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Myth & Reality of Titan’s Business + Strategies

August 25, 2010


In continuing coverage on Titan we would like to discuss about some of the Myths & Realities of Titan’s Retail Business.

Competitive Industry Impacts Margins – Titan has a huge competitive advantage in both its Jewellery and Watches businesses with strong brands, design capabilities and distribution. Titan’s financials have demonstrated the entry barriers to the business: despite the entry of a number of players in the industry.

The jewellery market is highly fragmented and is likely to remain so due to local taste and preference. The watch segment has seen a number of foreign entrants during the past 10 years and foreign players are unlikely to reduce their focus on India. However, entry barriers, Titan’s competitive advantage and huge untapped market potential will, we believe, drive Titan’s profitability and revenue growth over the next 10 years.

Can Watch & Jewellery Fade Out ? Watches are no longer just time keeping devices. Titan has positioned watches as fashion accessory. Even the mature Swiss watch industry has demonstrated steady growth during the past six years. We believe that, considering the huge level of under penetration in India, the risk of obsolescence in this industry is low.

Jewellery demand has grown steadily in India over the past 15 years. Despite the sharp rise in the gold price, consumer demand for gold jewellery has not fallen. We believe rising consumer affluence will mean demand for gold jewellery continues to rise in India and, in addition, there is substantial scope for the organized players such as Titan to gain share.

Mitigating Business Volatility – Titan’s quarterly margins and revenue growth has been, and is likely to remain volatile. Quarterly numbers clearly reflect the consumer cyclicality in its businesses as the company does not attempt to smooth its quarterly numbers. However, annual revenue and margins in both Watches and Jewellery have been on a steady uptrend for the past six years.

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