Ladies and gentlemen, good day and welcome to the Q3 FY 2022 earnings conference call of Titan Company Limited. 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 the 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, MD of Titan Company Limited. Thank you, and over to you, sir.
It has been a fantastic quarter for the company across all businesses. As usual, the Diwali and the post-Diwali season, you know, turned out to be very, very good. The enabling conditions were perfect. We had reached a very high level of vaccination status in the country, and therefore, the customer anxiety was very low. The pent-up, you know, feelings for shopping and enjoying were there.
The waves of greater formalizing were also in our favor in some of the categories where we operate. Of course, on top of that was the combination of innovation, agility, collaboration, teamwork, huge levels of customer relationships across our CBO network and of course our distributors and retailer friends and all our vendor partners who rose to the challenge and delivered an exceptional performance.
All the figures, all the information is there in the presentation, so I will not speak anymore. My colleague, Saumen Bhaumik, CEO of the Eyecare Division, is preoccupied on a certain development, and he'll be 15 minutes late to this meeting. All those of you who have specific questions on eyecare, please, if you can sequence yourself accordingly up to 4:15 P.M. so that he can speak to you clearly from the conference room where he will join us. Now over to all of you for the questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. The first question is from the line of Abneesh from Edelweiss. Please go ahead.
Yeah, thanks, sir, and congrats. My first question is on CaratLane. Extremely strong sales growth and like-for-like growth also. Two, three questions here. One is your first store in airport, is it largely for branding purpose, given airport rentals are very high and currently in COVID era, the footfalls are very unpredictable and very volatile?
Second is jewelry on rent pilot project. If you could share some details, how has been the initial response? And overall, such strong growth in CaratLane, is there some level of cannibalization which Tanishq is seeing in some segments or it is completely different consumption segments?
Hi, Abneesh. Ajoy here. While Mithun is not joining this call, I'll try and answer some of your questions. On the first one, the airport store is the first for CaratLane, and I think we have to yet figure out how the top line, et cetera, et cetera, pan out. By and large, every store that CaratLane opens has a path to profitability.
While, yes, it will play a branding and marketing role as well for CaratLane, we think there's enough. At that price point, there's enough opportunity for impulse buying to take place. This way, this will in a way enable us to test how strong is the actual revenue opportunity. Bangalore is a good city to have tried it. On the jewelry on rent, I'm afraid we don't have enough information right now to share with you.
However, we'll try and see if we can, you know, get back to you with some amount of learnings. It's early days. It's still at a very early days in terms of a pilot. So don't have anything to share. Growth in CaratLane cannibalizing into Tanishq, we are not seeing that. We have seen handsome growth in, you know, literally all the brands, whether it is CaratLane, Tanishq, Mia, Zoya.
Even put together between all these brands, all our brands put together, we are still around a 6% market share in a huge jewelry industry. Third, and of course, the customer segments are different. They may even need states are different in many of these cases. So I don't see any cannibalization at all.
Sure. My second and last question is on Tanishq. Your growth in the last two years of COVID has been extremely good in jewelry and well ahead of expectation and possibly well ahead of every player also. Here you have mentioned market share gains, and you have mentioned regionalization strategy of winning in focus markets.
Could you give more specific granular details, which market, what has worked? Is it better pricing, more focus on wedding, the design aspect? Anything else you want to highlight? Now when the third wave is also now over, essentially.
Do you see that the big fat weddings will be back so that the structural tailwind which was there that will become difficult, so people will spend more on the big fat wedding rather than on the jewelry because the restrictions will not be there if there is no fourth wave?
Okay. I'll start off with the first part of your question, which is to say what has worked for us. Actually, in quarter three, there has been a clear volume buyer-led growth and a grammage-led growth. Ticket size growth has been marginal because gold prices have stayed kind of muted relative to last year, which is very good news because of so many more people in the market.
We have seen very good so 32% has been a buyer growth, and on new buyers we have seen a 39% growth, which is to say, we have gained a lot more on new buyers, and we are continuing to see the benefits of formalization. In terms of regionalization, which is also helping us with market share gain, markets like Tamil Nadu, we have talked about, continue to power ahead in terms of market share growth and we are continuing to invest in that market. We are also investing in Bharat markets.
What we call as Bharat markets are those which are typically, you know, UP, Bihar, Orissa, parts of MP, Chhattisgarh, et cetera, where the upside is huge. There on the plain gold, as well as on wedding, the opportunity continues to be very, very high for us. Actually, on wedding, if I were to say, this quarter we've seen very good growth. It's led the growth. Overall retail growth has been around 34%. Wedding segment has grown at around 40% for this quarter.
The opportunity for the big fat wedding to, you know, and how it is gonna affect us because of other things, very early to say. Our total contribution of wedding continues to be around the 20-21% mark. You know, most jewelers have about 50-60% coming from wedding. The headroom for wedding-related market share gains is huge. What is working for us?
Yes, regional products, you know, which has been the thrust of it. Network expansion and regional and specific campaigns that we've run across different markets, and we are continuing to do so. In fact, we are picking up couple of more markets as we go forward. I think that is what is working.
Pricing has not really been too much of a area of concern for us. Yes, there is some plus/minus that keeps happening, but we've seen very good growth in the higher making charge products also. All the pluses and minuses are netted off positively.
Just one small follow-up.
Yeah, sure.
Sorry. Yeah. Wedding as a percentage of your sales, are you happy with that number, given market is much higher? Is there a conscious strategy to drive that much higher? In studded you used to have a number many years back, but then you said that every part of the business can grow and there are too many dynamics at play. What would be your comment on wedding as a percentage of share, medium long-term?
It's difficult to say share again. I would say that wedding can grow faster, just like studded can grow faster. But since we are also focusing on the everyday specials or core category, which we talked about two years back, that has also come back very strongly and in fact is a great, you know, it helps build a funnel. Because suddenly people will not come and buy wedding jewelry or high-value studded.
They start out by buying every day and then migrate on to becoming regular customers. But yes, we are seeing good traction in wedding, and we have a separate dedicated marketing and, let's say, merchandising plan and retail plan for Rivaah, which is our sub-brand for wedding. You will see much more aggressive play in that as we go forward. I can't comment on a contribution because everything is growing at a certain rate. We will continue to, you know, invest in both, Rivaah as well as studded disproportionately.
Sorry to interrupt. May I request Mr. Abneesh to please rejoin the queue. We have participants waiting for their turn. Thank you. The next question is from the line of Nitin Jain from Fairview Investment Advisory. Please go ahead.
The opportunity. I have just one question. A couple of quarters back, you spoke about Tanishq, you know, targeting the U.S. market. This quarter too, the commentary is that CaratLane has gone live with its U.S. website. What kind of potential do we see from the U.S. market? Like, what is the vision here for the next say three to five years? Thank you.
I wouldn't want to share any specific ambition in terms of numbers here, but it's a very, very grand vision, in the sense that we want to become the, you know, jeweler of choice, jewelry brand of choice for the NRI, PIO in the GCC and North America in the next three years. We're doing everything that we should be doing to get there, in scale and, at a very, very fast pace. We will share with you what we would like to share, sometime down the road.
Okay, thank you.
Thank you. The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises. Please go ahead.
Congratulations on a really fine result. You know, I'm just wondering, what is the expansion plan we have over a one to two year horizon, both for the jewelry business and the eyeglass business? You know, we were late in the wearables business. Are you planning to acquire something in order to fill the gaps and get better technology or whatever reason?
Rakesh, Ajoy here. I'll take the jewelry piece. This year itself, we have opened 27 stores. By the time we end the financial year, it may be another 10, 12 stores. We are looking at it, maybe 35, 37 stores is the sense we have for this year. Next year, again, we have in mind, we have a pipeline of 50, but we may land up, you know, opening 35-40.
That depends on local conditions. We are constantly pushing the envelope there, and we see the opportunity over the next two, three years to really, you know, we are at 384 odd Tanishq stores. We are also now begun to add a lot more in Mia besides the CaratLane expansion. Put together as a portfolio, we are already, you know, beyond 500, and we think the 500 could hit 600-700 over the next couple of years. Opportunity is large for all the brands put together.
Thank you.
Good afternoon, Rakeshji. This is Saumen from Eyecare division. On the network front, this year, in the last nine months, we have added 125 stores. This happens to be one of the largest expansion that we have ever done in the division. Our outlook is in the coming 12 months. By April 2023, I think our network count, which is about 707 today, should be around 1,000.
By thirty-first March?
Twenty-three.
23. Oh, okay.
We're trying to open one store every 1.2-3 days or something like that.
Great.
Hi, Rakesh. Suparna here from Watches. I know you did ask me a question on network and expansion that I do want to mention. In quarter three itself, we opened 35 new stores across the three chains. There is also, in addition, 29 stores renovation. There is a very big plan to expand and modernize the World of Titan, what is now we call Titan World, store chain.
In addition, Helios is expanding very rapidly, and the combination of Helios and World of Titan stores in many locations is working really well as an expansion route. With regard to your question on wearables, yeah, in quarter three, we had the launch of Titan Smart in the end of December, which has seen a lot of success.
In January, we've launched Fastrack Reflex watch called Fastrack Reflex Watch, which is also an in-house build. We have another launch tomorrow and another couple of launches in the next two to three weeks. We have a very healthy pipeline of smartwatches from both Titan and Fastrack.
Whatever we launched is doing really well. We hope to gather a lot of momentum on this in this quarter itself, which will then move on to next year, next financial year. As you know, we had actually done an acq-hire of a Hyderabad-based startup called Hug Innovations, and that whole team is really our tech team right now. In addition, we are working with various partners and alliances and we are very confident about taking on this, you know, expanding, exploding sector with a lot of good products up ahead.
I have one question for Ajoy.
Yeah.
Ajoy, Venkat just now said that he is looking at getting aggressive international expansion, and we want to cater to the Indian NRI and the PIO. Which are the areas that, you know, Singapore, Australia, Middle East, America, England? Because these are the places where the Indians are in quite a quantity.
Yeah.
So to be-
Hi, Rakesh, we opened our first international store after a long time in Dubai, a little more than a year back. It has done exceedingly well. After that, we've opened two more stores, and in the next two, three months, we are opening a few more. Our first North America store is slated to open in May, June of 2022, three, four months down the road, in New Jersey.
Our focus is going to be the Gulf Cooperation Council countries, including, you know, Qatar and Bahrain and countries like that, and the USA and Canada. This is our three-year focus. We are obviously looking at concentrations of NRI PIOs in the East Coast, maybe in the center, like in Texas, in on the West Coast, in the Bay Area, and maybe Toronto, Vancouver like that. The Australia, England and all are a little down the road. They're after.
Singapore and Hong Kong also big Indian populations. They can-
Yeah. Sure. I mean, they're all there in our just the scheduling, and there is a certain, you know, scale advantage, like if you're in the U.S. to put up five stores, there is a certain scale advantage that comes as opposed to a dissipated, you know, international kind of approach. Sure. As we gain, you know, traction, every year we will ramp up our ambition as well, and we'll certainly take your points.
Without any commitment that it will happen, do you think it will be reasonable to figure out that we'll open 20 stores in the next three years?
Um.
It's a commitment, obviously.
No, no. I'm not. My silence is not because I'm worried about the commitment. I'm just trying to recollect the plan. We are looking at, yeah, in the 20 store ballpark, yes.
When there's a sale, first of all, the gold price is INR 10,000 BP in India. For NRIs to buy there is more cheaper than buying in India.
Mm-hmm.
Before, do you think a typical store in Dubai or in America on an average will sell double of an Indian store?
Yeah. Like, I've also met many customers in the U.S. two months back.
Mm-hmm.
Both from, you know, their economic situation there in the $100,000 U.S. per capita on the one hand, and their stature, we were sharing with them products and prices and all that. The sense I got was what you're saying, which is a much bigger ticket size. Through that much bigger ticket size, a much higher first 12 months sale in every store that we open, which has actually been the case even in Dubai.
If you open 20 stores, then theoretically your 50 stores are more in compared to India.
Yeah. From sales point of view, yes.
Fair enough. Best of luck and congrats to your team once again for a stupendous result.
Thank you, Rakesh. Thanks for all the support always.
Thanks.
Thank you. The next question is from the line of Jay Doshi from Kotak Securities. Please go ahead.
Hi. Congratulations on good results, and thanks for the opportunity. Very quick bookkeeping question. Diamond prices have gone up quite a bit in the past couple of months or so, and you've called out that as one of the reasons for higher profitability. Is that number worth calling out in terms of what could have been the impact on profitability because of inventory gains on some of the diamond studded jewelry that you must have realized?
I think that is, of course, one of the reason which we called out, and it is well known that gold, diamond prices are going up. To some extent, we also took price increase and had advantage of stock which was at all. There were certain other elements also, you know, which helped this quarter.
Overall, I would put about 100 basis points, all those elements which came together, which may not be. I would not call it one time, but they are not normal items. That 100 basis point you can remember, I think, on account of two, three elements, not just only diamond.
Is it possible to share what are the other one or two elements, other than this?
Okay, one element at least I will call out that, you know, we have our provisioning policies and, based on aging of stock and with the growth, some of those stocks got sold out, so some of those provisions got reversed. That credit is also sitting in this quarter.
Understood. In case of diamond, you will continue to see that benefit for at least one more quarter or beyond that? Reasonable to assume?
Yeah, it's reasonable to assume that because some of it's a constantly moving thing, you know. We took another price increase in January, but there's still opening stocks. Now again, prices are going up, so yeah. In this quarter, I think you can continue to see some benefit.
I would add to Ashok's point, there was one more element where I think we've gained this year and this quarter some payout being lower on account of lower contribution of sales from GHS, which will catch up by the next couple of quarters. These are all the other elements which are also playing out.
Finally, with diamond prices moving up after a very long period, are you seeing any kind of increased interest levels in the studded jewelry?
Quarter three has been very good for studded jewelry. I mean, the growth have been marginally ahead of the overall sale. Even in the month of January, and I think we don't know how February fell yet. I think studded continues to see interest despite the inflation in diamond prices.
I think the cumulative effect of all this inflation will start hitting consumers in a bigger way only by February, March, I feel, or even April, when all the markets, you know, take all the price increases. We will have to see then. Right now, yes, the market for diamonds and inflation in diamonds is red hot. Also, you know, one of the things that I've certainly seen over many years, this is a store of value product.
It's not only a INR 2,000 rupee becomes a INR 60,000 rupee product, it's worth INR 60,000. Therefore, it is not like other categories where it has become more expensive. Sure, you have to pay more money, but the money is sitting in the product. To that extent, it doesn't work exactly like the price elasticity on volume kind of point that you're raising necessarily does not work like that.
As long as any brand has got an assortment which is sort of wide and deep enough to cater to all price points, which typically companies all our teams keep working. When prices go up, then assortment teams kick in and then create more products so that there are no gaps. There is a, you know, volume to price on a physical volume to price equation which is maintained around.
Correct. No, my question was the other way around. Are you seeing any pickup in the interest given that, you know, normally, if I understand correctly, diamond prices were stagnant for quite a few years, whereas gold was appreciating. So from an investment or, you know, store of value perspective, this movement in diamond prices, does it actually attract more customers to go for studded versus gold?
No, no, because gold is an investment product. Diamond is not, even though I yield that way.
It has paid back a lot to a lot of people, but people don't think of it as an investment product.
Sorry to interrupt. May I request you, Mr. Doshi, to please rejoin the queue. We have participants waiting for their turn.
Sure. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Shirish Pardeshi from Centrum Capital. Please go ahead.
Yeah. Hi. Good evening, Venkat. Hearty congratulations for beating our estimates. Very strong set of performance. I have two questions. First is on, obviously on Tanishq. You have reported a very strong growth. If you will be able to give me some breakup in terms of volume and value.
The volume growth. In fact, the entire growth in retail is driven by volume actually. 34% is the Tanishq retail growth in value. 34% is driven by buyer growth and 2% on ticket sales.
Okay. Any quick sense, because what we have been seeing this pent-up demand in deferred wedding, if that trend has continued in the month of January?
I don't really have the January data about wedding demand, et cetera, but the pent-up demand is there. If you ask me, there are a lot of weddings and a lot of people continue, the inquiries are there. We are anticipating this quarter there is opportunity for wedding and also, if you ask me, in quarter one going forward. Over the next five months, we are bullish on wedding, and we will push the envelope stronger on that piece.
I got that. That's very helpful. Why I'm asking is that you have beaten even the gross margin and jewelry being a larger component of your business. What kind of gross margin? I'm not saying the number, but is that trend is visible and is it sufficient that we can look at more than 20-odd percent gross margin in that business?
I think, you know, our focus is substantially on sales growth and starting to become more and more, you know, dominating in every city where we are, including the, you know, the programs that Ajoy has spoken about, which is, you know, multi-state trust. All that is, you know, pushing for scale, and therefore the overall expansion and the profitability of the business coming much more through scale than actually through gross margin expansion.
If it comes through that in a particular quarter because of some circumstances like that, it comes through. Gross margin is, in any case, not an end in itself. It's not a business KPI. It's sort of, you know, within a range we need to keep it, otherwise the health of the business gets affected. Otherwise, it's not an ultimate KPI.
The ultimate KPI is, you know, profit margin and ROCE. Therefore, the scale is what is. In fact, if you see substantial part of the expansion has been delivered by scale in Q3 and some part of it by the gross margin expansion. To that extent, this is dynamic. If we grow much more in gold jewelry in Q4 than in diamond jewelry, then the gross margin will fall. Does it mean anything? Nothing, because our profits may actually increase.
That's very helpful, Venkat. My second and last question on the watches segment. Again, watches have seen after a very long time a good strong growth momentum. Any color how the unit growth has happened or it is how the mix has changed in terms of premium and popular?
In watches, our volume, there's a gap of almost 10% between volume and value, which means there's an average price growth of almost 10%. It's on the back of the higher priced brands, which is both flagship brand Titan as well as international brands which are more expensive. Those have led the growth in Q3. Other brands have also done well.
Sonata, which is our economy price brand, has seen the least growth possibly because of, you know, the overall conditions favoring premiumization as opposed to the economy price point. Having said that, we are seeing good growth across all channels, whether it's multi-brand outlets, our own EBOs as well as the large format stores and marketplace e-com.
For us, different channels actually cater to different audiences and different price points. The multi-brand retail and e-commerce are more oriented towards the economy price points and those brands do better. Our EBOs as well as the large format stores are the place where Titan and international brands do better. As of now, there is still a large part of the growth is still coming from the average price point. There is volume growth, but not as much as the
I got that, Suparna. My question was a little different. In these circumstances, as we know, the wedding season and gifting season is really strong because of the festive season. Once the economy opens and things normalize, do you think that the premium end is growing faster or will come back, the growth rate will fall down to the economy brands?
I think the growth. You're absolutely right. As the situation in the country becomes more normalized, the lower priced products and the more economy brands will also kick back into life. Yes, you know, maybe a year from now, there will not be such a big increase in the value side. The premiumization will continue because that's where the overall consumer trend is. But the lower price points, middle and lower price points, that demand will come back.
You're right, with a lot of gifting, with a lot of wedding, a lot of other occasions where one would get gifted, which have not been celebrated, all these moments of birthdays, anniversaries, so many graduations, so many important occasions where watches are the gift of choice, those will come back and we will be able to see that, those coming back.
Sorry to interrupt. May I request Mr. Pardeshi to please rejoin the queue, sir.
Thank you.
Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.
Hi. Congrats on the set of numbers, and thanks for the opportunity. My first question pertains to jewelry segment. Couple of quarters back, you had specifically called out that we are gaining market share in Southern India, market share in Spain with a lot of effort and planning being put on that part of the business for a while now. Any update on that front?
Hi, Tejas here. Market share gains continue to be good, actually across the regions. I can say specifically for quarter three, the gain in market share perhaps is sharper in south and west. You know, in the east also there is, but not as sharply as I'm seeing in the south and the west. In the north, again, local jewelers have been subdued, so we have continued to see market share.
Across the country, the larger chains and organized players have gained from local, barring maybe a few select states here and there, like West Bengal or Maharashtra, where there are local chains which are strong. In the south, Tamil Nadu, you know, Bangalore, Hyderabad, everywhere we are witnessing good market share growth.
Sure. If you can double-click on South India further. We had made some attempt 4-5 years back in terms of Gold Plus, and now, after long, we are again seeing some traction there in South India market. Any strategic insights that you can share, what are we doing differently and how are we going about cracking that market again in Tamil Nadu in particular?
In Tamil Nadu, our network expansion as well as conversion of Gold Plus to Tanishq, I think was one very important piece. We are at 42+ stores right now. The second piece that we have done is we have done a lot of regional product introduction, including in the daily wear category, where we needed to establish ourselves as a jeweler, you know, which is taken seriously.
Na turally, our studded ratios are a little lower compared to the rest of the country, but we think it's relevant because it's adding to the top of the scale. Thirdly, we have done a very intense local, culturally relevant marketing activity by going deeper into consumer insights and understanding the progressive women of Tamil Nadu specifically. With Nayanthara as a brand ambassador, we've put together a very strong program.
On the retail operations front, there's a lot of focus on grammage growth and exchange and many, many other operating levers, you know. All these three things put together, including merchandise infusion, absolute investment in inventory going on, are working powerfully together and seeing us gain very, very handsomely in Tamil. We are very happy, and we are continuing it as a strategic program.
Great. Thanks. Second question pertains to eyewear profitability, which has been fabulous turnaround story in the last two years now. Just wanted to know, when we focus so much on profitability, the other side, perhaps the downside, I'm not sure in this case, could be Net Promoter Score. How are we faring on that front in terms of customer experience when we are focusing so much on profitability?
PS, how much we are focusing? Yeah. Okay. This is Saumen here. As far as the last two years goes, we have seen some unprecedented disruption, so we could not visualize anything more than a quarter. We addressed quarter by quarter, and that's how we got many of the internal metrics, right? As a result, in the most difficult time, we kind of managed our costs, et cetera, in a way that we saw the profitability and related turnaround.
As far as customer focus is concerned, this has been one of the unwavering focus of the division, whether we made money earlier or not. This only got better with the during the first lockdown when our people reached out, more than 3,000 people reached out to half a million customers just to connect with them to find out their well-being.
The kind of, you know, the positive response that we got and the truth that we also discovered how many people are waiting to come to our showroom for, you know, getting their problems solved and so on, so forth. Subsequently, if we look at our, you know, NPS score, it steadily improved, whether it's two days or 15 days or 90 days.
The last parameter is the information that is available in the public domain, which is a Google score. 420, 430 thousand people, our customers, have rated us 4.9 out of five. These are all enough indicators to us that the foundation that we have built over the last 12 years on the customer front has only become stronger in the most difficult and most disruptive phase of our existence.
Thanks for a really elaborate answer, and all the best to the team.
Nimesh.
Thank you. The next question is from the line of Chirag Shah from CLSA. Please go ahead.
Yeah, thank you. Thank you for taking my question. In fact, my question was continuing on the eyewear business margins. Of course, as the previous participant also highlighted, we have seen very strong margins growth in the last couple of years in the eyewear business.
Can you just talk about a little bit about the unit economics of the eyewear business? What is the revenue run rate that mature stores do versus the network average, sustainability of the margins here, and whether large part of the margin increase is because of the operating leverage as bulk of the investments are now behind?
Pre-COVID, our average store turnover used to be roughly about INR 1 crore. Obviously, this we have never seen a 12-month year up until together, so that is not a comparable figure.
Yeah.
That figure wouldn't have changed much if we normalize for 12 months. Last 12 months, especially the last eight, seven, eight months, we also expanded. We've also gone far deeper and wider, and the per store yield would be lower than, let's say, in bigger cities, in bigger towns and bigger cash markets. That's one side.
As far as the margin is concerned, at a gross contribution level, we do not foresee too much of a variation going forward as we see it now. Percentage will certainly drop because assuming that we are kind of out of the periodic disruption that we have been experiencing, and we'll probably see on full 12 months, our focus would be towards investment-building growth. Growth would come as a first priority, and that would have a consequent impact in the profit margin.
Just continuing a bit further on the eyewear business, you know, you spoke about the network rollout that you plan on the eyewear side. Given that the opportunity is so large, what stops us to go for slightly more or rather a faster rollout, network rollout than what we are envisaging?
I think you know that we have been in the business for the last 12, 13 years. We have reached a level about network size of 600 a year before. Now we are saying by end of FY 2023 will be 1,000. That by, you know, standard I think is a less ambitious goal where we stand today. Plus we have another channel, which is the multi-brand channel.
We have spent good amount of time, and we have taken lot of hits in order to correct this, you know, channel. That is our distribution channel through which we reach out to some 7,800 multi-brand outlets. Currently we distribute, earlier used to distribute only sunglasses, now we also distribute frames. This channel, post this revamp that we have done is showing lot of promise.
We believe that while our 1,000 stores will serve enough and more customers, I think there are some 10,000, 20,000, 30,000 existing mom-and-pop stores who have been serving their customers so very well. There is some sitting competence which is already there. We don't have to go there when this is already sitting. This collaboration. They see the value. We see the value. I think that is the other route that we'll take in order to really go deep and wide across the country, apart from our own exclusive
Just to make sure that the ambition and network expansion point that Saumen made just now is totally appreciated. It has taken us 15 years to reach 700 stores. The sixteenth year will take us to 1,000 stores.
Right. Appreciate that. Thank you for that question. If I may just ask one last question on the jewelry side. We spoke about the international expansion. Just wanted to understand as we venture into the international market, what kind of store formats are we looking at? Are these L1 formats or L2, L3?
It will mostly be L 2, L 3.
Sure. Thank you. Thank you so much and all the best.
Thank you.
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi, sir. I was just doing some back-of-the-envelope calculations based on the statements you've made and some news articles. Basically you said that the growth is driven mainly by the growth in the number of customers. The gold price YOY has remained flat, so therefore the volume per customer also would be roughly flat only. I mean, just putting two and two together.
On the other hand, we've also seen news articles where you've said that you're working on reducing the grammage per piece. If the volume per customer is more or less flat, but the grammage per piece is down, is it that the customer on an average is buying more number of pieces than earlier?
Okay, let me start with your first assumption about volume and grammage, being flat. Volume actually in quarter three, the grammage has grown faster than the rate of growth of customers. 32% is the buyer growth, and about a 45-46% is the grammage growth overall. Actually grammage per buyer has gone up in this quarter. Okay? I'm not making a statement for the rest of the year. That data I don't have it readily available.
Sure.
YTD also there is. In a YTD basis, the buyer growth YTD December is 55%. Of course, quarter one of the previous year was understated, so therefore the number looks high, and the ticket size was -2%. Grammage would be higher, okay? I don't have the exact figure.
Now, coming to the point of the news article, basically gold prices having gone up by over 20%, 25% over the last two years, our customers came back and were feeling the pinch of being able to buy. Everybody's budgets are not going up to that extent. Therefore, we took it as a strategic program saying, "Yes, gold prices in this volatile situation can continue to go up.
Why not offer the lightest weight products to our customers?" Therefore we did a massive product reengineering and, special alloy, et cetera. There are many, many levers there. We think this is terrific because it has given us fantastic growth in new customer acquisition, because the conversion levels and the net promoter score levels of the new customers who are coming, who typically will come in the sub INR 50,000, sub INR 1 lakh price band, has been very good.
We are seeing it as a fantastic lever to continue to grow the core category. Not just core, even in, let's say, bangles and other higher-end, wedding, we are also seeing an opportunity sitting there. We think it's a competitive advantage. We are not concerned about the grammage coming down. People are also buying. We are seeing anecdotally, people are also buying additional pieces when they see that they're able to fit it within their budget.
Yeah. That was also I was coming to, sir, that if the grammage per customer has gone up, but the grammage per piece has gone down, it means people are buying more number of pieces now. Just wanted to understand what is the customer psychology behind this, I mean, buying more number of pieces than earlier.
Is it just got to do with wedding jewelry proportion being higher, and in wedding jewelry the number of pieces you buy are higher? Or is it something else which is a little more sort of deeply embedded that people are now saying, "Let me buy lighter jewelry, but more number of pieces." Is that a psychological shift or something?
I think there is a certain sweeping conclusion that maybe you're thinking in your mind. When Ajoy is talking about a drive to reduce the weight, it is not as if every SKU in the company, they've reduced the weight. There is a collection which has got a low weight, okay?
That collection is helping acquire customers and all that. Therefore, it is not across the board all pieces have gone down in weight. Therefore, for the same per bill gram, the number of pieces is now 1.15 versus 1.108 last. Nothing like that. Let's worry less about it.
It is just that the bigger point to take away is that the growth in customers is exceptionally good, and it is pointing to a very good market share gain, especially because the new customer growth is substantially outstripping the current customer growth. Therefore it's clearly, therefore, pointing to a market share gain.
Okay.
Let's stay on that.
One more question.
Yeah.
Understood, sir. My second question was on margin. There's 100 basis points, sort of, not one-off, but maybe not, something that occurs every quarter. If we remove that, the margins are 13.7%. Do you think around this number is what a sustainable margin is going ahead or we should not look at it like that?
You know, last time, we have talked about 12%-13% margin band, and I think we are operating at the higher end or slightly above the higher end. I think with the growth coming by, we expect to operate around higher end of that band. I would say 13% plus minus. Quarter-on-quarter things can be different.
On a 3-4 quarter basis, that's the number which we are kind of keeping in mind. Please also understand that lot of competition is also kind of becoming aggressive in terms of their expansion, in their brand promotions, et cetera. We need to keep in mind that also and keep pace with that.
The scale level at which this quarter is.
Yeah.
That scale leverage will not play out in the same manner in other quarters where the scale level drops.
Yeah. Yeah.
Okay. That's all from me. Thanks and all the best.
Thank you. Before we take the next question, a reminder to the participants, to ask a question, please press star and one. The next question is from the line of Nitin Jain from Fairview Investment Advisory. Please go ahead.
Thank you for the follow-up opportunity. I would just like to delve a little on, you know, the criteria that goes into choosing the store locations. Just to give an example, in Pune, there are at least two to three jewelry clusters where your peers, Malabar and Senco, are present, but Tanishq is not in those clusters. The high streets where Tanishq is located, most of your peers are not present. What is the criteria that goes into choosing the high street locations?
I'm not able to figure out the which are those clusters. Mostly we go into marketplace stores, high street stores, and then we add. Within high street, there will be those which are like main high streets, which may or may not be a jewelry cluster, but it's a important high street. Then there are neighborhood stores.
Let's put it this way, that in Hadapsar there will be a store that would be a neighborhood or renowned, but then there'll be a main high street, let's say like Jangli Maharaj Road, et cetera, where we'll be having. A marketplace store could be something like Lakshmi Road in Pune. I'm taking the Pune examples to bring it alive. Then of course there are malls. Malls are also there, some select malls.
Our criteria is where there's a market for jewelry, we will certainly be there. We are there pretty much in most markets. In fact, I would think across the country. In a given town, if we are present, we are there certainly in the marketplace. Plus, we are there in all major high streets which have shopping for all kinds of retail outlets.
All brands are there. Now in the last several years, neighborhood stores have also cropped up quite a bit because each neighborhood. For example, in Bangalore, Electronic City or HSR Layout are more recent neighborhood stores, and they are also showing a very good traction.
Wherever there's a catchment opportunity and we are able to see an outlook for at least a INR 40 crore-INR 50 crore store in the near future, we go ahead and put up a store. Of course, we are going into newer towns and newer markets as well. Actually, we are the most penetrated jewelry brand in the country. These specific examples may be real, but they don't necessarily signify.
Okay. Just to follow up on that. Recently, like, the observation is that next to a Tanishq store there will be a CaratLane store as well. People who do not prefer to buy from Tanishq, they might choose to go to CaratLane. Are we trying to utilize that catchment area fully? What is the thinking there?
See, each brand will pursue its growth strategy in a way independently. In this case, CaratLane is also. In fact, you'll also find a Mia store sometimes or a Zoya store in the near vicinity. Every brand assesses the opportunity basis its customer segments. Anyway, every other competitor brand to us, to our portfolio also looks at Tanishq and sees if Tanishq is there, then clearly they try to come there.
Willy-nilly, when Tanishq establishes itself strongly in a neighborhood, that becomes a jewelry cluster in the next few years. I think, there is a little bit of a self-fulfilling prophecy here. We don't see any impact on Tanishq store just because a CaratLane store comes next door. In fact, there's an opportunity.
Synergistic.
It's synergistic, exactly.
Many partners are common now.
Yeah.
Franchisee partners are common to Tanishq and CaratLane in this particular example. It is synergistic even more so in there.
Yeah, that's what I was trying to pick your brain for. Thank you so much.
Thank you. The next question is from the line of Avi Mehta from Macquarie. Please go ahead.
Hi. Thanks for the opportunity. Just two questions. First, if I heard you correctly, the normalized range, you would argue that it should be more at the upper end of 12%-13% band, right? I just want to clarify that part.
Yeah. Yeah, that is what we said.
Okay. This is not from a near-term, but from an FY 2023, I mean, at least from that perspective, from a sustainable perspective, that's the correct way to read this. The second bit I wanted to know about, you know, while you've talked about continued strength in wedding sales, would it be fair to kind of extend this to the entire jewelry and watch segment, so despite this third wave that has kind of played out in the country? Or if you could kind of help us understand the impact from the same. Thank you.
It's jewelry segment or jewelry watch segment?
Jewelry segment.
Jewelry segment.
Jewelry segment, yes.
Actually, we are seeing strength across all price bands, across various categories between studded, between wedding, between everyday specials or core categories. Every category we are seeing, but that could also be because we are significantly gaining share and new customers. What we are seeing is what I'm telling you.
I think if I look at quarter three per se, every jeweler was very happy with the growth that they saw. I think that couldn't have come only due to wedding. It is also festive. During festival, everyday wear is also bought significantly. Right now what we have seen and what we hope to continue to see is a strengthening across. Wedding is like an icing on the cake.
Sure, it will grow a little faster or maybe we will push the envelope stronger on that. As I said, that is still only about 20-21% of our overall contribution. In the rest of the segments also we are seeing good growth.
Okay. My comment was essentially with respect to the Jan-Feb-March. I just wanted to clarify that. You're essentially saying that strength is across price points at least till now and-
Yes.
The demand is not.
Yeah, yeah. It's not primarily wedding led, if that's what you're trying to say.
Yeah. Yeah. It's not.
We have wedding, but it's not like overweight.
Sir, is it possible to give a similar comment for watches as well? Is that strength similar demand strength? Because I understand generally, you're seeing buyer-led price point and product-led strength continues. Even in watches realization rate, growth rate continues. Is that a fair comment, is how I should see?
Yeah. In watches also we are seeing, you know, good growth in the premium part. There is an overall average price point increase, so that is leading to that. Weddings actually are also, you know, a very big driver of sales for watches, and this particular, you know, the winter wedding season, particularly for premium watches. We are, you know, poised for some good uptake in the months and the quarters ahead.
Okay, perfect. Thank you very much. Thanks for your time. Thank you.
Thank you. The next question is from the line of Jay Gandhi from HDFC Securities. Please go ahead.
Hi, thank you for the opportunity. Just a couple of bookkeeping questions first. If you could just help me with the mix of gold sourcing this quarter and the wedding contribution to sales.
Gold sourcing for the quarter.
Yeah.
I'll pull out and tell you. I don't have the figure readily available here. Let me pull it out and check.
Good.
Maybe-
There is no change there, the way you know what we have been sourcing through GOL and through GP, TP, and spot buying. I don't think there has been any major shift in sourcing.
Fair enough.
Might be, but yeah.
Fair. The wedding contribution, I'm not sure if I missed this, but.
Yeah. Sorry. On the wedding
Wedding contribution.
Contribution is around 20% is what I wanted, what I've been sharing.
Thank you. I have one question, you know, what would be our share from South if you compare this quarter and perhaps, you know, the same quarter two years back? It's obviously likely to have gone up meaningfully. We've still managed to maintain broadly the same gross margins.
Now, just wanted to understand how does this play out? Because if you look at most of the other players who are wedding heavy, your counterparts, most of them end up having a gross margin of around, maybe ranging from 10%-15%. Now, how you have to gain market share in that area. How do you manage to maintain the same gross margin?
You're right. South region is relatively lower margin compared to the other regions for us. Yes, through-
Right.
A mix of product engineering through a mix of. I mean, we have an internal separate program on enhancing and optimizing gross contributions. Also, we've seen a little bit of benefit of you know higher Making Charges products based on product mix that we have been able to sell both in South and other regions.
Combination of product mix, product engineering through focus and also these lightweight. I think the lightweight has also helped in two fronts. One is price point also in terms of giving us a slightly better gross margin. We've been able to kind of in a way compensate the increased contribution of South and therefore some amount of margin dilution. We are also constantly rationalizing and reviewing our gold rate markups and Making Charges across different parts of the country. Yes, there is some amount of
Hello? Hello?
Management, we cannot hear you.
Can you hear me now?
Yes, sir. Please go ahead.
Yeah. Just the last point. The share of diamond jewelry in the South is not lower than the share of diamond jewelry in some other parts of the country. While the gold jewelry business is of one profile, but for example, Chennai is a very, very big diamond jewelry market.
Our share in diamond jewelry in Chennai is likely to be more than our share in diamond jewelry in West Bengal or Odisha or Bihar. Therefore, if Chennai increases in share compared to West Bengal, for instance, on the gold side we may lose, but on the diamond side we'll win. Outgos are also.
All right. No, fair enough, sir. I get that. The drivers that you mentioned is likely to be.
I think the point-
Sorry, go on, sir.
Carry on.
Yeah. The drivers that you mentioned are likely to be very similar across players. I get the degrees may vary, right? You may have done probably a better job. The only thing, the reason I ask you this question is it that you've been able to find lesser retail detachment even in South or is it the same market that you're gaining share in?
Sorry. I think between what we said, what I shared and what Venkat shared, I think that's the summary of what you know how we
Behind the-
Yeah. How we've been able to manage margin.
Yeah.
Yes, there is a studied focus also we bring in all markets and even in the South. Therefore, we are better off on studied than many other players. We are seeing some benefits of all these margin management exercise.
Thank you. 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 for all the support and for all the challenging questions as always. See you soon.
Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.