedged yourself?
So we will try to explain, we source a lot of gold through gold on lease program where the price -- which is a natural hedge because price is fixed on the date of sale. So that gold inventory is in a way, price-wise is not exposed, but custom duty is already paid. The day we source that gold on lease, custom duty is paid, but the price is fixed on the date of sale.
So that inventory is always exposed to custom duty variation. In the past, sometimes, when custom duty went up, we made some gains also and that also if you go in our quarterly results, you will find that we have talked about that. This time, the drop was very steep, and that is why a significant loss.
So just to elaborate and make it totally absolutely clear, if INR 100 was the import rate, and INR 15 was the customs duty paid, we paid the INR 15, but that INR 100 was floating till we fixed it, which we typically match with sales. So if INR 100 became INR 105, we sold it at INR 105, fixed it at INR 105, no loss, but the INR 15 was INR 15, and we couldn't hedge that INR 15 separately. And if the INR 15 fell to INR 6 as it fell, INR 9 we have to lose, we ended up losing.
The next question is from the line of [ Sourav Mondal ] from RK Advisory.
Am I audible?
Yes, please.
So my question is about analog watches. What is the trend there? And if you could give some sense about price category trends? And last 3 years and going forward, what is the revenue share of analog to wearable category?
So the trend is, like I mentioned earlier, there is a very clear premiumization trend where watches above INR 5,000, INR 10,000, INR 15,000, et cetera, are doing very well. We are seeing good growth in, like I said, brand Titan, which is kind of spearheading the growth.
As far as the proportion of analog to wearables, the last couple of years, we have seen wearables' share go up. But now with the wearables market in a bit of a correction mode, we are seeing that the analog share is higher.
The next question is from the line of Aditya Soman from CLSA.
Two questions from my end. So firstly, in terms of steady state margins for jewelry, what would be sort of a steady-state margin one should expect over a medium term? And has the guidance on that changed at all? And secondly...
Your voice is not very clear.
Steady-state jewelry margin, right? That was your question?
That's correct, yes.
And second question, you had a second part to your question?
Yes. And the second question is on these emerging businesses. I mean, the level of profitability even on a year-on-year basis hasn't improved. In fact, it's worsened slightly. So how do you think the trajectory on profitability plays out over the next few years? And what would be the drivers for improvement?
Okay. So emerging businesses for sure are in the investment phase. Growth is far more important than margin. But yes, as the scale is growing, some of the gross margins are improving. So they can -- but I think we are right now focused on them achieving the right scale and rightful position in the market.
Jewelry as we answered earlier, for FY '25, we think 11% to 11.5% seems to be the band which we've been able to deliver, and then at the end of the year and beginning of next financial year, we will be able to have much more clarity that going forward, what kind of number can be delivered.
And then maybe -- but no significant change in terms of the structure is happening, 11.5% to 12.5% to now we have talked about right now 11% to 11.5%. So we might go back to the original band. But yes, we will wait for some more time to kind of give that guidance.
The next question is from the line of Siddhant Dand from Goodwill.
Sir, my first question was about there's been a proposal to hike GST on luxury watches above INR 25,000, I think. So what percentage of our sales would that be? And secondly, would it hamper our plans to open ultra luxury watches -- watch stores in Helios?
Sir, right now, it's a proposal. I think the group of ministers has recommended to the GST Council. So we are not -- we will have to wait and see how it actually pans out. Our proportion of watches above INR 25,000 is not very high right now. But given the fact that premiumization is a very continuing trend, it will become higher and higher over the next few years.
Could you give a rough band of what percentage of top line would those be?
At this point, we'll not be able to share.
Okay. Secondly, my question was regarding our Golden Harvest. Competitors have come up with a little more aggressive schemes. So has that program been affected?
No. In fact, we ourselves have innovated a little bit on the Golden Harvest. We have launched another version which also enables customers to fix their gold rate, et cetera. And the benefit is different from the Golden Harvest usual scheme. So put together, both our programs are doing well, and enrollments have been good. We have not been impacted by whatever competitors have offered. They have continued to offer historically also more aggressively. So it's not that something new has happened.
But I think there has been intrinsic sort of relationship between preference for that brand and preference for that Golden Harvest equivalent of that brand. People want to buy Tanishq and people sign up with GHS. People want to buy some other brands, they sign up with a program of that brand.
Okay. Understood. My third and last question would be one of our biggest moat was we were able to give a Karatmeter and verify people's adulterated gold back in the day. So have we -- is there any sort of pilot or any idea around identifying whether someone's jewelry is a lab-grown one versus a mined one within the store itself?
Good idea. We should attempt it. We mentioned it in our media interaction when we did the De Beers tie-up, we have done a tie up. And we anyway use all their equipment for a lot of our value chain to ensure there is absolutely no contamination. And they themselves have also innovated and come out with a more, let's say, smaller device, et cetera, which can be deployed in-store.
So we are going to experiment with some of this in some of the cities and see what it yields. And we are also anyway separately testing out other competition and other jewelers products to see how much is truly natural, how much is mixed, et cetera. So all that work is on. But good idea, we'll consider your thoughts.
So are you seeing on ground adulteration going up in general?
I don't have data for that right now. It's too early to -- we have started doing some studies. But very interestingly, on gold, on a sidenote, even today, we get 2, 3 carats below the 22-carat in our exchange program. And it surprises me now. And in certain markets, it goes down by even more -- few more carats. So even after so many years of hallmarking and so many years of doing it, we still get very low carats in our gold itself.
The next question is from the line of [ Rahul ] from Union Investment Service.
Am I audible right now?
Yes, yes.
So like in the last quarter like we have data like few of the expansion plan of Tanishq, Mia, CaratLane stores actually. So could you provide an update about the store expansion plans, especially how many Tanishq, Mia and CaratLane stores have been added in Q2? And are you guys on track to meet the year-end target? So do you find if any of the data is handy?
Sure, sure. So we've added in Tanishq 22 stores. In fact, in this month itself, in October, we've added another 10 or 11 stores rather. We have added 33 therefore, up to 30th October. And our aim is to add between 40 to 50 depending on finding the right property, et cetera, et cetera. And typically, that's what we've added. Mia is also likely to reach 250 by the end of the fiscal. On CaratLane, Saumen will share.
Yes. As far as CaratLane is concerned, we very recently crossed a milestone of 300 stores, currently it is 301. Net addition is 29 for the year, and we hope to add another 20 before March.
The next question is from the line of Ashish Kanodia from Citi.
The first question is on the competitive intensity. So given the steep increase in gold price if you can highlight how the regional and local players are behaving? Are they kind of giving some offer on the gold price? Because we also noticed Tanishq was offering discount on the gold price for the first time. And post the discount, the gold price was matching the gold price what some of the other large players offers. So that is the first question.
Yes, you are right, the competitive intensity on gold rate itself has gone up, thanks to very high price of gold. And many, many local players have been either on their own or sometimes in response to other national players or chains come out strongly with gold price offers. And this year, we saw many players do that.
So we also decided to play it a little differently and ensured that our discount payouts during the festive season was smartly distributed between making charges and gold rate and other offers that we do. So psychologically, it helped the customer kind of feel a little bit more comfortable. But we still manage the payout in a manner that we look at them in totality. And therefore, it's not just a flow through.
So instead of more discounts, part of the discount was routed through lower gold prices. Is that the right understanding?
Yes. And what also it helped interestingly is during festive, the exchange became even more attractive, because people bring in their old gold at a certain rate. And then this is a discount, not the gold rate per se. So it actually means they gain -- in their mind, they gain a lot more by bringing in old gold and we wanted people to do a lot of that. So we ran a festival of exchange as well during this period, and this plays to that.
Sure, sir, that's very helpful. The second question is just going back on the LGD part. You have seen over the years like how CZ or ADs have kind of instead of becoming a jewelry, it basically ended up being just a fashion accessories, right?
So any learnings from that or anything -- I mean, maybe when AD was ramping up in India, we were in a very different zone. But any similarities or differences you see when ADs or CZ was scaling up and now when LGD is scaling up?
And second, given what, say a Westside has done and maybe some other players are also doing, do you see ultimately lab-grown diamond just fading away as a accessories rather than really replacing it as a jewelry?
See, the first thing is that certainly, LGDs are far superior to ADs and any other form because optically, chemically, physically they mimic, they are diamonds in a sense, right? And they're just grown in the lab. So to that extent, to compare them with AD is perhaps not right.
The other thing is, finally, the sustainability side of LGD is also an angle which is being brought in and all that. So I wouldn't compare it like that, but we'll have to actually see the way it plays out in the next many years for -- it's not easy to predict how it will actually go.
And your second part, what is it to do with the website?
My point was because if you are getting a LGD in a big box retailer, as a consumer, you will not necessarily see it as the jewelry, right, it ultimately become a fashion accessories.
Correct. So that was the point I was making about why Westside is choosing to do it like this and how it does not really impact on whatever we may do.
Also what we have heard and seen, Pandora and Swarovski have gone into that space and how they shape that category and how it does -- and of course, price is coming down. So you could be right but really very difficult to put a forecast on that.
Sure, sir. This is super helpful. Just one last bit is on the custom duty impact. So last quarter, I think you called out that the total impact could be maybe between INR 500 crores to INR 550 crores. And given that the gold prices has actually moved up, my understanding is the impact could be slightly lower than that. So is it significantly lower to call it out separately that instead of INR 500 crores, INR 550 crores, the total impact could be lower?
No, no. Actually, that was estimate, of course, at that point of time. And the gold prices going up have a very, very little impact on that. So actually, our current estimate, which is much more firmer is that quarter 3 may witness about INR 280 crores -- INR 275 crores, INR 280 crores kind of number.
The next question is from the line of [ SM ] from Mehta's Family Office.
I have one question with regards to lab-grown diamonds. In the past, we've seen something in the pearls. Now pearls were considered as precious and luxurious jewelry, but however, pearl farming changed the entire situation and then after the pearl lost all its charm. Is lab-grown doing the same to the mined diamonds?
Your guess is as good as mine, to be honest. And frankly, it's very difficult to predict what will happen. We can look at what happens. And yes, I mean, so it's very difficult to gauge. We've also had that in emeralds, we've also add that in this, but the same trend didn't play out like it played out in pearls, I don't know. Emerald continue to be natural emeralds and rubies continue to be very important.
The next question is from the line of Saurabh Patwa from Quest Investment Advisors.
Just wanted to have your thoughts on, with the rising gold prices and lack of commensurate pricing increase in diamonds, in fact, which has been falling, do you see rise of 18-carat and below kind of jewelry to make the products more -- in terms of most of the jewelers making those products affordable as well as margin -- maintain their margins for the studded jewelry, is this could be a trend we could see as we move ahead?
You're asking only for studded?
Studded, yes, largely for studded, sir. Because that's how you will make the jewelers more lighter as well as your -- the mix for your diamond and gold, mix could be -- the proportion in terms of value could be maintained.
There is actually -- this is Saumen from CaratLane. There is actually enough evidence, especially in the Northern region and the Western region, the high-value jewelry of diamonds has moved to 14-carat, and it has happened over a period of time, and it is actually a substantial segment of the higher end of diamond jewelry.
So sir, typically, also I'll clarify, most of studded jewelry has been in 18-carat. There is a small segment of 22-carat studded jewelry only in the South, which is of closed setting, which it's called. That continues to be what it is, and 14-carat is the other bit which, in fact, all of Mia is -- most of Mia is 14-carat and a good part of CaratLane is also 14-carat.
And now what Saumen mentioned. So whether 18 will become 14 as we go forward for the bulk of the market is difficult to say because there are enough people who say if I'm buying a diamond jewelry and especially if it is in the INR 5 lakh-plus, INR 8 lakh-plus in certain markets, they are okay if it is 14. In many markets, they are saying, no, it has to be 18. So it's not a very clear trend. It's a mixed bag. But yes...
For the customer segments like the point that Ajoy was making about emeralds, there is something to be said, 18-carat is closer to it being pure in a sense. And therefore, when I'm buying something expensive, exquisite, I'd rather have that. It's partly psychological, partly color and all that. So we are so much into 18 carat diamond jewelry and not 14.
Just to share with you, we keep experimenting in different markets, and we keep learning from it. And there is a geographic preference -- difference that Saumen also pointed out.
And sir, just second question on the -- when you highlighted there is a price fall in the solitaire, how does it work for the smaller diamonds that we use for studded jewelry, how has the pricing been there? While you may not -- while selling, you may not be explicitly mentioning that. But from your buying perspective, those diamonds, how has the pricing been?
Pricing has been fairly stable. In fact, it has gone up post the Ukraine war because of Alrosa sanctions, et cetera. And therefore, there was a certain shortage of supply. Thereafter, it's been pretty stable. There will always be deals going on here and there.
In fact, we have not seen any softness in that price in the small though Rapaport keeps publishing all kinds of data, but at the very small ones, they don't -- their data reports are not really relevant. It's mostly in the solitaires where there's reports available. So it's stable, I would say.
Understood. Sir, lastly, just a quick clarification. You highlighted that you expect around INR 280 crores of inventory [indiscernible] because of custom duty. Is this included in your margin guidance?
No, margin guidance is always normalized. We have always clarified that this is onetime event. Margin guidance is normalized guidance. So you have to account for -- adjust this INR 280 crores in quarter 3.
The next question is from the line of Sheela Rathi from Morgan Stanley.
So first question was actually just in connection to the previous question. So what was the key reason for the EBIT margin improvement for CaratLane this quarter? And should we expect the trend to continue to improve?
Yes, Saumen?
This is Saumen. Part of the reason is about the sales growth that has been significant. Second reason is also we have been able to hold the studded margin. And there has been also some marginal gains that would have come through our -- the price of procurement, et cetera, all these three.
On the cost front, I think we have managed to contain our cost. All put together, we would have seen about 1 percentage plus EBIT over last year. And it is expected to be better.
Okay. Understood. And second, Ajoy for you. Historically, you have guided us in terms of what the gold exchange for Tanishq jewelry as well as non-Tanishq jewelry has been. So if you could update us on that number for this quarter? And additionally, if you can tell us if there is a number, a similar number which we have with respect to diamond exchange? And if we have that number for this quarter will be very helpful.
I don't have a number for diamond exchange, though it is an integral part of the Tanishq exchange number, which I've historically given. First on the gold exchange, which is non-Tanishq gold, this quarter, we saw a lower gold exchange probably because I suppose people saw [Technical Difficulty] on gold and wanted to hold on the gold as much as they could. So it's 3 percentage points lower contribution than usual. That's what it looks like.
But if I discount the sale of coins because that is like buying coin, then it's a very marginal drop in contribution, okay? So then it's only a 1% drop in contribution. So it could be a very temporary quarter 2 specific phenomena.
And in Tanishq exchange, a significant part, not immaterial part or a material part of it comes also from solitaire exchange. That has certainly reduced, especially at the higher end. I don't have a number to give you on that. So I'm not able to share with you. But still ballpark, we are in that 8%, 9%, sometimes it may swing to 10%, it may be 8% or 9%, I don't have an exact figure right now.
And if I may ask, can a customer who owns diamond jewelry, a studded diamond jewelry or a solitaire, can they exchange it for gold jewelry? I mean, is that -- okay.
Yes, yes.
Okay. And just one final question. With respect to inventory, I mean, you attributed the custom duty related inventory loss. But will we have any inventory loss with respect to solitaires in the upcoming quarters?
No, no.
Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. C.K. Venkataraman for closing comments.
Thank you very much, everyone. So like I started, it's been a very satisfying quarter for us from a growth point of view. And across businesses, it's been quite satisfying. We've already spoken about jewelry and the analog watch business.
And just spending a minute on the analog watch business, I think what the team has done and the division has done is actually focus substantially on product innovation, retailing, branding and premiumization, and we expect to push the envelope on this and continue this growth trajectory for many, many, many years because this is actually a product with limitless appeal. So that's one long-term comment on watches.
As far as EyeCare is concerned, there is no question, but I want to clarify -- I want to tell you that the strategy that we started executing about 8, 9 months back, continues to be in full swing. And the customer acquisition rate continues to be at a very satisfying level. People are so excited about Titan Eye+ offering products, affordable fashion on the one hand, affordable progressive lenses on the other, premium frames and sunglasses on the product. So across the spectrum, we're delivering exceptional -- refined product value and building a solid foundation of growth over the next many quarters. And you'll hear about it always in the results in the quarters to follow.
The foundation of Taneira has become stronger and stronger and stronger. And we expect certainly FY '26 to be a sort of blockbuster year for Taneira. We aim to take it to its rightful place in the ethnic wear industry and make it a very prominent, very respected name in that market.
We are an established name in the perfumes business and doing very well in H1. The first exclusive brand outlet of IRTH was launched in October, it's a fabulous store. All of you who live in Mumbai, please go to the Palladium Mall and take a look at this, an idea which is waiting to explode. And you'll see the explosion of that across the country over the next many months and combined with the omni potential for that category, we aim to make a big mark in that -- in the organizing, formalizing, right serving of that category as well.
The international business continues to be on a roll. First half as well as the October season were very, very exciting. We're opening stores, by and large, as per plan and everywhere hitting the ground running to exceptional customer acclaim. And even the engineering business, as one of the investors had messaged me about a week back, TEAL is also doing very well.
So overall, the portfolio of Titan Company is in a very, very good place. And thank you very much for all the support and confidence that you have put on us over the years, and we hope to keep you delighted in the quarters to come. Thank you very much.
Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.