Ladies and gentlemen, good day, and welcome to Titan Company Limited Q2 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. 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, Mr. Venkataraman.
Thank you very much, and thank you and welcome to everybody on the call. It was a very satisfying quarter two FY24 for Titan Company and its subsidiaries. The actual results are up there for you to see, and I would just like to talk about one important development during the quarter, and that was the decision of Titan Company to acquire the stake of our joint venture partner, Mithun Sacheti, in the CaratLane Trading Private Limited . And that was decided in the around the 20th of August, and the work subsequent to that is under process.
When we partnered with Mithun in 2016, we had a certain common vision, common dream, and strategy, and, I'm very happy to note that partners have ended up achieving that very well, and I would like to thank Mithun for having played his part in it. As part of the agreement, the purchase of the Mithun stake is happening as per the shareholders agreement of that, time. And we are quite excited to be now in the next wave of growth, CaratLane, and given the profile of Indian consumers, their digitalization, their accessorization, their desiring to buy the right kind of lifestyle products, CaratLane is, positioned exceedingly well to capitalize on that opportunity. And it would be part of a wholesome portfolio that the Titan's jewellery Business will have to play with.
All of us are super excited to partner with Avnish Anand, the CEO of CaratLane now, and his team, in this next wave of the exciting journey of CaratLane. So I would like to now stop here and request for all questions relating to the last quarter performance. Thank you.
Thank you. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi, sir. Congratulations on the great performance this quarter. I had just two questions. The first one was, you know, in the presentation, you pointed to a material, beneficial, material impact of Shradh being delayed from September last year to October in the current year. So two sub-questions on that: A, is it material enough to impact the October sales? And if that is, does it make us reevaluate our expectations for three-Q sales growth?
Hi, Avi, this is Ajoy. Still, but very difficult for us to gauge the exact impact, because this year being it has that Malmas and then because of that, Shradh got deferred. So eventually we will know only by mid-November, because Shradh period of first 14 days of October, you know, while it was better than the Shradh of last year, which was in September, but how to account for how much sale has, you know, shifted from here to there, frankly, I have not been able to assess then. But we know it's material because of the fact that, pretty much many jewellery players saw good growth in quarter two. And, you know, we, we, we do attribute. So yes, to some extent, the first 14 days of October would be understated compared to, last year's-
Sorry to interrupt you, but, there's a bit of disturbance in the line. Let me reconnect your line. One moment.
No, no, that's okay. We can, I can hear, if it's okay with the operator, we can go ahead.
Yeah, yeah. Continue.
Sorry to interrupt you, but, I will have to reconnect the line, sir. Please.
Oh, okay.
Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may continue.
Yeah. So Avi, I was sharing that it, it's becoming very difficult to estimate how this, because which period to compare it with is becoming difficult. But yes, to some extent, you should consider in quarter three, there will be a catch-up of this higher growth seen here may get slightly impacted. We will know the exact impact only by the time we complete mid-November and end of quarter three.
Okay, sir. Okay,
Sorry, I don't have a number for you.
Yeah. Okay. Okay, fair enough. I understand then what you're saying. Any number for October that you would want to share, or that is something that's too difficult to give us a guidance or give us an understanding of the underlying growth momentum, maybe?
See, it's difficult. Again, October, you know, has 14 days of Shradh and 16 days-
Okay.
off season, and then to add them up and try to arrive at growth is very difficult.
Okay, sir. I understood. Fair enough, sir. So then the second question is again on the jewellery business, only on the diamond pricing. We understand that there has been a sharp correction in diamond prices. Could you comment if there is any material impact from this correction on either inventory or margins that you anticipate going forward? That's all from my side for now.
So, you're right. Diamond prices, especially in the higher caratages, in the solitaire side, have come down, and that's largely to do with international demand-supply situation, combined supply of solitaires in the market, and we have traditionally not looked at price corrections based on this situation.
But since there has been a significant impact, we have done small corrections in our pricing, and to that extent, that may result in some margin dilution, you know, over the next maybe seven to eight months, because it's the inventory that we hold that will translate into some degree of margin reduction flowing in. Again, not able to estimate how much that will be in any quarter, but over the next six to seven months, we think there will be. We also don't know whether the prices are likely to continue to remain low or go up. That's something which we are not able to estimate.
So would we.
Be on solitaires and not so much on the rest of the diamond-studded business. And the bulk of what we do is non-solitaire.
Okay, and so then materiality is not, is not great. Is that the way... I mean, does it change our expectation of where we were hoping, full year margins to be? Does that kind of get changed or no, it's not so material to talk about, is what I wanted to kind of appreciate better.
Avi, it is not so material to talk about. I think our guidance.
Got it.
2%-30% every year.
Perfect, sir. That's all from me. I'll come back with the other questions, back in the queue. Thank you very much, sir.
Thank you. Next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi. Congratulations on a great set of numbers. Just a follow-up on the point on diamond. So while you mentioned that the main fall has been in solitaires, so are you saying there is probably no need to reduce prices in the main, you know, the lower, you know, ticket size diamond that you sell? And in that context, would you then basically retain some of the commodity benefits, because prices there would have also fallen, though to a lesser degree. And secondly, is there any, like, impact on revenue as prices go down? In your past experience, does value tend to compensate for the more consumers tend to compensate for the lower value?
So the large part of our studded business is non-solitaire business. On that, we have not felt the need to take any price correction. It's normal utility, up and down, something keeps happening. So we have not taken any price. We don't even feel the need to look at that as a price correction. It's only in the solitaire side, where we've taken a small correction. And, therefore, yes, we will, you know, hope to get the same margins on the studded business, at least on bulk of it.
And the other question on more, Yeah, if prices come down over a period of time, they become more accessible. In theory, yes, but we've never had faced that situation, so we can't really speak out of any experience. But yes, if the prices are falling suddenly, we think people will wait and watch on solitaires as to whether there is more softness or will it come down further or will it stabilize. So uncertainty will result in solitaire customers being a little more cautious, but that's only on the solitaire side.
Okay, thanks. My second question was on the gap between UCP and primary sales and jewellery, which is around 27 versus 20. So this, I presume, is mainly for the L3 selling timing. So does it mean that we should expect primary sales to be higher by almost 6%-7% in the Q3 to make up for this gap?
No. Let me just clarify. 27% is the growth if you look at your customer price, okay? If I look at some amount of discounting, et cetera, that 27% growth will actually come down to 26%. And thereafter, there is a further three percent drop on account of timing difference of upstocking, downstocking this year versus last year. Last year, festive season was in October, so the upstocking happened in September. This year there was no such upstocking, so therefore, the primary comes down further. In addition to that, there are some adjustment accounting entries which resulted in a reporting number of NS-
Actually, domestic is 21% , n ot 20%.
Yeah. So domestic is 21%. So 27% comes down by those two pieces I shared, which is to do with some amount of discount payouts being a little higher, and the second piece being the primary difference, that growth gets shaved off from 27% to 26%, 27% to 24%, 23%. Yeah. And then the balance, 23% to 21%, is some accounting entries, which, you know, happen to come at this point in time.
Okay, okay, thanks. That's it from my side. All the best.
Thank you. Next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity, and congrats for good numbers. Can you help us understand developments in the lab-made diamond industry? There are reports saying that this is causing the slowdown in diamond industry in China, and also that lab-made diamonds are now available at, like, as high as 90% discount to real. What are the trends which you are seeing, and if these diamonds become more popular in India, what would be your strategy to counter this trend?
So, let me give one broad perspective that, internationally, the diamond prices, especially in the higher caratage side, have taken a hit on account of couple of things. There is... I mean, bulk of it is international market. So what we understand from the diamond cutters and polishers is that there has been some kind of bullwhip effect on, because of the timing difference of end consumer demand versus, what the back end of the supply chain kind of gets to see. So markets have started coming down some time back, but these guys were still, you know, increasing the supply of polished diamonds and so on, and now there is a certain realization of inventories, et cetera. So that's one.
Second, what I understand is, most parts of the world, demand situation, due to economic factors, has continued to be very weak, especially including China, which is likely to remain like this for the next one or two years. Europe has been down, Japan has been down, U.S. also has been impacted. The third factor in addition to all that is, in about 40%, you know, by volume of the U.S. market is bridal center stone. In that, a certain proportion of diamonds have got replaced, natural diamonds have got replaced with lab-grown. So that could be adding a little bit more to this drama. So all these three factors and oversupply of roughs and therefore polished stock in the market has resulted in some price correction, and this could be part of a business cycle.
It, some part of it may be structural, but very, very difficult to estimate. In India, at least, we are not seeing any demand. We have not heard of anything in any of our stores across all our brands, where people come seeking for lab. People want a certification that can you please ensure that you also add to your guarantee that our products are natural. So that indicates that they are keen to ascertain the authenticity of naturals. And we are, of course, selling only natural diamonds. So in the future, what will happen, how it will happen, we are watching, and we'll figure out how things play out.
Sure. Thanks. That's helpful. And also, I wanted to understand, if I look at like-to-like growth for CaratLane, that's lower at 10% compared to Tanishq at 22%. Can you help me understand this? I would have expected the growth for CaratLane to be higher because it's a new format.
Yeah. So a couple of things, here. The Tanishq is operating in a market, have the benefits of formalization and the opportunity to gain share from many. Two, Tanishq is also gaining size by virtue of operating at a low market share, high value space, whether it's high value studded, whether it's in gold. Therefore, you will see that the ticket size has contributed as much to the growth of Tanishq as, as any other, as the number of buyers. So in fact, on a like-to-like basis, 50% of the growth has come from ticket size. The rest has come from buyers. In the case of CaratLane, as a conscious strategy to operate within that price segment, was tested, and that's where you need to give attractive products.
There's no ticket size-led growth, it's largely buyer-led growth. So that, that's the way it'll equate. Further, if I were to deconstruct the Tanishq growth, the growth in buyers and new buyers is particularly high for us in the higher, greater than INR 200,000 space. Whereas the sub INR 50,000, sub INR 100,000, we are seeing certain much lower new buyer growth. It's that in the sub INR 50,000, there has been significant amount of, partly there is enough and more players in the market, and partly consumers being a little bit more under stress.
It probably reflects a more modern, younger customer, IT crowd, et cetera. There is some, some amount of consumer sentiment and share of wallet play, which is happening in the sub 50K. We are seeing in CaratLane, Tanishq, Mia, from the same store, new buyer growth, kind of comparable. So I think that's the way to understand this. Otherwise, there's no reason to worry. I would add one more thing: CaratLane has certainly added a lot of stores in the last 20 months, and to some extent, the same store growth in certain cities could have got impacted by that. But we are closely watching that, and we are sure that overall city growth is very good.
Understood. That's it from my side. Thank you, sir.
Thank you. Next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, sir. Hi, thanks for the opportunity, and congrats on the very good quarter.
Devanshu, you are not audible. Can you please speak through the handset?
Yeah, I'm speaking from the handset. Am I audible now?
Yes.
Yeah. So, my question is on the capital raise of about INR 2,500 crore through debentures and about INR 1,000 crore through debt. So wanted to check if you can provide some color on the utilization of these proceeds, and also what is the blended rate of interest that you foresee for the same?
I think we did this issue yesterday and getting all things closed today. We did two tranches, INR 1,250 crore and INR 1,250 crore. Other one is for 24 months. We've got a blended rate of 7.74%, is very, very good in the current rate. And idea is to use this for the acquisition consideration partly and partly from internal. So that is the purpose.
Acquisition of CaratLane stake, sir?
Yes, yes, yes.
Okay. Okay.
CaratLane acquisition, just to add that it is in through the CCI approval. We expect that CCI approval should come soon, soon. And we are getting just ready that as soon as the CCI approval comes, have necessary funds to kind of consummate this transaction.
All right, sir. Sir, another thing that I wanted to understand is from a competitive intensity point of view, the access to capital for other organized players has also improved, either through capital markets or through franchisee investments that they're getting. Almost all players are talking about increase in network expansion versus historical trends. So what is your view on the intensity in this market? And do you foresee any potential impact on margins because of it?
No, you're right. Most of the organized players and some of the independents also are maybe in their close by cities or near or the same city. And therefore, we are seeing that. We are also actually expanding quite rapidly. We added in the first half you know, 19 stores in Tanishq. And as we speak, we've added another 8 in the month of October, and we have visibility for another 15. So yes, expansion is on, both in existing markets and new markets. We are also expanded significantly many of our stores. We have undertaken significant store relocations and expansion to be able to do full justice to all the products and changes and ranges that we are selling.
Also, at least I'm able to see on the ground is an acceleration in the formalization of the category because of an increased activity level by other companies, like what you're mentioning. There are many places where we are like three, four of us in one stretch next to each other, and that whole city or the whole locality, depending on how big that city is, is actually transformed from a jewellery industry point of view. I think, at least on the small size, jewellers are certainly getting much more affected. Therefore, the acceleration of the formalization, which means that the sale of these does not have to come from Tanishq. Equally, we are also seeing that when we are just next to other big national brands, we are coming out as better.
You know, contrary to what somebody may think because of premium and all that, but premium is only one aspect of it. Finally, the quality of the designs, the quality of the finish, the superior experience inside the store, all that, customers are able to perceive directly in a short time. In half an hour, you'll know the difference, right? Unlike, you maybe go a day later to some other store, your memories are, like, dim. People go and come back and buy. So actually, we are benefiting when competition is putting stores next to us, as opposed to worrying.
In fact, now more and more people I meet on the ground are saying that, "Let those brands come and put stores next to us, actually it will help us." Because the overall traffic for jewellery in that city to that stretch is going to dramatically increase, and we'll get a greater share of that than otherwise.
And hence we are seeing market share gains even in those cities. So frankly, you know, all the forces are working well. Competitive intensity has always been high, will continue to be. So I don't think that's something we are worried about.
Got it, sir. Thank you. That's it from my end.
Thank you. Next question is from the line of Shirish Pardeshi from Centrum Broking. Please go ahead.
Hi, good evening, Venkat, Ajoyji, thanks for the opportunity and congratulations. I have a few questions, starting with the main question, which is fundamental question for Ajoy. Last many quarters, we have seen a new buyer growth ahead of 45%. So I was more curious to understand the profile of these customers, what kind of ticket size these people contribute, and what is the frequency at which they buy?
So I'll just correct you, Shirish. It's not the growth, it's the contribution of what you're talking, 45. And even in this quarter, it's a 48% contribution, 48-52, year-on-year to repeat. So typically, there is a difference between a new and a repeat customer. The new customer comes in at a lower ticket size, sub INR 75,000, because they are sampling the brand. Very rarely do they come and buy a very high value item. Repeat customers typically have much higher ticket sizes, and, for their lifetime value to us is, is much more. However, the new customer segment is critical because they are the funnel. Over a three-tofour-year period, they migrate from being a sub INR 75,000 to a INR 200,000+ buyer, assuming they stay with us and they don't become dorm.
So that's the story as it goes. Profile, well, largely, they are typically people who are otherwise buying gold jewellery from somewhere else, and they come in, they want gold, and they want gold of their kind, and they're typically the everyday product, you know, buyers, whether it's bangles, earrings, finger rings, chains. Over a period of time, then they get attracted towards the studded side of the business as well. So they are more traditional, by and large, not all of them, but by and large, especially in most of the market.
And two, they are lower ticket size. The metros and the bigger cities, yes, we also get a lot of studded buyers, especially those who come in and buy Mia or a Tanishq of INR 50,000 or even a CaratLane in a CaratLane store. That's a different kind of audience. Audience is. They are not the same as the earlier one I described. So two types of customers, but beyond that, I don't know what else I can share.
That's helpful, Ajoy. The reason why I'm asking now, today, the Tanishq store count is at 445, and Mia is 145, almost one third. So I was more curious, that number of stores over the last 5-6 quarters, we have added very aggressively in Mia. Obviously, that format is working well, and obviously, you would have put behind, those energies. The reason why I'm asking is that, that upgrade which is happening, say, for example, a new buyer comes with a plain gold and upgrades to a solitaire or studded, is the trend which is going to stay for a longer time, or there is some, trend which is now Mia is the different segment which is catering and, plain gold Tanishq is, catering to a different segment?
No, no, no. I think that's a very simplistic view. Firstly, Mia is present in almost all Tanishq stores also. Okay? And, and in not some, many of the Mia stores, we also have kept a Tanishq complimentary range of studded products. So you must recognize that these are two channels who are attracting a certain profile of buyers. Secondly, in the Tanishq channel also, you get a fair amount of people who come in and buy studded in the sub INR 50,000-60,000, both in the Tanishq brand as well as in Mia. Mia is mostly 14 karat, Tanishq is only 18 karat in that studded space. So it would be too simplistic to classify. What I told you was a large number of people who are sitting and buying... And when I say new, this is new to Mia or Tanishq.
So the large number of people who are out there in the unorganized market, who are buying typical gold products, that was the first profile I spoke to you about. That is a big chunk. That is a very big chunk because of the sheer formalization benefits and the market share gains that we spoke about. The second customer that you are referring to is a new age customer, where there is more of a market expansion activity and not so much of a share gain. As in new customers who are looking at this category as a new acquisition to have for adornment.
Okay, that's helpful. My last follow-up on the jewellery, now we have almost 10 stores outside. Would you be able to share some qualitative, quantitative data, how the stores are faring? What is the sq ft or per sq ft sales we are getting or any, any color, how we should build?
Hi, this is Mitra here. So far, I mean, as on date, we actually have about 13 Tanishq stores. We've just opened soft launch, Singapore. The formal launch is tomorrow, and we'll be opening Houston as well tomorrow. Dallas is opened recently. Plus, 2 stores that we opened a little while ago in Qatar. They're all doing quite well in terms of numbers. All of them, once we open them, are pretty much better than whatever we had anticipated, including relatively high studded ratios, reflective of the type of customers that or the type of incomes and the type of lifestyles that Indians internationally are enjoying. So from a performance standpoint, we're all doing extremely well. We're getting a good percentage of repeat customers.
We've also recently, about a month ago, opened the first Mia store in Dubai, the first international Mia store, the first one outside the country in Dubai. That is also helping us pull in a set of non-Indian customers as well. That's the broad approach and the track that we are taking for Tanishq.
Yeah, I'm sure that's helpful. But I'm looking more from.
Sorry to interrupt you, Suresh. I'll request to come back in the question queue.
No.
Thank you. I request all the participants, please restrict to two questions per participant, so the management can address all the participants' questions. Next question is from the line of Aditya Soman from CLSA. Please go ahead.
Yeah, hi. Good afternoon. So first question, I mean, you talked about a faster customer growth at the top end in terms of higher ticket sizes. But I see that Zoya at present, I mean, while you are expanding it, is about 10 stores. Would you think the time is now right for you to accelerate the expansion of Zoya and any sort of outlook you want to give us in terms of where Zoya can be, let's say, in the next two to three years?
Yeah. Hi, Aditya. Zoya is currently at eight stores, if I'm not mistaken, not 10.
Yeah, eight, eight.
We have actually, as we speak, in the pipeline. But the pipeline takes a little longer to materialize in case of Zoya, because some are built to suit. But we have at least another six or seven stores visible for us, and therefore, I've made this comment even earlier in some other media interaction, that before next Diwali, you could expect about 15 Zoya standalone stores. Besides that, Zoya is also present in six, or is it seven galleries, I think. And there are a few more galleries that will come up, which is inside a Tanishq company store. So there may be a couple more that may come there. So you're right, we believe it is the right time to expand Zoya.
From, let's say, three stores, four years back, it's at eight, and by next year it will be closer to 15, and the top seven, eight cities or top eight towns will get covered. And yes, we think Zoya can grow well. Very difficult to give an accurate number on this because it's an evolving thing. Last year, Zoya did, in consumer price terms, at about INR 140 crore. We are targeting, growth, a good 50% growth in the current year. I think we can sustain good growth. We haven't done an exact projection, but clearly we see that building up into a nice, sweet business as well, besides being a great brand.
No, that's, that's really helpful. In terms of profitability, anything to call out on Zoya? I mean, would that be more or less, any sort of rough direction?
Gross margins are better than Tanishq because of it being 95% studded business. And so the rest of it is really operating leverage, which we don't do a separate P&L for Zoya. Only margin and profitability-wise, it's much higher.
Very clear. And these are all L1, I'm assuming, or are they again L2, L3 as well?
These are currently all L1. We will evaluate if we need to do an L2.
Very clear. Thank you.
Thank you. Next question is from the line of Nehal Shah from Nuvama. Please go ahead.
Yes, good evening to the management. Ajoy, my first question was on the jewellery business. I know at the start of the call, we tried bifurcating the benefit of maybe what the shifting of Eid had. Just to understand if, say, looking at the growth in July, August, would be in any way a bifurcation or a see-through into how the quarter would have performed had the shift of these not happened. Would that, in a way, give a sense, just to understand from that perspective?
No, not really, because July was the Malmas, and we saw from July to August to September, the trajectory was going up, so very difficult to judge. We tried all this, but can't help you.
Sure. Fine. Thank you. The second question was on the jewellery margins. Last year, I think we had a 2% benefit, where we saw some benefits also coming in from the increase in diamond prices at that point in time. And while I don't think we bifurcated the difference, assuming, say, 1% was related to that, is it that this time around, the pricing in diamonds is, as you said, more towards solitaires and the higher carats, as last year it was more on the carats that we were using, and that is why it is not really clear in terms of how the margin impact would play out in the future ahead?
No, I don't think that's a way to look at it this way. Inventory gains came in because we took the price increases ahead of the actual costs hitting us because of the pipeline inventory we had, and that was across the board, whether it was smalls, whether it was slightly bigger stones or, or solitaires. Right now, as we speak for quarter two, there is no impact of any price related. Therefore, the difference between last year, quarter two, and this year, quarter two, is the extraordinary inventory gains that were, in a way, one-time to last year. This year, what you're seeing is the normalized margins in quarter two. Going forward, because we've taken some small correction in pricing, there may be some-...
Some gross margin dilution on account of that segment alone, but that will play out over the next six to eight months, and we are not able to estimate exactly how much, because it depends on the sale of those finished goods, et cetera. So right now, in quarter two, the only difference you see is the normalization of margins.
Understood. That's it from my side. Thank you.
Thank you. Next question is from the line of Siddhant Dand from Goodwill Warehousing. Please go ahead.
Yeah, hi. I think my question on Zoya was perfectly answered before. My other question was, Trent has launched a premium Indian menswear, Samoh, which is, you know, arguably clashing with Taneira at some point. Is there an understanding on which segments, you know, in apparel will be managed by them versus Titan, or are we open to compete?
Nothing to share at the moment, Siddhant, on that. Maybe we will share something once we are also completely clear.
Okay, that's fine. And there was some media article on a INR 10 lakh plus invite-only format. Is it a Zoya store or is it something else?
No, I think it was a little bit of journalistic imagination.
Okay. Okay. Okay.
Sure.
Thanks a lot. Okay, perfect. Thanks.
Zoya, we already have a south store in Zoya. We are looking at capacity for expansion, because our current store size is not adequate for the demand that we cater.
Yeah, understood. I was expecting that. Okay, thanks.
Thank you. Next question is from the line of Milind from Dalal & Broacha. Please go ahead.
Hi, I have two questions. First of all, congratulations on good numbers. I have two questions. One was that now Hallmark becoming quite common, what is the USP, especially in gold jewellery, that Tanishq could have against other jewellers, like maybe a Kalyan or Malabar or you know, similar kind of jewellers?
So I think purity is one aspect on which customers have distinguished. Secondly, is our gold exchange policy, the transparency of pricing, transparency of the way our... You know, there's a net weight, gross weight difference that we bring about. There is also an excellent exchange program, the TEP, in which we give value for stones, we give value, transparency in which the, the exchange program works. There is great product finish and design, which we are very proud of. Finish in terms of purity as well as design. And also, I would say, the customer experience that people get in our stores. So there are many different legs on which the brand is differentiated, besides the overall appeal of the brand to the Indian woman, to the progressive Indian, you know.
Okay.
I think all these factors play a big role in differentiation.
Okay, got it. Thank you. Second question was on lab-grown diamonds. Now, frankly, even now, I find a lot of resistance, even in the customers, to go for lab-grown diamonds. But all said and done, it's like a IVF baby or a normal baby. Baby remains same, there is no change. So, there is no difference when it comes to lab-grown diamonds versus natural. So, do you think that this will be a major challenge, going forward for Titan, in the next three-to-five years? I'm not talking of immediate, but over the next three-to-five years, do you think that there could be a impact, in the sense on value?
I do understand that there may be some kind of an increase in volumes, but would the value be impacted because of lab-grown diamonds becoming more and more popular? Because we have seen that in U.S., 50% of loose diamonds now are already lab-grown diamonds. And I inquired that the cost of a one carat lab-grown diamond is roughly less than $200. So that is why this question.
Okay, so first let me clarify that 50% of the center stone bridal engagement ring product, so that itself is about 40% of the overall. So that 50%-
Right.
Will translate to 20%. Okay? Just to clarify.
Okay.
Second piece, you're right. If suddenly a retailer decides to sell a lot of lab-grown diamonds, and because the price of lab-grown diamonds is crashing. In fact, it's crashed very, very badly. And as a consequence, many retailers in the U.S. who were selling both have seen that the lab-grown has cannibalized, and now they are having a rethink on their entire strategy, including the Signet Group and quite a few other big players. How things will pan out over the next three to five years in India is difficult to gauge. In the U.S., the concept of stored value in a diamond is not such a big concept for them.
As you can see, it is largely in this engagement bridal center stone where this phenomena is occurring, but not in the rest of the fashion jewellery or other jewellery, at least, to the best of our knowledge right now. So in India, the stored value of the diamond, and particularly in the solitaires, where we are seeing this demand kind of, you know, impact in the US. In India, the solitaire is being bought not for young brides, but it is being bought for, you know, milestones.
And a large part of solitaire is also investment-led. How this will pan out therefore, the next three to five years, we don't know. We are keeping a close watch, and we will- what options, you know, we want to explore as we go forward, we see that there's a big impact. But right now, we are not seeing, and we'll keep a close watch.
Okay. Thank you. Thank you very much.
Thank you. Next question is from, Sheela Rathi from Morgan Stanley. Please go ahead.
Yeah, thanks for taking my questions. So my first question was with respect to, you know, the comment on the new and repeat buyer ratio. What I understand is last two quarters, the repeat buyer ratio is on the higher side versus new buyer ratio. So there the question is, what do you prefer? I mean, in terms of how do you want this ratio to look like, from a medium-term perspective? Because I would understand that new buyer means you have a higher, customer growth, whereas repeat would result in higher, bill value growth. But ideally, what is the balance you would like to maintain? Or how should we look at these numbers when you share these numbers?
So we are happy with the kind of ratios we are seeing, 50/50, 50 to 48, 47. And this ratio varies by quarter because of inflation and buyers come in, because a lot of people in the month that time. So it'll fluctuate, but we are comfortable with this 50 to 48, 53/47. It's a healthy balance, because you must realize that we also have a large number of existing stores. Ratios will be skewed more towards repeat, and the newer stores will have a greater skew towards new. So this is a good balance, I would say. We are, we are happy with this balance.
Understood. And, Ajoy, you mentioned about, you know, how the repeat customer in a Tanishq store over, you know, three to four years spends, you know, INR 150,000-INR 200,000 versus, you know, the first time purchase, which is less than INR 75,000. How does the repeat behavior in CaratLane or Mia pan out in terms of the spend?
There is a slight increase in the ticket values, but in Mia and CaratLane, since the update, continue to serve strongly to the sub-50, sub-1,000. They may buy more pieces more often, but the average selling product is pretty much where it is. And even, in fact, when the price of gold, et cetera, goes up, the endeavor of both these brands is to ensure we products in the price point, so that the catalog is not vacated. So repeat is slightly better, but not like the way I described Tanishq. They may come in buy more often, they may come in and buy more gifting or sale or whatever, but the piece price remains more or less there.
What would be the differential in price points for CaratLane and Mia now?
CaratLane is around the 25, 24, 25 thousand range, and Mia is around 31, 32 thousand.
Understood. So one final question.
One point, One point.
Sorry?
Tanishq is the last ticket.
Sir, sorry to interrupt you, but I need to reconnect the line. There's a lot of disturbance in the line. Participants, please stay connected. Ladies and gentlemen, please stay connected. Participants, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead.
Waiting for the question.
Okay. Sorry, finally, Ajoy, you were saying something on Tanishq in the end. I think.
No, no. Just the ticket, ticket value is INR 140,000.
For the repeat buyer?
No, for average for Tanishq. I'm telling everything average-
Okay.
For all the,
Understood. One final question from me. What was the share of gold exchange this quarter?
Gold exchange was around 30%. Sales by virtue of gold exchange, that is a non-Tanishq gold exchange, was 34%, 33% in the current, in quarter two.
Understood. Thank you so much.
Thank you. Next question is from Jay Doshi from Kotak Securities. Please go ahead.
Hi, thanks for the opportunity, and congratulations on very solid execution. Just one question. Is it possible for you to give us some color in terms of, what percentage of your studded inventory right now is, you know, inventory where their procurement cost was higher and, you know, versus the current spot price of the average procurement? Or either absolute number or percentage basis or, some color that helps us sort of appreciate, this aspect better.
So, Jay, Ashok here. As we spoke in the beginning of the call. The impact on studded margin going forward for next six months is not material enough, so you should not worry about that, and we would not like to put a number behind it.
That's helpful. Thank you so much, and good luck for the festival.
Thank you. Next question is from the line of Gaurav Jogani from Axis Capital. Please go ahead. Gaurav, may I request you to unmute your line?
Sir, I'm audible.
Yeah, now you are.
Yeah. So my question is with regards to the sharp margin expansion in Q2. You know, the margins were, ex of the bullion, were around 14% odd. So what really, you know, explains this sharp expansion QOQ? And what would be the guidance in the light of the margin that we have seen in the Q2 for the full year?
So QOQ is not the right way, uh, uh, to look at it. You know, there are seasonality, there are diamond festival or diamond activation. Quarter two is for that, and typically, quarter two margin is always higher than quarter one. Quarter one is more Akshaya Tritiya, where gold jewelries are far higher. So don't look at quarter-on-quarter, look at year-on-year. And year-on-year, last year we had called out that we were sitting on one-time gain, so compared to that, we are down by 1.3%, 1.4%. This year, again, you know, studded share is even higher than the last quarter, too. So some help has come from there. Some of the gold portfolio realizations, extra, et cetera, are better. And some, you know, in, in jewellery business, there are thousands of moving parts, you know.
Some plus, minus happens. In this quarter, all these factors, levers, are generally in positive direction, so we are there. Nothing to specifically call out that, except the diamond share and gold portfolio better realization, there is nothing specifically to call out.
Sure, sir. So, sir, in that light, what could be the possibly margin guidance, or the guidance for the full year? What band would you now say, you know, that would be achievable for the full year basis?
Full year, I think we are being consistent for last couple of years. 12%-13% is a good margin band for jewellery division , to aspire for and deliver for.
Sure, sir. Thank you in this for me.
Thank you. Next question is from the line of Nitin Jain from Fairview Investments. Please go ahead.
Yeah, thank you for the opportunity. So my question is on CaratLane. So if we look at the margins for at the beginning of FY 2023, we were somewhere around 7%, the EBIT margins, and since then, there has been a gradual decline in the EBIT margin. So how do we look at this picture? Is it as a result of the competitive intensity or the product mix has changed considerably? If you can throw some light here.
So CaratLane also last year, at least, was beneficiary of large change in diamond business, 75%-80%. They also had some amount of inventory gain. So quarter one, quarter two, particularly of last year, had that benefit sitting in that. It was a very small part of the thing, so none of you asked at that point of time, and none of us called it out for CaratLane. CaratLane, right now, I think as far as the growth. They, they are planning for growth and accordingly organizing themselves for that. But at the gross margin level, they are kind of comparable to where they were.
The remaining, the fixed cost part of it, you know, which is kind of preparing for the growth, putting more offices, putting more marketing, branding, et cetera, is kind of creating a little bit temporary stress in the PNL if you are looking at it. But we are very hopeful that over next two, three quarters, this should get sorted out as they regain their growth back to what they are planning for.
Okay. Just to confirm, there is no, like, significant change in the product mix, worth calling out?
Nothing. Nothing, nothing.
Okay. Thank you. That's all from me.
Thank you. Next question is from the line of Neeraj Khaitan from VT Capital Markets. Please go ahead.
Yeah. Hi, thanks for the opportunity. Since September 30, the gold prices have risen by around 10%. Do you think that will have any effect on the demand?
Yes, it has. Obviously, more customers get spooked with this kind of sudden jump, especially post 10th of October, I think, post the geopolitical tension. We have seen a certain sluggishness. But, having said that, you know, I think, in the last few days there has been stability and most customers tend to wait till as late as possible before they jump into the festive buying. So yes, overall there has been some dampening, but having said that, we're, we're still looking. We are still seeing reasonably decent value growth.
And I, I personally feel the next 10 days, we will see a huge surge of customers, providing no further jumps take place in the gold price. Otherwise, that can create a little chaos. But if the gold price remains where it is or if it comes down marginally, my feeling is that many customers who have been holding back will jump in, and including wedding purchasers who are waiting for gold prices to stabilize. But anybody's guess, huh?
Thank you. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask the question. A reminder to all the participants, you may press star and one to ask a question.
I think all questions are done from whatever we can get.
There are more than 20 parties in the conference.
Yes, sir, we don't have anyone in the questions here. Would you like to give any closing comments?
Yeah. Thank you very much for everybody, for all the encouragement and challenges as always. See you 90 days from now.
Thank you very much. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.