Thank you for entering and welcome to Titan Company Limited's Q4 and FY25 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 the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. C. K. Venkataraman, Managing Director, Titan Company Limited. Thank you, and over to you, sir.
Thank you very much. Good evening, everyone. It's wonderful to meet at the end of a wonderful quarter. Performance very, very satisfying across segments, across countries, and clearly, despite the surroundings being challenging, whether it is gold rate on the one side or pressures on discretionary consumption, the innovation engines of Titan Company, execution excellence on all fronts, assets in the air, on the ground, partners of exceptional caliber, deep and wide across the world now, and the tens of thousands of what we broadly call Titaniums, putting their heart and soul into everything that they do, have delivered a very good performance. Very satisfying, and over to 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 touchstone 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 Manoj Menon from ICICI Securities. Please go ahead.
Hi. First of all, good luck to Venkat for all the future endeavors, and good luck to Ajoy as you take on the new role. Good luck and God bless you both. A couple of questions from my side on the jewelry business. One, given the incessant sort of price increase which you have seen in the gold commodity, just some snippets from you in terms of your research as well as anecdotal evidence on what the consumer is telling you right now. So these are consumers cutting back on the volume side of it. These are consumers asking for more 18-carat. And more importantly, how do you see this evolving, and what are the plans in place? That's the first one.
Thanks, Manoj. Just reminding you that this is effective first January. The change, so we are still a way to go, but thanks for your good wishes and answering your question on what the consumer says, so two, three things are coming out and this is now. I'm seeing this over the last several months as gold prices have clipped up so sharply. We are seeing in the sub-INR 50,000 price band, very specifically, more in gold and a little bit in studded also, there is an impact on the consumer sentiment there. Now, some of it is us vacating price points because simply gold price goes up. The same product goes into a certain higher price band. That is one part of the story, but there is continued, let's say, customer sentiment in that lower price band where we are seeing some buyers being a little reticent.
Second piece is, yes, customers are more open to 18-carat gold. We don't really have the full information as yet. We have just launched some collections in 18-carat gold in certain parts of the country for traditional customers as well. And we hope that we'll see good response. And I know that in CaratLane, we have launched something in 9 carats as well. So there is early traction. And more and more customers are going to be open to lower Caratage simply because the price point has become quite a bit. On the higher price band, while there is buyer growth, we are seeing some of the customers actually scaling down the complexity of product they are willing to buy.
So it means that if earlier they were open to buying a higher making charge product, they are sliding down a bit, but they are still buying a certain quantum of gold and a certain value. So there is some indications there. And if I were to answer your question on what are customers telling us in terms of our conversation, they certainly are feeling the pinch, and therefore they are looking for solutions, both in terms of lightweight jewelry, lower Caratage jewelry, as well as probably lower making charge jewelry. So they still want gold, but they are looking at how they can manage it within their budget.
Understood. Thank you. Just one quick follow-up, and then I'll have a second question. So the quick follow-up here is, let's say in a hypothetical scenario, because at the end of the day, gold is just a commodity. If gold corrects 20%, 30%, and probably stays there, I know that it may not last so long. I'm not taking a commodity view here. In the interim, consumers may have more from [2020- 2023]. Does it have some let's say, an impact on your medium-term absolute revenue situation?
Actually, we would welcome any gold price correction because a lot more customers will come into the market. Evidence of that was seen when the finance minister had reduced the duties last year, and so many fence-sitters just jumped in, so it's the best situation to be in. It also helps us improve margins, actually, on various fronts, so actually, we would welcome it, and any value or ticket size drop being compensated by a jump in number of buyers is a fabulous situation to be in because it can cultivate them.
That's a fair answer. And quickly on the second one, as I understand, the diamond prices, let's say, in the wholesale market have declined materially over the last few years, whereas in the retail market, it is probably flat. Now, I'm thinking from a consumer point of view who, let's say, bought diamonds from any jeweler two, three, four years back with, let's say, an explicit or implicit understanding that I can actually come and exchange it at the market price. Now, is there a situation where consumers are coming and looking for an exchange and realizing that my diamond price has not inflated at all, where gold? And does that have any implication for, let's say, what he or she is buying today in an exchange? Is he preferring more gold over studded or diamonds rather?
One clarification that there are different behaviors in the solitaire segment, and especially the bigger sizes, one-carat, two-carat plus, and then smaller carat sizes in solitaire, and then the small. More than 90% of our studded, 95% of our studded business is non-solitaire, which means they are small. Have the prices really come down in wholesale market or in retail? No. In solitaires, there's a different story. One-carat plus, two-carat plus, in the wholesale, they have come down. But if I were to go back five years ago, if somebody had bought, we were selling five years ago, the price has not really, it went up and it's come down. So the index, it is difficult to mathematically conclude it because it's to do with the type of diamond, fancy, shaped, big, small, thick, VVS, etc.
That's simply too many elements, but I'm just giving an index feel to it. So this is at the wholesale level also. And in retail, certainly anybody who's bought diamonds from us five years back is not going to experience a drop. They may say, "Okay, it's not really appreciated much." But somebody who's bought it two years back may think that the price has come down, but actually, that is more narrative in the media that he might be reading. Whereas when she comes to the store, she may say there may be a 5%-6% impact. But coming to the question you asked, because of this, let's say, narrative or otherwise, if this perception exists, are people saying, "Let me go to gold"?
There is a bunch of people who are saying, especially the high-carat solitaire buyers, and there's a very small number, by the way, in the entire year that we sell to them. That customer has become a little wary of using the solitaire, big stone as a means of investment. And therefore, because the price volatility is saying, "Let's see where this settles, and let's see if it starts coming up." So they are holding back. Are these guys going and buying gold? Some of them may be doing so. I don't have exact data to correlate, but we do know that some of our high lifetime value customers are all feeling gold is certainly the flavor at this point in time, and they have no hesitation in buying gold, whereas they may have some hesitation in buying these solitaires.
On studded, small stones, I don't think this story is at all playing out the way we might be imagining, and that is more than 90% of our studded. So different stories sitting here and different kinds of segments, and we are also leveraging that. And by the way, on the solitaire side, smaller stone sizes, we are seeing a whopping increase in buyers. And at overall level, studded buyers are outpacing gold buyers, whether solitaire or otherwise. Since not now, but the last two quarters, and it carries on into this month. April month also, it has been that way. So actually, at a buyer level, the story is different from the value level that we are seeing. I don't know if I'm answering you or confusing you, but I'm just giving you three different insights.
I'd like to listen to the transcript once again, sir. Thank you, and good luck.
Thank you. The next question is from the line of Avi from Macquarie. Please go ahead.
Yeah, hi, Avi. Just wanted to spend some time on the jewelry margin. Could you please help clarify this overhead management which you carried out this quarter, and how sustainable are these gains? Essentially, the context is that despite a weakening mix, we have seen almost 12% standalone EBITDA margin, and hence, is there an upside possibility to that 11%-11.5% range that you were indicating prior to this quarter?
Avi, Ashok here. Actually, 11.9% if you think about domestic jewelry business, it's 11.6%. You can see in our disclosure that there has been higher primary for international business, and they had some positive impact on the reported number. Okay? But 11.6%, nevertheless, had a small element of operating leverage as well as some hedging gains sitting in it. Whenever robust growth happens, some element of operating leverage coming in jewelry business is quite normal, and which has happened. It is not that extraordinary effort to squeeze out the normal cost which we need to invest for the growth of the jewelry business. It is just the scale going up for the last two, three quarters has given that benefit.
We have been mindful of what costs we are incurring and how we are incurring, but it is a combination of operating leverage as well as some hedging gain which you are seeing that studded ratio is slightly lower, but still we are able to deliver. As far as coming to 11%-11.5% margin guidance, that is clear. We are not guiding you for any upside. Considering the uncertainty of gold prices and many, many uncertainties for the future, 11%-11.5% seems to be more reasonable to think about.
Got it. Fairly clear. Sir, and the second and last bit is on the demand side. Now, you did clearly allude towards the consumer behavior asking for more value, more making charge, and you've been able to deliver that in this quarter as well, it seems like. Now, if I were to l ook at this going forward for FY26, how would you parse the growth? Are you in a scenario where the last year is giving you confidence of sustaining upwards of 15%? If you could give some sense on how should we look at the next year? That's all from my side.
Sorry, what is 15%?
I meant sales growth, sorry, jewelry sales growth. When I say how should we if you were to look at your earlier immediate targets and what is expected for the next year on a simple average basis, it does imply an upward of 15% rate at 2.25 times, and that's the next where I would come.
Okay. So that's the derived figure. Okay. D emand outlook has been driven, especially in this last quarter, and even to an extent in quarter three by the average ticket size growth, which has certainly been influenced by the increase in gold prices. And therefore, buyer sentiment and buyer growth have been rather muted. Now, how this will play out as we go forward is very difficult, but certainly from our end, we continue to target high double-digit growth, whether it comes in value, whether it comes out of buyer or ticket size or a combination of the two. That is a very quarter-to-quarter fluctuating scenario, very difficult to predict. But certainly, we are targeting, and we are preparing and aiming for these high double-digit growth. What turns out, of course, depends on the situation.
But Ajoy, do you see international at risk because of this tariff talk, etc., or is that not anything to get so much bothered about?
Dinesh will try and answer that for you.
Hi, this is Dinesh here. Tariffs, as of the way we are seeing things now in the U.S. market, it's not really caused any significant thing, but we've not taken any price increases as yet. We're waiting. We will watch how the whole situation unfolds, and then based on that, depending on what competition also does, it's quite likely that if tariffs go up, then we will take price increases. How that's going to play out, will it mute demand? At this point in time, the view would be that it doesn't look likely, and it also looks like between India and the U.S., the bilateral trade agreement is progressing well, and it looks that we will reach some an agreement on that.
Trump has just announced that he struck a deal with the U.K. first, and since India has already done a similar deal with the U.K., India and the U.S. doing a deal looks quite likely.
Got it. Fairly clear. Come back in the queue for the other questions. Thank you.
Thank you. The next question is from the line of Videesha Sheth from Ambit Capital. Please go ahead.
Hi, good evening, team. Thank you for the opportunity and congrats on the numbers. My first question was on the competitive landscape. Last quarter, you had mentioned that the element or the competition element on the gold pricing had stabilized, but on making charges, it was still elevated. So given the inflation that we've seen in the fourth quarter, can you comment on how the landscape has changed? That was my first question.
Yeah, I t is broadly in the same zone as what I said last time. Competitive intensity continues to be very high. Price warriors are there. On gold rates, we have not seen that much activity. Making charge continues to be. It fluctuates, but by and large, I would say it remains what I said last time.
Got it . And the second question was on the studded jewelry part of things. As a category leader, how would you think about reviving consumption in this segment going forward? While the De Beers partnership is a step in that direction, but any other have you identified any additional initiatives on this front that could stimulate demand?
Actually, on studded, as I said, there are two, three segments. You think of it as solitaire. Within that, there are lower sizes and bigger sizes. Lower sizes, the demand has already revived, and we've, in fact, aggressively pushed forth on using our distribution network as well as our ability to source and supply. So that we are seeing very good growth. So that's been one lever. We've pivoted in a way from larger carat sizes to smaller ones, and it's showing up in numbers very well. In terms of jewelry, studded jewelry, if of our portfolio across Tanishq, CaratLane, Mia, and if you were to look at it in the sub-INR 50,000, sub-1 lakh range, we've still been able to clock in maybe early double-digit growth in that area thanks to the portfolio play.
And therefore, pushing that portfolio play, including network expansion across CaratLane, Mia, and distribution depth, even in the Tanishq stores, that is the second lever. Third lever that we are really looking at is reducing the price points for customers by looking at lower Caratage. So if people have been used to buying 18-carat studded, they are also now beginning to get comfortable with 14, and in the case of CaratLane, they've also introduced 9-carat. So these are three, four different levers, but nevertheless, desire creation and excitement by each brand continues to be at the heart of it all because finally, it's an adornment product, and she's wearing it to experience an emotion. T hat continues to be a very big lever.
Understood. That was helpful. Just a small follow-up to this on the CaratLane, and you're launching the 9-carat jewelry on the 9-carat as well. But given it's not hallmarked in nature, how do you expect consumers to react?
Hi, this is Saumen. We launched this 9-carat jewelry sometime around Valentine, and we saw good response. This is not hallmarking. We are not claiming it is hallmarking, but it is stated as 9-carat diamond jewelry. It's sold as 9-carat diamond jewelry. But it is also quite likely that 9-carat is going to come under a hallmarking very, very soon. It's in very advanced stage. T hat will settle down very soon. And otherwise, we saw decent response, and with the gold rate increase, it's an alternate option for customers who are also looking at adornment other than just investment.
Got it. Understood. Thank you.
Thank you. The next question is from the line of Arnab Mitra from Goldman Sachs. Please go ahead.
Yeah, hi team, and congratulations on a great performance across all the businesses. My question again was on studded, and where I'm coming from is when we anecdotally speak to a lot of people who historically have worn diamonds, they are rich families. That segment seems to almost suggest anecdotally that we are not going to buy diamond, or they are going to buy much lesser of diamonds going ahead. But your growth rate, buyer growth are all very good, so are we dealing with completely different types of consumers here? Are you getting the growth from people who are buying diamonds for the first time in your view? Just trying to understand this disconnect that a lot of people feel between what you speak to anecdotally and versus actual numbers which show good growth for you.
Yeah, actually, there are many segments, and frankly, some of us anecdotally speak to only some other people like us, and they may be all already diamond buyers and fairly well-off and very well diamond buyers. And again, if you happen to be speaking to the type who is seeking solitaire as an investment buy, then that's another sub-segment within them. So I would say that there are simply too many different segments, and the segment whom you are referring to, the ones who buy diamonds for investment, is a rather, rather small percentage of the total studded buyers existing. E ven if of the penetration of amongst new, of course, new studded buyers, there's a vast ocean out there.
So I'm not even saying suddenly there are new people coming in, but even existing studded segment, this is a rather small percentage of people that we may be anecdotally receiving such pieces of information from. And even they might be fluctuating in their behavior. When it comes to adornment, they may have no qualms in buying smaller stones, etc. And when it comes to investment, they may be having a different point of view.
Right. So from the data that you gave, which is buyer growth being pretty strong, the fact that the value growth is not keeping up is purely a function of the fact that gold is a smaller component of the jewelry, and therefore the unit price hasn't gone up as much as gold.
No . See, buyer growth is higher in studded than gold, but gold has been rather, rather dull because of the sub-50,000 segment. Okay. Now, that's the only piece here. At the high value end, is there a customer for studded jewelry? Certainly. Value growth will come. It's a mix of both. I don't think I cannot conclude that growth will come only in the lower end in studded and higher end in gold, nothing like that. There is opportunity both ways. In fact, India is modernizing, and there are a lot more Indians who are happy to spend on high-value studded as well. So this is not a commentary of this piece at all. There is opportunity both.
I was just making the point, even in the sub-1 lakh studded, we are seeing, because of portfolio play, we are seeing an early double-digit growth, which is not a commentary on what is happening on the higher value studded.
Got it . And my last question was just on this. We had obviously a lot of news around lease costs going up during the quarter due to tariff speculation. So has it impacted this quarter in any way for you, and is there any lingering impact going forward on that? That would be my last question.
So you see, of course, you are right that as a knee-jerk reaction to gold on lease rate has gone up, almost doubled and more than doubled, and it is settling down now. But more than that, even gold price, gold rate also impacts our financing costs because now the same quantity of GOL is far more expensive, 30%-40%, and I have to pay interest on that 30%-40%. So just the rate increase had a small impact, but overall gold price increase had a larger impact for the full year as far as GOL interest cost is concerned. But the good news is that after that, GOL rates have been settling down, and they are now about 75-80 basis points above the historical number. And we will see how does they play out in FY23.
Okay. Thanks so much, sir. That's it from my side. All the best.
Thank you. The next question is from the line of Kunal Vohra from BNP Paribas. Please go ahead.
Yeah, just one question. I hear from the market that the wholesale price of LGD have again crashed in recent months. What are you picking up about the state of LGD retailers, and is LGD coming up in your conversations? Also, if you can update us on your latest views on entering the LGD space.
So I can share with you what I've picked up about the retail and wholesale prices of LGD. Certainly, the wholesale price was anyway coming down continuously, and it continues to drop. And that will not stop because even automation will happen, and many other tech developments and productivity developments will push costs down like any tech product. But interestingly, even on the retail side, many of the players were retailing LGD products at roughly INR 60,000-INR 50,000 a carat. Now, this is to be taken with a pinch of salt because the Caratage is not exactly straightforward. That has now come down to INR 30,000 for many players, barring one or two players who are continuing to retail it at INR 60,000. And there are new players coming in all the time.
So our estimate is that the market will continue to drop the retail price of LGD per carat, and that will make it much, much more affordable. And I'm not sure how the unit economics is going to play out for a bunch of these players unless we see a large number of totally new buyers coming into studded, which, of course, if it happens, is great news for the industry overall. So it is a choppy situation. But nevertheless, even at INR 30,000 a carat retail price, the markups are quite heavy. So I suspect there will be more price warriors who may come. But this is just to give you an overall narrative, and where this will end, very difficult to predict.
What about your thoughts on entering this space? The drop in prices, does it make it completely unviable, or would you give it a thought at some stage?
We'll keep thinking about it, is the best I can say, because the stability has not been reached, and it's not that everybody is coming and asking for LGDs, etc., and many shares are jumping in anyway, so it's too premature to comment.
Okay. Thanks. That's it from me.
Thank you. The next question is from the line of Percy Panthaki from IIFL Securities. Please go ahead.
Hi, sir. Just wanted some clarity on this hedging gain. So my understanding was the purpose that we hedge is that the EBIT margins of the business remain unaffected by any volatility in the gold price. But you're saying that the reason why margins are higher is because of some hedging gain. And the second question related to this is that when the gold price is going up, we should actually have a hedging loss because we are recovering higher from the consumer. And to offset that inventory gain, actually, we are entering into a futures contract, so that contract should give us a hedging loss. So can you just address these two issues, gaps in my understanding, please?
So gold is volatile at this point of time, and we have, if I can use the word, Contango gain. When you are doing forwards in gold, when you do the future, there is a different economics. When you do the forwards with the gold on international exchanges, then there is a different economics. And we have been able to do some of those transactions in quarter four, which gives us Contango gain. And that is what the reason is. And it's not so because every time it keeps moving, and there are thousands of transactions which get squared up on an every day basis from our side. So overall basis, when I compare that we have a small hedging gain, we are not and your idea is correct.
When we move from cash flow to fair value, if you remember, the idea is to not disturb P&L through hedging actions, but we have contango gains because we are able to do forward transaction on international exchange.
Understood, sir. So this contango gain is a one-time permanent gain, or will it reverse next quarter?
No, so there is a part which is timing-wise. The period of forward will keep accruing, and then there could be a part which can reverse also, depending on the gold price.
Okay. So part permanent and part phasing. Is that how I should take it?
Yeah .
Understood. Sir, second question is on the outlook for jewelry growth next year. So see, while the gold price inflation has definitely dampened the buying sentiment, the number of buyers are coming lower, etc., but still there is some amount of inflation which is sort of at least partially benefiting us because the gold price has, let's say, doubled in the last three to four years almost. So the person will not cut down his volume by half. He might cut down his volume, but there is still a net-net gain in the overall outlay per customer. And that has benefited, and we have done close to about 25% top-line growth this quarter.
So my question is that if we assume that the gold price remains where it is currently, then should we expect this 25% top-line growth to continue for the next two to four quarters?
Percy, this is Ajoy here. The 23% or 24% growth that you talked about, I'm not sure it's 25%, maybe domestic primary sales growth reported MSC is showing up as 23-point-something%. But that percentage is because there was also some amount of upstocking that happened in the year-end because of an early upshift this year, right? If I go down to the secondary growth, actually the retail growth, it is around 20%. I just wanted to correct you there. Certainly, what you said is true. When gold prices are going up sequentially, there is a benefit. There is a value growth, and therefore there's a ticket size growth that we see.
In our mind, as I mentioned in an earlier question, we are certainly planning and targeting and also hoping for a healthy double-digit growth, either driven by ticket size or by buyer or by both. The outlook for jewelry continues to be positive. If I may pick up one or two other threads while we've spoken a little bit about the headwinds and price of gold, see, this year there is a very good wedding season in quarter one. Last year, there were elections in quarter one, and there were no wedding days. Infrastructure spending by government has continued and will continue for the first four, five months, which was not there last year. There is also the largest from the Finance Ministry on the IT for a large number of people in the country.
Maybe not directly, but at least the secondary and tertiary second order, third order benefits of that will start flowing into the economy. There is also a lot of liquidity being injected. So a lot of positive tailwinds are there despite the uncertainties that exist in the market. So our outlook for jewelry, not just for the year, but for the next few years, continues to be bullish, and we are committed to driving healthy double-digit growth year on year.
Got it, sir. If I might just push this a little bit, can we say that the growth rate trajectory has possibly, at least in the next couple of years, moved up from a high teens to slightly higher than 20%?
I can't say that because I could be getting ahead of myself. We happen to have delivered a 20% growth in one quarter. We have to be a little bit more careful in making those statements. I would still say it is healthy double-digit growth. Whether it is going to be 15% or 20% or something in between the two, we would still leave it at that. Between 15%-20% is a fairly good rate, I would say.
Okay, sir . That's very helpful. Thanks a lot and all the best.
Thank you. The next question is from the line of Vishal Gutka from ASK Investment Managers. Please go ahead.
Yeah. Hi, team. Congrats on the good set of numbers. Sir, I have one question on the franchisee formats. My analytics are suggesting that you're piloting a format where capital is brought in by franchisee, and you'll be running the store. PF Kalyan runs a similar store. Is this true, and if it's true, then historically, capital has never been a challenge for us? Just wanted to get your comments on this.
We have a unique format. W e are always learning because we respect competition and what they do, and there's always something to learn from them. W e study what they're doing and what a few others have done also in different ways. The second piece is we have also many associates and partners who may not have the succession planning in their own firms or in their family, and many of them have been with us for a long time. W e also start thinking about how do we ensure some continuity, and yet they have an ownership because they have a relationship in that neighborhood, in that catchment. There's a lot of respect, and we also have a lot of care because they've been with us for 25, 30 years. T hat's another factor that we are keeping in mind.
And therefore, yes, we will continue to experiment with formats. It's not so much from capital scarcity, but also from the point of view of is there some merit and advantage in doing so because increasingly, the business is more complex also, and many franchisees may not have that level of organization depth to be able to manage some of these things. So we are also looking at it from that perspective. But having said that, as an organization and as a brand, we are not wanting to run too many stores on our own, and especially not beyond the top 10-12 cities in the country because it's more complex for us to manage. Whereas our presence is across 300-odd towns.
So we will still be a largely franchised network with limited cities where we will do, and that too only stores where we have large turnovers at stake.
Got it. Sir, I just have one bookkeeping question. What is the store opening guidance for Tanishq for FY26 domestic business? How many stores are you planning to open?
40-50 stores.
Okay. Great.
But we are also looking at 50-60 stores of existing stores being either renovated or relocated or adding additional space. When I say additional space, it's like adding an entire store. So a transformation program is underway in the last two, three years, and it will continue in the next 18 months. And the headroom on that front is rather more high compared to even the headroom on the network. While we'll continue to grow network into new catchments and cities, even this is a big piece of our growth.
Got it . And the 50 distributors, most of them will be L1 format, right, for you?
No. Most of the, in fact, new ones are likely to be franchise L2 or L3. Very few will be L1.
No, sir. I'm talking about the renovation part. You told us 50 distributors are planning to renovate for this.
No . Those are also mixed L1, L2, L3, all formats. We have, in fact, transformed 160 odd stores in the last two years, which are a mix of franchise and company.
Great, sir. Wishing you all the best, sir, for future purposes. Thank you.
Thank you.
Thank you. The next question is from the line of Devanshu Bansal from Emkay Global. Please go ahead.
Yes, hi. Congratulations on a great performance, and thanks for taking our question. Sir, from a balance sheet perspective, there has been an increase in our working capital, and that has sort of led to some fall in our return ratios also. This is obviously due to increasing gold price and related fall in volume consumption. How do you plan to deal with this as gold prices are continuing to increase? There is a significant working capital increase, so how do you plan to deal with it?
Yeah. So largely, you are right. This is all on account of gold price increase. And of course, some investment of inventory is done in some of the catchments. If gold prices continue to rise like this, while we have some levers of increasing our GOL level, etc., etc., but it would certainly require some more capital investment from our side, and for which our balance sheet can be leveraged. It is capable. But the idea would be then to leverage GOL more. And it is very unpredictable to what would be the gold price trajectory going forward. We will wait, watch, and see, and keep responding to the evolving situation. But yes, you are right. In the current context, a little bit of strain on working capital has come in.
Fair enough, sir.
And the year-end number which you see, which I had spoken about, Akshay Tritiya being early, there has been upstocking towards the end of March. So the balance sheet number which you see is a point number. That's not the story for the full year.
Understood. Ashok, also, if you are open to sort of call out the exact quantum of the hedging gain in this quarter, if you are calling that out?
No, it's not that significant that we should call it out. It's not that significant. But it is one small factor in that marginal EBIT margin which you see. So nothing so significant that we start calling it out.
Understood. Sir, last question from my end. The overall jewelry UCT is 20%. Can you call out the secondary growth in credit sales? So reported is 12%. What is secondary growth in credit sales for Q4?
Yeah, I'll tell you. This growth, I'll tell you. One moment, sir. Yeah, it's around 12% . 10%-12%. Maybe not 12%. I don't have the exact figure here. Almost similar to what I had.
Almost similar. Okay . Fair enough, sir. Thanks for taking our question.
Thank you. The next question is from the line of Jaykumar Doshi from Kotak Securities. Please go ahead.
Hi. Thanks for the opportunity. My question is on industry practice of exchange and cashback in case of studded jewelry. Now, in a hypothetical scenario, if the consumer behavior changes and if consumers start sort of exchanging more studded jewelry in future and buy gold jewelry or basically take cashback, that could have a significant impact on profitability for overall industry. So I'm just wondering, is this something that comes up in board discussions or industry association discussions? As an industry leader, how comfortable are you with this policy that you have today where basically anyone who has potentially bought any jewelry from you in the past 10, 15 years can always come back and give it to you at 10% lower price or 15% lower price versus the current prices?
And that's because partly there's a big gap between your procurement cost for diamond and your retail pricing for diamond. So I want to understand from a risk management perspective, is this something which you think about?
Yeah. Venkataraman here. Just from perspective, in India, the category of jewelry is so much about store of value. And in a way, the exchange policies reflect that customer need. And therefore, even the relatively lower gross margins in this industry in India because of the store of value concept, because customers don't want to lose when they exchange. I'm talking in general. I come to the diamond jewelry point in a minute. So that depresses the markup potential in India versus, let's say, in the U.S., it's not a store of value. It's an accessory. The markups are like other accessories. Now, in a way, related to the store of value concept, because also of the connections to culture, tradition, feeling of wealth, people don't like to sell jewelry. They exchange jewelry, but unless there is a calamity in the family, they don't sell their jewelry.
It's in a way related to the store of value and, of course, also related to the diamond aspect of jewelry. Therefore, we have had this policy for you can exchange gold as well as diamond jewelry for cash. That policy has been there for more than two decades, but the incidence is really, really in the decimals, in the small decimals because of this. Unless generational views on the subject change, which may be 20 years, 30 years, 40 years, and that's a very long time for us to talk about here, this is not a because it has not materialized in its actual incidence on this. Even what you're asking, which is people coming in with diamond jewelry, exchanging it for gold, even that incidence is very, very low.
Understood. So basically, exchange proportion is broadly similar, and that has not changed whether it is for gold or diamond in the last few years.
Gold to diamond, yes, because diamond is an upgrade product for those who never had diamonds. Yeah, and just to add a little bit, I have personally seen many customers be extremely delighted when they come back after several years and say, "Wow, my diamonds, my gold, everything is appreciated." That feel-good factor is so much that she is very happy to, in fact, upgrade and add a lot more, and therefore, the upsell we see on exchanges out of that goodwill, and in fact, the statement they make is, "Only a Tata company like this would gain such appreciation and see," so actually, we see a lot of positivity, and the risk factor hypothetically does exist, but it hasn't yet played out like this so far, and we hope it doesn't.
Very helpful. Very clear. Second question is, in FY26, we have standalone jewelry growth of 21% and EBIT growth of 12%. Now, with you maintaining your EBIT margin guidance and the ballpark expecting growth to be 15%-20%, do you think FY26, even notwithstanding the volatility in gold we have seen and the mixed changes that we've continued to see, do you think that that gap will now narrow? Y our EBIT growth also will be ballpark in that range, 15%-20% or maybe a couple of percentage points short of top line growth?
If we are going to maintain EBIT margin, then it has to be. Otherwise, there is no way we will be able to maintain EBIT margin. That's the expectation. Market is very, very and while this is the current view, and if circumstances change dramatically, then we may have to get back to you guys talking about it. Right now, whatever we see with that, we think, yes, we should be able to grow at a similar pace. I'll just add one more piece. Our priority to continue to grow top line and acquire customers is the highest. Sometimes we may be willing to invest some of that margin into growth. That's been the outlook, and that's also been the guidance from our board and everybody. Margins may sometimes come down if the competitive situation or the consumer sentiment is adverse.
Thank you so much, and congratulations on your appointment, Ajoy .
Thank you.
Thank you. The next question is from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Hi. Good evening. I also had a question on competition. So in an environment of there are two aspects to it. In an environment of sharp increase in gold prices, are you saying that we have not seen a pickup from, say, regional private, smaller guys who probably would be sitting on higher inventory gains on schemes, etc.? Have they had that intensity not accelerated? And the second part to that was, as you may have explained, gold on lease quite well. I just wanted to understand, is the availability of the gold on lease and the fact that it is stretched because of the higher gold prices also a source of competitive advantage for you because you're a Titan and you can get it at a lower rate as well as have probably an infinite working capital limit?
So just could you shed some light on these two aspects? Thanks.
Yeah. So gold on loan, your observations are right. We are in best position in the industry as far as India is concerned to leverage gold on loan, get the best rate, and substantial amount of limit without any concern from the banks compared to other where they would be on the point, will not like to extend. So that gives us a competitive advantage and ability to invest in inventory at higher gold prices. The first question was on the demand side.
Competitive intensity. Yes. Those who don't hedge do sit on inventory gains, and they are willing to let go of margin, and they play it out in the form of heavy discounting on making charges. And it is not just restricted to small players. It is also even larger players. Not every large player is hedging 100%. So it does play out. So yeah, but we also then respond in whichever way is appropriate for that market. And therefore, it's a complex constant game share, invest in providing value to the customer in some form. Brand, customer experience, product design, making charges, everything comes together as a value proposition.
Because my question is just why, again, this question is because the pace of gold rise has been so sharp this time. Maybe there could be more investment by large private, small private investors in this, but you're saying it's a manageable scenario right now.
Yeah. I t's not new now. I f you ask me, last 12-15 months has continued to play like that, and we just got used to this.
Got it, and the second part was on a couple of data points on the World Gold Council data. One was which said that exchange as a percentage has not dramatically gone up in spite of prices going up so sharply, which means that the new buyer growth might have been a little bit more surprising. It should have probably fallen off a little bit more in the industry, and the second was on the fact that the overall demand growth has been valued on this 3%. On these two points, you are growing far, far faster as you have been historically. Has the shift further accelerating in this rising gold price environment towards organized players? And are you surprised that just using buyer growth in spite of this dramatic increase in gold price and exchange has not dramatically gone up? Those are my questions. Thanks.
No. So exchange has gone up somewhat. If I look at this quarter four, the contribution of exchange has gone up by a couple of percentage points. That's one. New buyer growth, especially in gold, has flagged. And certainly, as I said, in the lower price bands. So it's not that we are blazing our way towards new buyer growth in gold. No. In fact, quarter three and quarter four, it has been very muted. And therefore, higher growth in ticket sizes usually comes from higher repeat. So the skew between repeat and new has been there. Some of the overall new buyer growth percentage figures you're seeing is to do with the overall portfolio because Mia has opened a lot of stores, etc. And that is giving us some benefit in the new buyer growth.
But if I dissect it by brand and go into by store and channel, and by category, there is a similar point as what World Gold Council has said. But exchange has gone up certainly in contribution by a couple of percentage points in quarter four.
Got it. Thank you . Wish you all the best.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, team. Thanks for the opportunity and congrats on the good setup, Venkat. So just one question to the team. So you mentioned that our watches and wearables coming from MCD continues. But just to clarify, is the focus on assessing long-term customer relevance of this offering, or are we still evaluating the economic viability of the business model here?
I t's both. The first one is certainly very important. What do customers think, and customers are not that clear. They are pretty confused, and many others, there are people who would like to experiment. There are people who are getting a little worried about the prices, and there are many new customers who come into diamond jewelry and want the authentic piece. They are not so confident, so right now, I would say in the balance, there are many more people who are already diamond buyers who may be buying LGDs, and many new to the category are still a little hesitant, and the store of value that Venkat talked about pretty much plays a higher demand, but definitely, the customer piece is more important. Economic piece, we can figure out once we know what the customer really wants and how it plays out.
Economic piece is how we manage the business.
Thank you. And is this read-through the same across our engagement with customers here and abroad, or is it changes because the store of value understanding also changes?
Sorry, what is the question?
No. So is this read-through on customers, is it same across in India and abroad, or then abroad because the store of value dimension is different? Over there, it is slightly different than how we are reading customer in India and LGD?
At the moment, and Vinny can add, our focus in the U.S., the most world market in our overall situation, Indians are more Indian in the U.S. than in India, and the store of value is quite pronounced there as well.
Sure. And lastly, are there any regional nuances that we would like to call out in this quarter number in terms of north, south, or any read-through there on demand?
East and south continue to lead the growth, and west and north have been a little more sluggish, and within that, again, west maybe a little bit more than north has been sluggish, but that seems to have been the trend of the current financial year that we are saying is 31st March.
Okay. Thanks, Venkat. Thanks, and all the best for coming quarter.
Thank you.
Thank you. The next question is from the line of Mokshit from Aurum Capital. Please go ahead.
My question has been answered. You can move to the next question.
Thank you. The next question is from the line of Vivek from Jefferies. Please go ahead.
Hi, team. Good evening. Three questions from me. First, on LGD, again, one more question. On the LGD side, is your worry more about, given you are the market leader in jewelry, you do not want to, let's say, create, or create is the wrong word expand the market? Because we have seen someone, let's say, retailer-like trend, which has also entered into this. So is it more about you don't want to, in a way, cannibalize your own business by existing diamond business by creating more awareness? Is that the hesitation, reason for hesitation?
We are trying to understand what the customer wants, and frankly, that is what guides us, and how is the customer thinking about it? We are still seeing customers are a little unsure. The trend has got into it? It has purely an independent decision, and it's not something that is not playing in our mind at all. We need to be clear what is the value proposition we need to offer to the customer, and at the next level, we need to be clear what will be the source of differentiation and continued competitive advantage in a category which could get very easily commoditized because of price. These are important considerations for us, and I don't know whether you should call this hesitation or examining and reflecting as to what is the right thing to do.
Okay. And is your internal view also that LGD will have no impact on, let's say, natural diamonds, or where you are on that bit?
Very difficult to answer that question because how it plays out will depend on whether new customers will the market expand? That's the big question. And if the market expands and penetration of diamonds, which is as low as 15% in our country, goes up even by a few percentage points, it can bring many new customers and can be a win-win. In the short term, there may be a lot of ups and downs. It has to settle somewhere. Very difficult to predict. Some pluses and minuses can happen, but we need to look at it over a slightly longer period and see where it has to settle.
Got it. My second question is, there are obviously, at least globally, whatever, and I have admittedly very limited understanding on this, but I hear that part of the reason why natural diamond prices actually went down was because of LGD. But what we, there was a recent media article which said that natural diamond prices actually moved up 10%. T his was in the month of March or end of March . Do you have any insights as to what drove this change, and is that something more, I don't know if secular is the right word or not, but I would still use that. So is there something which is happening which is why natural diamond prices moved up?
Again, this reflects the wholesale prices of roughs and again on the higher heritage segment. It is probably on the back of Chinese demand perhaps coming back. I don't have more insights on whether it will go further up or that was the bottom and from here on it's up. Difficult. Only the rough suppliers and what happens in international markets will probably determine the price from that. Very difficult. I don't have an answer to your question. Sorry.
No, I appreciate. Thank you for that. My last question is, on the sequential basis, we have seen jewelry margins actually moving up, and Ajoy clarified that there is no major hedging impact because of which the margins have moved up, and our channel checks actually indicated in the last few months, given how gold prices moved up, especially in the fourth quarter fiscal, there was a lot of, let's say, discounts or making charges, promotions given by regional players, local players. Why is it that this has not shown up in your numbers? What am I getting wrong over here?
See, the gross margins have been impacted because of the product mix. No question. Ashok did share a fair amount of, let's say, answers, observations on the fact that there's a mix of operating leverage and some hedging gains, contango, etc. So those pieces have probably played out in the EBIT margin percentages that we have seen. Gross margins have certainly got impacted on two counts. One is product mix. The other is the price of gold itself playing a role in the studded margin line item level as well. We explained that earlier before when prices of gold go up relative to diamonds, there is an impact on the gross margin for the studded jewelry line item itself. So combination of these two has impacted gross margins.
I see.
Sorry, and sequential piece that my colleague here reminded me is also because the studded ratio in Q4 versus Q3 is different. Q3 is a rather more gold season. In Q4, we have a lot more diamonds. So that could be another factor playing out.
Right . W hen I said sequentially, I was looking at all the rolling four quarters, for example. The only thing was what Ashok mentioned was there is no big impact of any one-off on the EBIT side except the operating leverage, right? So in that context, basically, the discounting or whatever we saw on the ground, it was minuscule compared to- or you did not face that pressure as much, except for a slight impact on gross margins, which got offset at the, let's say, due to operating leverage. Is that a fair understanding?
Yeah. Y ou are right.
Got it. Thank you very much. Very useful.
Thank you. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Venkataraman for closing comments.
Thank you very much for all those piercing questions and the encouragement, as always. See you in the next quarter, and good night.
Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the line.