Titan Company Ltd
NSE:TITAN
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
Abbvie Inc
NYSE:ABBV
|
Biotechnology
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Realty Income Corp
NYSE:O
|
Real Estate
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
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 |
3 100.8
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.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
Abbvie Inc
NYSE:ABBV
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Realty Income Corp
NYSE:O
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Titan Company Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Q4 FY '22 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, Titan Company Limited. Thank you, and over to you, sir.
Thank you very much. Welcome to everyone on the call from my colleagues and me from Titan here from Taj Bangalore on this Q4 FY '22 earnings call. Very, very satisfying quarter in a very challenging situation with COVID wave 3 lockdown for some weeks and the international conflict starting late February going all the way to the end of the year affecting oil prices and including the prices of gold and creating a lot of uncertainty in consumer sentiment. But despite all that, we ended FY '22 in a very good note and equally, and as importantly, our preparations for a very, very ambitious FY '23 were also completed in that same quarter and we prepared well enough to make a very good ambition for FY '23 as well.
So I have nothing really more to say and I would request the questions to come in for us to answer.
But before question come in, Venkat, I would just like to call out few specific items related to Q4 and FY '22 performance. Ashok Sonthalia here, and welcome to everyone to the call. And it's great to be talking to you guys on this auspicious day of Akshaya Tritiya.
You are all well aware that Titan has a long-standing philosophy of sharing its prosperity and success with all people in an equitable manner. This year, 2021-2022 has been exceptional for all of us in multiple ways and our profit performance has been good and therefore an ex gratia amount of INR 72 crore at a standalone level and a total of INR 82 crore at consolidated level have been provided in the Q4 accounts.
During the quarter, the company also came up with a voluntary retirement scheme for employees in the month of March 2022 and a charge of INR 51 crore at standalone level and INR 54 crore at consolidated level on this account also has been recorded in Q4 P&L as an exceptional item. Both items put together a total charge of INR 123 crore on a standalone has been made in P&L and significant part of this ex gratia amount is reflected in the employee cost line item.
Normalizing for the ex gratia amount and VRS amount like-to-like EBIT and PBT for the quarter are at INR 841 crore and INR 787 crores, respectively. It's [indiscernible] margin of 12.1% and PBT margin of 11.3%. For the full year FY '22, PBT before ex gratia and exceptional item stood at INR 3,054 crore. EBIT margin and PBT margin is 12.3% and 11.6%, respectively.
With this, I would like to open the floor for questions. Thank you.
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss.
My first question is on Fastrack. Fastrack is the only format wherein in FY '22 there has been no store addition, in fact there has been a net closure of 5 stores. And when I see the retail growth also, in both full year FY '22 and Q4 the like-to-like and sales growth has been pretty disappointing. I understand Omicron impact in Q4, but FY '22 32% sales dip in Fastrack retail. So what is the way forward here? What has been the issue in FY '22?
So this is Suparna from the Watches and Wearables Division. So Abneesh sir, Fastrack store format has been -- is in the process of being reimagined and that is why we didn't add any stores this year. We have a new store design ready and that's been [indiscernible]. Once that is fine-tuned, we are going to roll out. In fact in Q1 itself, we have at least 7 store locations finalized and awaiting the new store design.
So I think there are 2 parts to it. One is the revival of this Fastrack store format and bringing in a lot more experiential inputs into the store format. I think the larger point also is that, for some people, online is the natural default thing and we have, in Fastrack, do very well in both our own brand e-commerce as well as in marketplace performance.
So therefore, the need to totally reimagine the store experience [ is on track and a ] work in progress. And next financial year we have a plan of opening another 10 to 12 stores at various parts of the country.
My second question is on Taneira. So sales growth of 4% in Q4, so I understand the Omicron impact, but on a base of 14 stores for the full year you added 6 stores, which is a big addition on that kind of a base. So this 4% growth, would you say that you are a bit disappointed with that or is it more of Omicron? How is the model shaping up? Are you now much more confident versus, say, when you started the year?
Abneesh and everyone else, I'm introducing Ambuj Narayan, who joined us as the CEO of Taneira business 2 months back.
Yes. Good evening, and welcome to the call. I'm happy to be here. So yes, we're disappointed, but when I look at the [Interpreted] and January was [indiscernible]...
I'm sorry to interrupt you, sir, but we cannot hear you clearly.
Disturbance in the call. [ But ] it was largely due to Omicron. Now we are -- we have opened 6 -- opened 6 stores last year and there is a very good pipeline of stores that's coming up and we are confident about the Taneira and doing very well in the coming year.
Yes. And last 2 questions. Titan EyePlus minus 4% sales value growth, so dip in Q4. So any competitive intensity increase has happened or it's again linked to the Omicron itself in terms of retail world?
Abneesh, this is Saumen from the Eyecare Division. Like you said, Omicron was certainly a factor for the month of January. And in the month of March, while Titan EyePlus channel has done sales more or less positive, we also had to deal with some store closure and overall for the division we also have to do a certain amount of channel correction. That's why overall figure is muted. Otherwise, we haven't seen any different kind of a competitive activity. It is just the combined effect of Omicron and year-end correction that is done to make sure this system is clean [ and it ] take off from the day 1 of the next year.
The next question is from the line of Vishal Gutka from PhillipCapital.
Yes. I had just a couple of questions. First thing is on the loan facility basically, like Bajaj Finance provide for consumer durable. If there is a regulation restricting what do you call to provide finance for purchase of jewellery, because lately too couple of jewellers were filed their IPO, there they stated that they are -- there are some parties providing finance for purchase of high value studded jewellery. I just wanted to know your thoughts on that. And I just wanted to do know what is the contribution of Golden Harvest scheme as well as gold exchange program for the quarter?
On the first point, I think there is an issue there, because then RBI with [indiscernible] EMI on jewellery and have met them 3 years back and the whole view point [ was ] enhance the acquisition of monetary assets. That was the view that RBI had taken and I guess that would apply equally to loans as well. We had a very, very vibrant EMI program that we had begun as a pilot in Bangalore in 2016 and we were planning to take it national when RBI came up with this monetary assets not financed. And the Golden Harvest?
Ajoy here. On the Golden Harvest contribution, the contribution has gone up compared to last year. It's at 18% contribution to the sale in the quarter versus 15% in the previous year same quarter. However, in FY '20 in Q4, it was at around 20%. Due to disruptions in enrollments in the subsequent 2 years, it is still catching up, but enrollment levels are very good. In fact, Q4 we have seen very good enrollments in Q4 and even -- and that has continued in the month of April.
So going forward, I think, post these 2 years of disruption, maybe this quarter it will continue to see the effect of last year's disruption in Q1, but thereafter I think we should be on a steady wicket. But overall, 18% contribution versus 15% last year.
Okay. And the contribution of gold exchange program for the quarter?
That's also been good. It was 28% versus 27% in the previous year in terms of contribution.
Okay, sir. Sir, last question from my side on the international front. I think we have opened one more store on the -- I think in the USA apart from couple of stores in UAE. So what is the outlook going here? What is the guidance in the medium term? How many stores we're looking with regards to international expansion for the Jewellery business?
Please wait till next Friday for the Investor conference.
The next question is from the line of Amit Sachdeva from HSBC.
Just a small question on the demand outlook, Venkat and Ajoy. Given the gold price surge in March was pretty precarious, but I assume February was going okay and January was somewhat impacted. But wedding season seems to be very good and there was a hope at least that demand outlook should be robust if not disruption continuing on gold prices. So can you give us some thoughts on how April has gone and given the base is also very benign, but how I should think about demand picture in the current outlook as some challenges, which you mentioned, are still persisting.
So I'll get Ajoy and others to comment in a minute. Amit, while the conditions in Q4 were finally not conducive to overall demand and we also have to measure our performance from a competitive point of view and not just our growth or decline in sales. And our sense is, from a competitive point of view, we will continue to be strong in every category where we operate in Q4 and therefore a blip, which is such a large external factor, we don't have to think about it or worry about it, just move on. That's sort of putting it behind us kind of thing.
April has begun very well. We are very, very satisfied with the first month of the year and we are quite running for the targets that we have set out for ourselves for the year and on that we are on target.
So that's very good to hear, Venkat. Sorry, Ajoy, you were saying something, please.
Yes. Yes. I'll just add on to that. Gold price volatility has been -- has impacted, let's say, big ticket value purchases, especially for wedding. And this is particularly true in March [ extended ], to some extent, in April. Having said that, I mean, we are very, very happy with our April top line. We are expecting now that gold prices in the last at least few days, at least last 1 week, seems to have kind of moderated downwards, perhaps people were also just waiting and holding back to see how things shape up on the gold price front.
We are actually quite hopeful. In fact, we are also seeing, as you said, there are lot of wedding. It's been a Q1 with the Akshaya Tritiya and weddings coming after 2 years now, 3 years actually. Last 2 years has been tough. So we are very positive and hopeful and in fact we are seeing good traction. Very happy with it.
Great. Great. That's really good to hear, Ajoy. So in that context, I had -- also good to hear that Venkat mentioning that there is an ambitious target for FY '23 without giving guidance, what -- how we should read that statement?
What it means?
Yes. I mean, because given the FY '22 has been at least a very good year and are we looking at 20% kind of growth or higher, or how do you -- because, at least, there was a larger plan to go in strong double-digit growth as such production jewellery, but given this -- but when you say ambitious, how one should think about those numbers?
Actually, we are not giving guidance on that for FY '23, Amit, not yet at least.
Sure.
But the opportunity for the company in every category it operates, where it is leader today in 3 businesses. But in others, picking up, but a huge headroom. So in every business, we are looking at a good growth, which together translates as a very ambitious growth [ of the company ]. And you can just sort of look back to the past about whenever we have used the word ambitious, what is the kind of figures we have talked about. Imagine the best.
Okay. Understood. Understood. Perfect. No, I didn't want a guidance, to be honest. I just wanted to understand whether this confidence is coming from the good demand condition you've seen in April and continuing into whatever this week, et cetera, and just…
Yes. The ambition itself was set about 10 weeks back, middle of February, when we are -- even in the middle of, in fact, wave 3, but looking at the opportunity, the country's represents for the company. So…
Sure, sure. That's helpful, Venkat. I just have a small question on VRS and a couple of exceptional items that you talked about. Well, we see also margins in watches, et cetera, are very weak. So is it something to do with disproportionately impacting watches, VRS and other things or is there something to read in margins? And can you give us a bit of margin anatomy of what has happened this quarter so that we could clearly appreciate what has really gone on there?
So you are right. Like watches from the manpower and both these exceptional points are related to manpower and head count. So watches have a share of manpower and head count in the business and that is why they have kind of -- have to absorb higher proportion of ex gratia as well as VRS and that is reflecting in the slightly subdued margin.
Yes. Got it. And if you were to sort of exclude that, what would be the watches' margin?
The watches EBIT margin for the quarter would be 6.7% and for the year would be 6.9%.
Got it.
But you must also factor in, they have not yet kind of fully recovered due to pandemic level. They have grown, but, yes -- there is opportunity to further improve the nature of the category, especially if you compare it with Eyecare or Jewellery. It is the most challenging category from a consumption point of view in these times of everything, working from home included. And we are hoping and expecting FY '23 will be rather different.
The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises.
Yes. What is the reason for losses in these watches and eyewear?
Sorry?
What is the reason for losses in watches and eyewears?
So let me answer, Rakesh. Ashok here. If you take out these ex gratia and VRS, then watches actually in Q4 had a INR 42 crore of EBIT and on a full year basis INR 160 crore of EBIT. And as far as eyecare is concerned, they had for the quarter INR 3 crore EBIT and INR 61 crore of EBIT for the full year. In watches, also, there is one more item is sitting in their P&L in March. Like we have Business Associates Meets -- I'm sorry, eyecare. Eyecare Business Associate Meets happened in this quarter and which also had about INR 10 crore of impact on their profit.
INR 10 crore cost?
Yes.
Business has earned INR 60 crores a year?
Actually, Rakesh, we have this tradition of what is called a Business Associate Meet which happens…
You should get your associates to pay for it also.
We are preparing for FY '23, Rakesh. So that is why in March, bringing everyone together for the associate…
It used to happen once in 2 years. And the last time we did it was in June of 2019, so we're doing it after 3 years. It's been a significant part of building confidence, camaraderie, team esprit de corps across the company system to deliver results year-after-year.
Where was it held this year?
Sorry?
Where was it held this year?
This was at Dubai. Rakesh-ji, this is Saumen. It was done in Dubai.
And anyway, congrats on a fine results and ending [indiscernible]. Anyway, we'll be [indiscernible]. Anyway, congrats, and thank you for your good dividend. I thought it -- I hope it could be better. [Foreign Language]
Correct. [Foreign Language]
[Foreign Language] But we have a defined policy once we were on a 41st quarter.
We have a range.
So we have a range, 25% to 40%, and this payout translates into about 31% and keeping the growth ambition in mind and our requirement, I thought, this is a good level, which we can -- consistency and the good performance, everything is reflecting…
We are not giving a bonus also now for 15 years, so company's trajectory has changed since completely [indiscernible] repayment of that the bonus is.
So of course, we can bring that feedback and we can discuss at some point in time or...
Yes. I have a feeling it's high time we do it. And clearly market [indiscernible]…
Sorry, what was that Rakesh?
Brand tonnage has both -- all the brands are [indiscernible] actually when I see the Church Gate shop, I feel great. I think we got to work that lady who -- that man who asked, you got to work on Fastrack, sir. India is such a young country, I think Fastrack is the most desired brand.
Yes. Feedback noted.
Suparna we've not be able to exploit, because India is such a young country, 25% of world are below the age of 25 years.
That's true. The potential is huge and we are working on a big revival plan for Fastrack with products exercising…
Unless you increase the range of products. I don't know why we don't have a deodorant like brand and we don't know the [indiscernible] I think deodorant is the biggest market and with Titan marketing Fastrack advertising, I think we should go with deodorant, handbag, ladies handbag.
We have big plan on bags. 13, we will talk about it.
What did you say, sir?
In the 13, we have this Investor Conference in Bombay.
But I might not be able to come.
Sure. Somebody from Rare will be there actually.
Are you Zooming the conference?
No, no, in-person.
I know it is, but I will not -- if I am not able to come to in person, then…
ITC Parel.
Pardon?
ITC Parel, Maratha. Grand Maratha.
ITC franchise…
Sorry, sorry, Bombay.
No, I'm saying, you're going to Zoom it?
No, in-person.
It is in person.
Pardon?
We are not planning to have a parallel Zoom on that.
Why don't you have it, sir? We can -- even from abroad we can attend. I request you to have it here.
We will explore it. Yes.
Okay. It's nothing. There is no problem on that. There is no regulation, there is no problem. I don't know why you exclude. [indiscernible]. Anyway, congrats on a fine performance. God bless.
The next question is from the line of Manoj Menon from ICICI Securities.
Just 2 quick ones on jewellery and a bookkeeping question after that. One, on just give an update on the gold hallmarking implementation, the regulation, law, et cetera, has been around for a while. It will be helpful on how are you finding actually on the on the ground implementation?
Second question on jewellery to Ajoy is, look, as a consumer, I've been observing -- or it's my interpretation of what I see is that, there is a lot of action which you seems to be taking to actually make the brand younger, basically if you agree with the hypothesis or no? And if yes, it would be super helpful on what exactly you're trying to attempt here?
Manoj, Ajoy here. First one, on the hallmarking. I think, hallmarking as a process has kind of stabilized across the districts that were identified, have not gone beyond that. Within those districts also we see that there is a greater tendency, because of the nature of the way hallmarking laws have been framed it is at the point of a sale. So wherever jewellery is getting manufactured, those centers are getting loaded, other centers are not. So it's -- in the long run, they will have to modify it, I think, so that across the country hallmarking can be spread out. Right now, it looks like there is a traffic jam that lines up at the bigger cities where jewellery gets made.
But at a way -- in a way they are checking, they are -- the authorities keep coming to the stores, they keep visiting, BIS authorities are trying to ensure it is implemented well. Having said that, we have still received anecdotal feedback.
In some of our stores, hallmark jewellery which continues to be inappropriate when we look at it in our carat meter or when we melt. So we can't say whether some of it was recently hallmarked or it had been an older hallmarked jewellery. I think a big initiative like this for such a large fragmented industry will take a little longer to stabilize.
The outcome of this I can share -- well, I don't know whether it's an outcome of this or it is a general outcome. We are seeing that the migration towards organized retail or towards stronger players continues and therefore every organized player is kind of aggressively pursuing very strong expansion plan.
The other piece that I can share from a data point is that we continue to see very good traction amongst new buyers or new customers who are new to Tanishq or new to Titan as well. That indicates that there is a certain migration taking place from family jewellers, et cetera, simply because people want to kind of get towards a more trusted name.
On the second piece, where -- what is the direction of the brand? So I think, the brand has always stood for a certain progressiveness and the certain modernity get rooted in tradition and I can't say whether we are trying to be younger, because we are appealing to a fairly large age group from 25 to 55, I would say. And however, what we are seeing is that the brand does [ remains the same as the ] outlook and therefore a lot of the communication that you've been seeing in a way reflect [indiscernible]. One is the customer [indiscernible] a lot of stuff happening. And on the other hand, you will also see that...
Sorry to interrupt you, sir.
We are continuing to push very strongly on the brand front [ Between ] Mia and CaratLane, we continue to target a much younger audience, and both of those brands are also doing pretty well. So yes, at an overall level, we are aggressively investing in these brands and we are seeing the good results, the customer feedback as well as our brand scores.
Understood, sir. Sir, I actually missed the last one statement, there is some bit of disturbance when you -- the last statement on Tanishq and then I could hear Mia and CaratLane sub-25, younger, et cetera. If I may request that one last statement on Tanishq, if you remember, if you could repeat will be helpful, sir?
Yes. So as I said, Tanishq is continuing to push strongly on the progressiveness index and we have a very wide target audience from 25 years to 55 years. Whereas in the case of Mia and CaratLane, they're targeting much younger audiences and there too we are pursuing good brand investments and brand visibility. So overall, as a portfolio, we are investing strongly in all the brands, including Zoya, if I were to add that.
Okay. Fair point. And Ashok, one clarification with you if I may. The INR 72 crores of ex gratia, if I understood correctly, it's been called out, let's say, as an exceptional or a one-off. I'm not going with accounting standard part of it, I'm just going by the highlighting part of it. Now when I -- basically there are companies which I cover, which I historically had EVA-based model et cetera that makes you meet a certain target, you get paid variable accordingly. So my basic question is, why is it considered as something not a normal and why is it an exceptional or one-off without getting into technically of it, because you're done well, you paid a bonus, it should be in the normal line item, right. I'm sorry for my ignorance if I'm missing something here?
No. So what -- let me give you something in this. One is that principle behind determination of amount is consistent over at least last decade or even more so, whenever Titan is standalone, that's consistent. But the determination of it only happens after the year-end and there is a great achievement. So that is why you cannot be making provisions for this et cetera, we never do. We just decided at the end of the year when there is actually a good performance and based on that determination, the principles which we apply, and that is why from accounting point of view you find out -- you will see that it is under the employee cost. But because you want to see also the quarter comparable to whatever you are looking at, that is why we have decided to tell you the amount.
And this was not part of the normal variable pay of the employee.
Yes. It is completely equitable in a democratic manner distributed to everyone.
Okay. So I'll take it offline, sir. Thank you. And it's not material to take the time in the call.
Okay. Yes.
The next question is from the line of Kunal Vora from BNP Paribas.
First question, Titan has recently acquired a stake in lab-made diamond company. While it's a small investment, can you share your thoughts on lab-made diamonds in the context of Indian market?
Thank you, Kunal, for that question. For the last many years, there has been very little conversation that we have heard or seen in the stores relating to lab grown diamonds, because the desire for natural diamonds in the Indian middle class is so high that for the next many, many years given the kind of affluence that's waiting to happen, they're very confident that the power of the natural diamonds will continue to exist, especially given the penetration of natural diamonds in the Indian households.
However, in the U.S. particularly, the share of natural diamonds -- household penetration of natural diamonds is very, very high, especially because of the work done by De Beers over the last 6 or 7 decades. And so, on the one hand, the natural diamond penetration is very high; on the other, the subject of sustainability is at a greater level of consciousness in the western countries, especially in the U.S. and the Gen Z and to some extent the millennial are looking at options and therefore the traction of lab grown diamond jewellery in the U.S. particularly is quite strong. And we wanted to -- given our international ambitions on the one hand and given the fact that sometime in the future, maybe distant but nevertheless in the future, then Gen Z of India will also start looking for these kinds of things. We wanted to dip our feets in the pool and be ready when the time comes. So that's the background.
Sure. But how large would the contribution be in India? Will it be in single digits now or is it larger?
In India?
Yes.
In India, we can't even pursue it. Actually it's that low.
It will be less than single digit, maybe fraction. Very, very early days. Even in volumes, I would say, it would be less than single digit.
Not really, it would be less than 0.1%, maybe it'll be 0.01%, it will be like that.
Right, understood. Okay. So it's a very, very insignificant. Okay. Second and last question. Losing some moderation in growth across categories this quarter compared to last. So like, while I understand the Omicron, do you think the pent-up demand played out earlier this year and because of that we are seeing some moderation? And also, how would you gauge your performance in the April to June quarter considering that the last 2 years deals are really, really -- it's very small. So what's a good way to look at your April to June performance?
Going back to the first part, I think what affects demand is not just the real things which are around you, like Omicron was a real thing, but also what are the news that you are reading and seeing and listening to all around through newspaper, through WhatsApp shares, through other kinds of social media post and all that, which makes you feel it's not a great time in general and that overall depresses demand and that is at the backdrop of our Q4 performance. And we've always maintained that we are not a company which is looking so obsessively at every quarter, we are looking at it at a 1 year and more than 1 year kind of time horizon, because real value creation in any enterprise happens in that kind of timeframe.
So from that timeframe point of view, the manner in which the country is poised on multiple accounts for growth, especially in the segments where Titan Company plays and our overall competitive advantage which we have built over so many years and we have substantially sharpened in the last 2 years gives us a lot of confidence about FY '23. Our ambitions for FY '23 were set in that context. Our performance in April without getting into detail confirms that confidence -- I mean, the ambition and prepares us really well for the thrust in the next 11 months.
I was not completely clear about your second part of the question about…
Yes. Second part of the question was, how are you looking at this April, May, June? Because if I look at the last 2 years, April, May, June were disrupted. I mean, like you were not really -- clean number, so…
Our reference is not the FY '21 Q1 or FY '20 Q1, sorry FY '22 Q1 or FY '20 Q1. Our reference is the market opportunity there and to some extent the FY '19, FY '20 base. And those are the principles that we've used in setting our ambitious target for FY '23 and we are running to that.
The next question is from the line of [ Ash Shah from ES Capital ].
So as the previous participant asked about lab grown diamonds, I wanted to pick your brains on the same subject. So you said that in India it's a very low proportion as compared to natural diamonds. But if you start advertising, if you start putting more marketing efforts into it, don't you think that will create a lot of awareness just the way you mentioned that De Beers did over the past 6, 7 decades for natural diamond in Western market? And they also have a sister concern by the name of Lightbox, which they run in U.S., so why can't we have it in India also, like a sister concern company dealing into lab grown diamonds in India?
See, the reason why De Beers created Lightbox is because the natural diamond penetration in the U.S. is such a high level and the demand for sustainable materials across categories is rising in that country. So the Lightbox rationale is sitting in that. The natural diamond contribution in annual sales as well as the total penetration in India is so low and this is the very directly middle class aspirational item as it has been shown even in China over the last couple of decades.
So the opportunity for natural diamond jewellery in India is so large that we have no plans at all to get into that in such a big way. And -- but it is -- the point that you're saying that, wouldn't there be a small opportunity that Titan Company can capitalize off? Of course. And at the right time, I'm sure the jewellery division would look at that. In a way the investment in great heights is also to build the overall understanding capability in these areas, so that as and when we believe it's time for us to act, we are able to act more effectively than others.
The next question is from the line of Jaykumar Doshi from Kotak.
Just a quick bookkeeping question. What was the ratio of net sales to UCP in FY '22, if you can give us some sense?
For the company level? Because for every business, it is separate and…
Company level, standalone jewellery, so excluding CaratLane.
Come again.
Standalone Jewellery segment.
That is 90%, 89%, 90%, that's the number. So we didn't see any variation, Jay, on that. It's almost at the similar level what it was in the previous…
Over the last 3, 4 years, so net sales to UCP has not changed in the -- at all?
Half a percentage here and there quarter-on-quarter can happen, but nothing much.
The next question is from the line of Vaibhav Ghaisas from SBI Life Insurance.
Sir, just on the recent news items are mentioning some increase in the making charges, are we having some infusion cost or is it some deliberate effect, something which has done to compensate either on the cost part or making gold at attractive rates, how does this work?
This is Ajoy here. I don't know where you picked it up from, but we have not taken any increase in making charges in the domestic business at all. So I don't know about this.
And also when we do that, I don't think we will -- it will be in the press, not on this.
No. Obviously, sir. This is why I was trying to understand. No worries. Okay. When this is not done, then nothing to move away.
The next question is from the line of Jay Gandhi from HDFC Securities.
I just wanted to ask you one thing, sir. Sir, if I see the 1Q, there has been a INR 3,000 crore jump over 6 months, around INR 5,000 odd crore over the year. But the gold on lease hasn't really moved as much. So I just wanted to understand if my review is correct that in FY '23 we may -- we're choosing a more expensive route to acquire customers? In other words, is the gold on lease or the fresh purchase is maybe lower versus gold exchange given the fresh for the period?
So next year, Jay, of course, gold on lease can go up and so there is no deliberate attempt. Every time when there are opportunities between GOL, SPOT and GEP, TEP focus will continue. I don't think we are going to dilute that. That's a great customer acquisition tool for us and that will continue. But beyond that, whether we buy SPOT or whether we go GOL, that's a continuous theme on the economics of that and that is how we decide, but our preference for GOL has not at all diminished, that much I can say.
We had lot of repayments in GOL in the current year, because the previous year it went up significantly on account of inventory recall, melting, et cetera, to manage the working capital and, therefore, you're probably seeing this fluctuation year-on-year. When we compare it to maybe 2 years back, et cetera, it's pretty much comparable.
So if I have to just ask in FY '22 overall, the GOL, exchange and SPOT buying would be what percentage of the sourcing, I'm sorry if I missed this question before?
GOL typically would be around the range of 50% in terms of kgs and SPOT buying will be much, much smaller. The exchange, et cetera, would work out to about 40%. Between exchange and this outright also, we purchase some jewellery directly from vendors, that also has a gold component. So GOL is between that 50% to 60% range typically, and that is what you will see also in the month of -- in the year of FY '22. I don't know if you are asking for FY '22 or…
FY '22. For FY '22.
Yes. So it's broadly in that range.
Right. And sir, just one last thing if I may squeeze in and forgive me if it's a naive question. But on this hallmarking thing, if everyone has to hallmark, right, the key issue within the industry was, and this was probably a tailwind, is the trust deficit. Now this worked in your favor over the decades, but if everyone hallmarks, the trust deficit gets called for, then how does this help to be organized for?
Yes, a very good question, Jay. The Tanishq brand started in 1996. It's 26 years now, and if you look at the purity of the gold that we buy, the other jewellers -- jewellery that we buy from customers, the purity has even -- I'm sure if you were to look at yesterday's purity, it is still in the 19.5, 19.75 carats, as of today 22 carat is supposed to be. So in 26 years, the purity stock of customers has not dramatic -- it has improved, but it has not dramatically improved. Which means, when the hallmarking happens on the jewelery and that 2 carat is about 8% in terms of value and that represents 8%, making charge difference at [indiscernible], something about [ that ] were to remain the same place when it comes to their own margins. Which means if they hallmark, they have to raise their prices and in which case the competitive situation will dramatically change at Tanishq. So that is the [indiscernible].
Yes. So that is only plus that we have, basically we -- they make it less competitive, is that it's the only argument.
Jay, I didn't get your response, there was a lot of disturbance.
Yes. So I was saying that because they become less competitive to the extent of what 7% to 8%, that seems to be the only argument for this -- for it to be working for organized, right? I mean, I was actually hoping that you would shut me up by saying you need to buy more Tanishq to understand what the difference is.
But isn't an 8% making charge difference very important argument?
No, in the sales, I say, anyway if you look at the gold rates in Tanishq sold or any other jeweller, there is a certain premium you charge on gold rates also, which obviously is almost absent in some unorganized folks. Now you already enjoy a certain premium there.
Possible.
I understand that we will -- they will get less competitive at time, but that's a one-time thing. I mean, people do eventually get over…
It will not be a onetime. For me to continue to offer 22 carat every day, when I was offering 20 carats every day earlier, it's a daily thing that my -- for me to operate my business with a certain gross margin that I should get. For me to be viable, I will have to raise my prices. That's the point there.
Fair point, sir. Fair point.
The next question is from the line of Pratik Rangnekar from Credit Suisse.
Just one question from my end. On the jewellery business margins, you did call out the staff cost related one-offs. So even if we maybe adjust for that, it seems like there is a sequential drop in margins. So can you provide some context to that considering that probably the studded share has also increased versus third quarter and probably there is an inventory gain that you alluded -- in diamonds that you alluded to last quarter as well?
So if you exclude the one-time, the EBIT margin for jewellery in Q4 is -- stands at around 13.1% and I remember mentioning even in the last earnings call that in Q3 we had an exceptionally high benefit on many counts and therefore those margins of -- EBIT margins of 13.5%, 14% are not something which we could expect because we were planning to continue to invest back in the brand and in certain other areas for the business and we had clearly indicated that on a stable run it is going to be between to 12% to 13%, may be trending closer towards 13%.
Having said that, Q4 is the one quarter which had certain costs which we have consciously taken in. We also wanted freshness in merchandise, so we start the year well. We've invested something a little bit more in IT. We've had a few meets for our frontline staff, et cetera, to kind of thank them for their exceptional work done over the last couple of years. We have met some of our sales team. So that they are all primed and energized.
So first of all, I don't think the EBIT margin is anything to be worried about. It's quite good and healthy. At the same time, yes, there are some costs which are there in Q4, which may or may not repeat extensively in the remaining quarters.
[Operator Instructions] The next question is from the line of Shirish Pardeshi from Centrum Capital.
I'm really sorry joining the call late, so pardon me for the repetitive questions. Have you said anything qualitatively how the U.S. and UCP market is? I mean, I do pickup from the press release saying that you've done one pilot or very soon we are getting it. So maybe in the medium term, next 2 to 3 years, how we are going to develop or one should look at this business?
Actually, Shirish, if you can wait just for 1 week, next Friday is our Investor Conference, and I will be talking about this -- to some extent a bit detail at that time.
Sure, sir. My second question is on the eyewear. I mean last 10 quarters if I put numbers together, our estimates versus the delivery, there is a lot of volatility. I mean, last con call also I asked this question, when do we see a steady-state growth and margin delivery for this business? I mean, is it that another 2 quarters we'll have to wait or maybe 4 quarter we'll have to wait?
Actually if you exclude the Q1 of FY '22 as well as the Q1 of FY '21, you would see almost 3 plus 3, 6 steady quarters. PBT margin ranging between, I think, 15% to 20%, okay? Q4 this year, as I said, sale was affected because of Omicron in the month of January. And in the month of March, we needed to make certain correction to clean up some of our channel, especially the distribution channel. Apart from the fact that we had some one-off expenses like it was explained by Ashok, there was a large expenditure of what we do once in 2 years. We did in this case after 3 years for Business Associate Meet.
If you actually adjust for all these things, Q4 PBT -- EBIT would have been in the ballpark of INR 15 crores to INR 18 crore. Okay. Just to sort of give you a sense of. So it was not significantly different than the last 3 plus 3, 6 quarters and so we are not seeing that as really an aberration. It is a bit of a correction that we did. And if you look at just what happened in the month of April, it just reinforces that we are just in the right track.
Sure. Sure. My next question to Ashok-ji, in FY '22, could you quantify what is the saving in terms of the numbers we've got it on the War on Waste?
So War on Waste program, which was run last year, where we were doing quantification and we had at that point of time said that there are certain items which got induced because of the environment, like travel, power, et cetera, et cetera, and there were certain things which were ingrained into our business processes, which are sustained now. So they have become part of thing and now we are not calling them out separately. And the natural savings have almost disappeared, because you see all the activity and velocity of travel in Q4 particularly, and we also took that opportunity to travel a lot and meet people. So -- but the other process part of it are sustaining and we are not now anymore calling them out.
That's really helpful, Ashok Ji. But one follow-up on here. We have done the hedging and now I'm sure 2 quarters has gone in, related to this hedging would you think there is some more savings which we can extract because of the quantum and the demand situation?
So hedging change which we did was basically to remove volatility, because we were on cash flow and cash flows were becoming unpredictable because of the COVID induced lockdowns, et cetera, and we moved to fair value of inventory hedging, because inventory and gold is far more certain and far more this thing. And that is what is giving results that now you don't see any kind of volatility we are pointing out in our P&L because of gold hedging. Hedging is just to insulate us from price risks. Idea is not to make money out of that.
Okay. Okay. Ashok ji, my last question pertaining to this VRS and the ex gratia charge, which has come. So this is fully charged for FY '22 or is there anything which is -- which will flow to in FY '23?
FY '22, everything has been taken care of. All the future liability on account of VRS have already been accounted for, so there is no further charge coming in either quarter one or FY '23.
The next question is from the line of Ashish Kanodia from AMBIT Capital.
Yes. The first question is, in terms of inventory gain on diamonds, so last time you called out that there was a one-off and there was some flow-through in 4Q as well. So can you please quantify what was the impact of that inventory gain on diamond? And the second question is on ingot sales. So again in 4Q, there was some ingot sales of around INR 375 crores, so what led to that?
Ajoy here. The total, let's say, benefit on account of diamond-related price increases and inventory gains in the second half of the year is about INR 190 crores in the previous fiscal, okay. So it's split between Q3 and Q4. It was, I think, about INR 60-odd crores or something like that in Q3 and some balance in Q4.
In terms of gold sale, we try to see some amount of optimization on gold on lease. It was a question which came earlier on and we also look at our inventory position and cash flows. We do some amount of optimization and based on, of course, how much exchange gold has come, we try to only sell out of the exchange gold, so that you can try and make some optimization. So that happens from quarter-to-quarter basis and internal conversation on how to optimize.
Sure, sir. That's helpful. And last question is, I think, for a couple of quarters, we have been trying to try new initiatives in the southern markets and in some of the Bharat markets as well, so in that context our channel check suggest that you are also trying to implement, maybe, pan India a similar gold price, right. So from a gross margin perspective or from an EBIT margin perspective on the jewellery business, are we seeing some impact from that perspective as well that when you maybe focus more on southern markets, but in some of the Bharat markets there is higher discounting or higher marketing and because of which the margins are kind of taking some hit?
Yes. So let's put it this way, the geographic mix has an impact on the gross margin and you are right that as we increase our contribution from Southern markets, there is a some amount of dilution in the gross margin of the business. On Bharat markets, we don't see that much of an impact on gross margin. But yes, marketing investments -- yes, but the marketing investment is not that material when you look at the overall NSV of the jewellery business. It may be to the extent of 0.1%, 0.2% here and there.
But as we had mentioned even in the previous earnings call and we continue to mention that there is intense competitive intensity in the jewellery market, because all organized players are seeking to expand, there is gold rate related activities. While we haven't taken any call on whether we will have a single gold rate or no, but we are being competitive in different markets and we are certainly going for aggressive market share gain. Therefore, the investments that we continue to make either in the form of gold rate or offers or marketing spends or even the kind of product mix that we are willing to supply as we try to maximize the opportunity in every geography will, in a way, therefore have a slight dilutive effect on the margin. But the overall operating leverage because of the growths in the top line that we get will more than offset it.
So to that extent these 2 will keep kind of balancing each other out and therefore the guidance that -- or not guidance, the indication that we had given that we will operate within this 12% to 13%, trending close to 13%.
Yes. Operating leverage vis-a-vis other initiatives that we are planning to invest to continue growth.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. C.K. Venkataraman for closing comments.
Thank you very much everyone on the call. Very, very exciting quarter and a whole new exciting year ahead of us. As always, all of you asking the right things, I think, probing questions to make us reflect on everything we do and continuously strive for an improving financial performance. Thank you, and see you next week, most of you.
Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.