Q1 21/22

Aug 4, 2021

Ladies and gentlemen, good day and welcome to the Q1 FY22 earnings conference call of Titan Company Limited. As a reminder, all participant lines will be in 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 the conference over to Mr. C K Venkataraman, MD of Titan Company Limited. Thank you and over to you, sir. Thank you very much. Good evening everyone on the call. It was a very satisfying quarter for Titan Company as the presentation reveals. As usual, the people of Titan Company, the extended Titan organization from the employees of the subcontractors and carriers and all the retail store staff, all the sales staff of distributors and sales and distribution organization, and of course all the employees came together to deal with the consequences of the second COVID wave. In terms of performance and management and profit performance, it's been a very encouraging quarter. We're very confident about the balance nine months of the year. The level of vaccination, I just checked today, we are at I think 46 crore people have been vaccinated and in the 18+ age group, it's 43%, I'm told. At current rate of vaccination, we expect 75%-80% vaccinations by end of September and therefore from an overall safety perception point of view, it's a good sign and it will open up the door to demand in various categories including lifestyle categories such as ours. Barring any other unforeseen or the consequence that relating to COVID, which is anyway not in our hands, we are pretty upbeat about the balance year. Now I would request Ashok Sonthalia who is here now in the first meeting as the CFO of Titan Company. Welcome Ashok, to share some thoughts before we start the Q&A. Thank you Venkat. Good evening and hello to all of you. It's really wonderful to be talking to you. My first meeting as Venkat alluded. While Venkat gave you some details on our overall performance in the just concluded quarter, I wanted to brief you about some updates on our subsidiaries and on gold hedging approach. You know we had incorporated Titan Commodity Trading Limited and I'm very happy to inform that TCTL has started operating in and Titan has started hedging its gold through TCTL now easily. Titan also established 100% subsidiary in U.S.A. this quarter to further its business interest particularly of Tanishq jewelry business in that geography. Now coming to our approach to gold hedging, while there is no change in Titan's philosophy of not taking any price exposure on the gold that we have, we have made a change which is effective from July 1, 2021. Earlier we used to hedge cash flow arising out of sale of gold inventory and accounted for it under cash flow hedging methodology. With the volatility in cash flow due to sales volatility due to stores closures, et cetera, observed during last year as well as this year, there were mismatches in hedges which created ineffectiveness of hedges and created volatility in financial performance on quarter on quarter basis. We have now decided to hedge the gold inventory itself instead of cash flow arising out of sale of inventory in future. This shift will minimize and bring in more certainty to our hedging activity and the chances of mismatches in the hedges will get minimized. The old outstanding contracts that are open as on 30th June 2021 would continue to be under cash flow method till their closure and all the new contracts from July 1st are under fair value method. We have included these details on slide number 36 and 37 of the investors presentation uploaded on stock exchanges and on our website. You can look at them for more details if you could not capture whatever I spoke about. Another point before we open the floor for questions, that in view of the stricter regulation on disclosure coming into play, in this call we will not be able to share specific revenue growth number for July. While we will be providing you a qualitative picture of that, but a specific growth number we will not able to provide. With that, we can open the floor for question and answer. Thank you. 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 their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. In which one? 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 Percy Panthaki from IIFL. Please go ahead. Hi, sir. A couple of questions from my side. In terms of store openings over the next 2, 3 years, could you give some idea on what would be the proportion between metro Tier 1, Tier 2 towns, et cetera? I'm not looking at exact figures, but what I'm trying to understand is that the store split of the current stores that you have now, will the store openings be in roughly the same proportion, or it's going to be materially skewed towards any particular POPs data? Thanks, Percy. I think the opportunity for Titan Company in middle India and below is very high. A lot of stores that we have opened in the last two, three years are certainly in smaller and smaller towns, and we expect that to happen. When you open stores, your total store shifts over a period of time, does it have any implications either on your sales per store or on your profit margins? The sales per store obviously is lower in smaller towns as we increase in smaller towns. It is not as if the growth opportunity in large cities is low either. For example, our largest jewelry store, which is in Delhi, has grown handsomely in the last few years, even when we are opening our store in Ganganagar or Yamuna Nagar in Haryana, for example. They have a sort of compensating effect. The leverage is what we are pushing as opposed to per store sales. The individual store economics in terms of asset turn as well as margin are anyway sort of built into the system through our terms of trade and all that. There is no worry sitting there. Okay. Apart from this, for any reason whatsoever, let's say once the COVID disruption is fully out of the way, your margins for your jewelry business, I think before COVID, for 2 years, you had averaged somewhere in the region of 12.5% EBIT margins for jewelry. Once the COVID disruption is completely out of the picture, is there any reason why you would not go back to those margin levels in jewelry? There is no reason why we would not go back to those margin levels. Okay. That's all from me, sir. Thanks, and all the best. Thank you. Thank you. The next question is from the line of Chirag Shah from CLSA. Please go ahead. Yeah, thanks for taking my question. At the outset, I also wanted to congratulate Ashok, and good to have you sir on this call. I wanted to take a step back and understand how we are thinking of economics. Titan is, of course, best model that we have, but for our franchises operating inefficiencies work against them in this pandemic period. Given this, is there any change in franchise economics that is needed going forward? Last time you also spoke about how we are institutionalizing management of cash and balance sheet within the company beyond the CEO minus two levels. How are we thinking of institutionalizing the same within the franchises, and how do we think of improving inventory turns for the franchises? I'm wondering, some of the digital initiatives that you have taken recently would also help them in higher inventory turns for them. Certainly, the leverage advantage that a corporation like Titan has, an independent businessman does not have. Therefore, when the sales fell in FY 2021 and even during FY 2022 now, there is an impact on the economics. I mean, on the financial performance. Fortunately, over the years, we have built robust businesses in most of the franchises. Last year, as well as to some extent this year, we stepped in with loans, grants, and sort of helped them buffer the situation. Because of the overall cumulative prosperity that Titan brands have delivered to them, it was not an issue. They could sort of take it on their chin and move forward. Therefore, we have not had to make any structural change to the terms of trade of business and therefore increase, let's say, our cost of retailing and distribution. That's the first point. The second one is, actually individual businessmen are quite savvy in the management of cash, actually. We don't really need to teach them. We often find a jewelry business, for example, where we have these two different L2 and L3, which is a buy and sell versus company stock. Yeah. We often find that the stock turns of the franchises who own the stock for comparable turnover bands is actually better, because they're on the ground managing it, and it makes so much more. The cost of borrowing is much more than for us on the gold and loans and all that. There is really nothing that we have plans of teaching them, as you say. The principles of stock management, for example, in the watches and wearables division, we have taken the whole theory of constraints principle all the way down to all the franchisees so that it's a flow system where what sales get replenished and how long it took to sell is considered before it is reordered and stuff like that to manage the asset. In jewelry, the same principles of what we use in the consignment help to manage the asset. We have now created a team in head office for the franchisee entry to help transfer all these best processes to them as well. Sure. Also, can you touch upon the two key growth levers we have? One, we speak about the Many Indias program that to increase the state level relevance. Just on the second part, the Golden Harvest scheme. Enrollments in FY 2020 have been uneven for obvious reasons. That would understandably result in some volatility in revenues in the current year. Can you just give us a sense of how enrollments are moving in the current year on the Golden Harvest scheme? Yeah. Hi, Chirag, Ajoy here. Hi. Enrollment, obviously in the month of May, everything was shut, but June and even later on in July, pickup has been good. Has kicked in well, and it is continuing to ramp up. Hopefully, going forward, it should be a good base that we will rebuild. In Q1, I must certainly share that since last year, Q1 was a disrupted quarter, therefore enrollments were not there. Therefore, the opening base of matured accounts were limited. To that extent, that engine was understandably a lower contributor to sale in Q1. Right. Going forward, the enrollments look good. On the part about, let's say, trying to win in different parts of the country and Tamil Nadu, which has been our strategic market, has continued to fire well. We have also done a lot more localized activity in what we call as Bharat markets, which is really UP, Bihar, Jharkhand, MP, Odisha, and that has also been working well this year as well with lot of localized activity. We are also exploring a couple of more markets in the current year, but we're waiting for things to stabilize and see if the momentum is right for us to intervene in those markets going forward. Overall, that approach, what we kind of crystallized a lot more last year, we are continuing with that state level kind of customized plans. It is going on well, and it has really helped us a lot in the states where we've done a lot of this work. Sure. Just one last question, if I may. In the annual report, if you see while the Golden Harvest fixed deposit, which is held as a reserve, as a proportion of Golden Harvest related liability has gone up materially. Just wondering if that has to do with any regulatory change that has happened. As per rules, 20%, but I quote a specific number. That should be the thing. Sure. For FY 2021, that number has gone up to 28%, which is why I'm asking this question. I will get back to you after checking. Sure. I will join back the queue. Thank you very much, guys, and all the best. Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead. Mr. Maheshwari, your line is in talk mode. Kindly go ahead with your question, please. As there is no response from the current participant, we move to the next question from the line of Abneesh Roy from Macquarie. Please go ahead. Hi, Venkat. Hi, Ashok. Welcome to the board. I just had two questions, just taking up on the demand recovery, trying to get a sense. Venkat, would you say that gold jewelry kind of would come back as customers have not been able to purchase due to shops being closed? Is that what you would expect as we go forward into the year? Is that the reason for your relative bullishness? If it is, would you be able to share any guidance on the sales for the 9 months as you go forward? Hi, Abneesh Roy, Ajoy Chawla here. Hi. We have seen a certain, what I would call a pent-up demand on account of gold jewelry, even studded jewelry, on account of missed milestones in the period of lockdown. Typically people wanting to buy during Akshaya Tritiya were not able to buy. We have seen evidence of that in June, and it has continued in July. The rest of the quarter will look like It's kind of difficult to give a guide. At least for us, we are seeing a lot of new customers also walk in. The contribution of new customers, as well as the absolute growth that we are seeing in new customers is also giving us a lot of confidence. The third piece which I would like to share here is, these milestones I talked about birthdays and anniversaries. This is now becoming a growing trend for us. 1 is, of course, a spike that you see immediately after unlocking. I think as a process, we have become little better at managing that. That is amongst the repeat customers is also growing up. I think we have more than just the pent-up demand as a basis. There are wedding demand, which anyway people are advancing their purchases because they don't know when wave 3 may come, if it comes, et cetera. These are some of the demand drivers. Okay. No guidance on recovery by when, nothing like that, right? You would not be comfortable? That's the answer. Yeah, not on this call. Not on this call. Okay. Sir, secondly, on the margin front, in the last call you highlighted there were some discounting pressures from other peers. Is that now behind us? Is that a fair understanding? See, discounting has always been there, last year, this year, and nowhere have we actually slipped on margin on account of that piece. No. Competitive intensity continues to be high. Post unlocking, most players in the market have been on aggressive offers. We followed whatever we think was right to do, and we followed our schedule. It's okay. That will continue. It's an operating aspect of the industry. Okay, sir. Lastly, sir, just a bookkeeping on this change in hedging. Does this, in a way, require us to increase the number of hedges that we keep on book? Would that be a right understanding or that is not correct? No, I don't think that's the right understanding. It is just, I will again repeat, that instead of the inventory which was exposed to price risk, and we were hedging the cash flow in future out of that inventory, now we are hedging inventory itself. It basically brings in more certainty that what hedges we are doing and tagging to the exposed inventory, which is for price. You know, we kind of bring in through GML, which are naturally hedged inventory. That proportion, we are not foreseeing meaningful change. If that proportion changes, then in any case, we have to hedge the remaining inventory. Again, this is operating and very tactical month to month, week to week, quarter to quarter. This system doesn't bring in any structural change into amount of hedges need to be taken. Okay. It's just an accounting. Got it, sir. Clear. The unhedged and ineffective hedges is now behind us. That's the takeaway. Okay, sir. Thanks a lot. Thank you very much, sir. Thank you. The next question is from the line of Avnish Roy from Edelweiss. Please go ahead. Thanks for the opportunity. My first question is on TCL North America. 12 years back, you had exited U.S.A. I want to understand what has changed, and if you could discuss any numbers here in terms of investment or losses. Is there any learning from CaratLane international business, which has increased 9x YOY? Is that giving more confidence? Because the U.S.A. market in 11 years could have become much more competitive now. If nothing worked then, you had highlighted that you want to and U.S.A., the market higher. If you could discuss these points. Yeah, thanks, Avnish. For various reasons, which were valid in 2006 to 2007, we decided to target the mainstream American consumer with Tanishq. Okay. We went into malls. We created a product line which was totally American global in terms of styling. Took an unknown brand into the American market. At that time, we felt that we could make a success because the proposition that we had was differentiated, and we felt that there was a decent space in the American market for that. There was a decent space. Everybody who came into the Tanishq store loved the entire value proposition that we had put together, from product design to range to quality to the customer experience to the store design and all that, and we had very good customer feedback. The biggest challenge that we had not visualized that well was the investments that we needed to make to generate the walk-ins, build the brand and generate traffic into the stores. Even as we were starting to grapple with it, the global financial crisis struck, and we realized that it's going to be a long haul and many INR 10 crores would have had to be sort of lost before we saw light. Titan Company was in a very different situation in 2008. That was the reason for closure at that time. Now, the incorporation that you're referring to is for making a serious play in the NRI-PIO market of North America. Just in 10 years, I mean, even NRI-PIO market was large. I won't go into why we chose not to go there then. I'm telling you why we are choosing to go there now. The per capita GDP of the NRI-PIO is $100,000 in a country which is $65,000. The NRI-PIOs are more Indian than Indians living in India, and their connection with the culture of India or the festivals of India, even the functions, the Nigel celebrated with pomp, the Holi and Diwali and all that. There's a lot of socializing that happens. We ourselves know in India, the NRI traffic during December month and all really peaks. We are now playing in a very different category, which is pretty large. Our sense is that it may be $3 billion-$4 billion at least. The market is pretty unorganized, and we believe that we can hit the ground running. We can get very decent ticket sizes, very good diamond jewelry share, and also a lot of prestige by upping the game in terms of style quotient. All in all, the game that we're going to play now is very different. The Tanishq brand is very strong in the NRI-PIO consciousness. We've done a fair amount of research to make sure that when we go in, people are waiting there to welcome us, just like it happened in Dubai after many, many years. Therefore, the market opportunity, very different. The strategy is very different. The competitive advantage is something else compared to unknown brand fighting big global brands at that time. Huge, desirable brand fighting mostly local players this time. That's a big difference. Sure. My second question is on closure of stores. You have closed 5 stores in different formats. 1 Mia, 2 W40, and 2 in Fastrack. If you could discuss the reasons, and is this more focus on digital or online you want to drive? Avnish Roy, we have 1,800 stores plus, Avnish Roy. We can't help not close some of them every year. I mean, it is like that. It's just a regeneration of the system. Nothing particular to note. It's not a material number from a network size point of view. Last quick one. You have pointed that in jewelry last year you saw a quick turnaround, quick football recovery, and you have said this time even in watch, you have seen that, and eyewear. What is driving this? Essentially, is it more of base effect or there is a faster sentiment improvement? Hi, this is Suparna here. Yeah, I think the consumer sentiment has been faster to recover, and we see that across all channels in the watches division. Whether it is multi-brand outlets or the large format stores, and certainly in our retail stores, consumers have come back faster and that's at an overall level. It took longer for people to come back to buying after the COVID wave last year. This year has been much better. Avnish Roy, last year there was no vaccine. This year there is a vaccine. I was in Punjab last week, and so many people on the road, so many people in this famous restaurant called Haveli. The fear of COVID, even though the tragedy of COVID was greater this year, but the fear of COVID is much less because the vaccine is a protection shield, and that's what I'm sure is influencing the recovery across categories. Sure. That's quite helpful. That's all from me. Thanks. Thank you. Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead. Yeah, thanks for the opportunity. First question, with mandatory hallmarking effect over the last year, how strictly are the rules being followed in the large market cities, and what are the benefits you expect in the year to begin time? Hallmarking is mandated, yes. We have been compliant right from day 1 across all our stores, whichever city it is. There is some amount of disruption in the supply chain in terms of post-production, because there is a new system of, in a way, capturing the hallmarking HUID number through some centralized system that is resulting in some significant bottlenecks, which BIS is trying to address. That is the main impact currently of hallmarking. Meanwhile, jewelry associations continue to kind of lobby for a certain deferment, delay, et cetera. We are carrying on the way it is, and we have expanded our operations suitably to cover up for these delays. Now, the benefit for us, well, in the long I think HUID is a good move because it will really bring transparency and some credibility to the hallmarking field. Tomorrow as a customer, if you are able to use that number and check where it was hallmarked, et cetera, you'll prevent any contamination in the hallmarking process. BIS also seems to be pretty clear that they are going around checking the quality of hallmarking and all of that in the initial months and weeks, so that there is no hanky-panky. We think this will be good for formal organized players who are operating on clear purity, et cetera. Eventually, I think the entire industry will kind of get into that mode. If it's good for the customer, it's good for us, so it's good for all of us. It will be valuable. Sure. Okay. Second question regarding CaratLane, what is the store count potential for this brand, and would it remain focused on jewelry alone, or would you consider extending it to other luxury products? We have Nitin here, who is the Managing Director of CaratLane. It'll be wonderful to hear him share his thoughts. The first part, did you ask me the current store count? Yeah. The current store count. No, store count potential. Like where do you think could be the potential store count for this brand? Yeah. If you consider that the stores are roughly about 1,000 square feet, and we are currently in only 44 towns with depth in about 16 towns only, you could put any multiplier to that and we would find a lot of potential if we look at just India alone. Beyond that, the second question that you had was around Sorry, could you repeat the second one? Yeah. I was just wondering whether this brand can be extended to other luxury products. Right now you're doing jewelry, but can you extend it to other luxury products as well? It could be, but it hasn't crossed our mind yet. Thank you for bringing it to our notice. Sure. One last question, if I can. For FY 2022, how do we look at jewelry and watches business revenue compared to FY 2020? Would you say that for jewelry, 15% kind of figure over FY 2020 is possible or a bit too ambitious? In watches, if you can share, when do you expect to get to FY 2020 level of sales? Actually, we had reached FY 2020 level of sale in Q4 of FY 2021, and then we were gunning for a good growth in all the businesses in FY 2022 till Wave 2 came. I think in the nine months, I think we should be gunning for certainly matching and exceeding what we would gun for. Okay. Are you saying that do a good figure, double-digit figure, or you're saying that FY 2020 number can be matched? I don't know. Last year was a drop, no? Sure. It will be just a point-to-point growth. Okay, sure. That's it from my side. Thank you. Thank you. The next question is from the line of Aditya Soman from Goldman Sachs. Please go ahead. Mr. Soman, your line is in talk mode. Kindly go ahead with your question, please. As there is no response from the current participant, we move to the next question from the line of Krishnan Sambamoorthy from Motilal Oswal. Please go ahead. Yeah. C.K. Venkataraman, last year, particularly the second half, we saw a significant bunching up of wedding demand. Also benefits of things like lack of overseas travel, therefore putting greater income in the hands of the customer. Do you expect something similar in the current year as well? The overseas travel part from whatever we are sensing is still a big constraint. While the people's moods have improved, vaccine and all that, the governments continue to be strict about visa. For example, even for our own launches, stores in Dubai and U.S. and all that, we are not able to step out of this country. I suspect that advantage will remain for a while. Weddings, I'm not clear. Maybe Ajoy can speak. Yeah. I think wedding demand will be stronger in the second half. It's already there because people are advancing their purchases, not knowing when Wave 3 will hit, and therefore getting on with it. Having said that, certainly like last year, we think wedding demand will be stronger in the second half because people have missed out in the first quarter. Understood. The second part, while you did highlight that you don't want to give July numbers, could you share store operating days data similar to what you had given for retail main too? Sorry, what data? Store operating days. Store operating days. July. I think no. No. We can guess. It's about 80%-90% for jewelry, and it's in that around the mid-80% kind of number. 88%. Yeah. Yeah. For watches, it is between 75 and 80. Because of malls. Because of the malls, yeah. Yeah. There are lots of states where there is alternate days. It's certainly much below 80. Yeah. Garrett Lynn Mithun says it's 88%. I feel that because the public is also now starting to become reasonably well aware of this, the sales must be getting distributed over the days in which stores are open. Yeah. You may not be able to use this, frankly, beyond a point for any practical calculus. Yeah. I would strongly suggest not to use that data because the correlation is not standing out. What Venkat said is borne out by data. We should look at total month sale only. Okay. Just one final question. Ashok, can you explain what's the role that Titan Commodity Trading Limited, what does it play in the hedging process? It's a registered broker with MCX in a way. Earlier, if you remember, we used to deal with other brokers including Karvy, and we had a bad experience there. Some of our money got stuck. Just to avoid that risk, we kind of created our own entity. Titan is a sizable player as far as gold jewelry and hedging is concerned. Apart from avoiding that risk, of course, we are saving some brokerages, BG charges, et cetera. There were those too. That was not the motivation. Motivation was to avoid the risk of a counterparty in this kind of transaction. Understood. Very clear. Thank you. Thank you. The next question is from the line of Amit Sachdeva from HSBC. Please go ahead. Hi. Good evening, thank you so much for taking my questions. Congratulations on good set of numbers in this separate quarter, especially margins, if I may say, on the jewelry. I just wanted to, Ashok or Ajoy, if I can get some clarity on jewelry margin. I remember last quarter, there was a one-off expenses or at least write-off on account of the custom duty reduction that had already happened and impacted quite sizable amount in Q4. If I remember correctly, Subu had said that part of it would be also affecting this quarter. If I were to say two-third, one-third, I just wanted to know that what kind of custom duty impact would have still hit in this quarter, and can you quantify that in terms of EBIT impact? I'll take that, Amit. Yeah. We were actually expecting to absorb a much larger component of custom duty impact in quarter one. Because sales itself are much lower, that amount is also much lower. Coincidentally, some of that loss has got set off by what we call as a FIFO gain which is on account of gold rate valuation. Actually, in this quarter, those two amounts are canceling each other out. Okay. You're not seeing any impact of that. They happen to be the same number, give or take INR 1 crore here and there. Sure. Yeah, to add to Ajoy, there will be something going into quarter two now. Now amount is not significant where we call out specifically what that amount is, but some carry forward to quarter two will happen. Okay. That would be, I would guess, would be marginal and not really very meaningful at least the EBIT margin level. Would it be a safer assumption? It should not be very meaningful, but we will kind of let you know. Meaningful, maybe, but not material. Not material, yeah. Okay. No, that's very helpful. Thank you so much for clarifying this. My second question is, obviously, you talked about demand and the fact that you would not be very specific about July. I would also gather that July month is split into two halves, and first half July typically is a very bland and very lackluster anyway, structurally and cyclically, and it's only the second half of July that takes off. My question is And also there's a growth factor of metro demand and tier 2, tier 3 demand which had been divergent at least last year, and I would guess Q4, where metro demand would have come back as well. Could you give us some picture of how the July has progressed on first half, second half dynamics? Second, tier 2, tier 3 or smaller town versus metro dynamics. Are you seeing this trend sustaining? Some color would be really helpful, Ajoy. Okay. Actually, this time around, first half was much better than the usual, because there were still quite a few wedding dates available till 17th of July or so. After that, the Adhik Ashad month started, demand actually slowed down. The first half was quite good for wedding, therefore also more for plain gold. We actually advanced in the North markets till our studded activation, which we usually towards the end of July, it goes on all the way to mid-September. This time, because of momentum as well as uncertainty of wave 3, in the North markets, we have advanced it by about a week, therefore we saw good opening traction to that. The rest of the markets followed in the last few days of July, that has also seen a good response on the studded activation. To give you a sense on metro and tier 2, tier 3, this time round because Bombay, Delhi, and some of the other north and west markets have been good. Ahmedabad. I think we are seeing a better response this year because some of these markets were badly impacted last year. Sure. Tier 2, tier 3 towns are certainly recovering also pretty well. The metros and the mini metros have started punching their weight a little earlier this year than last year. Therefore, overall, most markets are firing well, barring a few states which are still impacted. 3 or 4 states which are impacted. Okay, great. That's very helpful, Ajoy. Thank you so much, and all the best. Thank you. Thank you, Amit. Thank you. The next question is from the line of Shirish Pardeshi from Centrum Capital. Please go ahead. Hi, Venkat, and welcome, Mr. Sonthalia. I have three questions. The first question is on the jewelry part. If you could talk about the mix, how this has fared in this quarter, maybe that would be very helpful. Hi, this is Ajoy here. The studded mix, I guess that's what you're referring to. Yes. In the quarter, we have seen on retail, I'm just giving a retail flavor because on final we say that it is a little different. On retail, I think it's 25% has been the studded mix in this quarter. This compares to 21% last year, which was impacted quite a bit. The year before last, it was at around 28%. The studded recovery is better than last year, but yet to catch up at least for quarter one figures. You have advanced the designs in the northern market. No. That is in July. Okay. This is referring to quarter one. Okay. There is no impact of any activation in Q1. Got it. Thank you. My second question is on watches. When I see the slide 47 and 48, I think you have reported a very strong volume growth. Maybe if you can help, what is the volume absolute quantity in the quarter? The related question on that is that despite higher volume growth, the EBIT is not showing that momentum. Could you talk something about the mix, which segment has done better or lower? Yeah. This is Suparna here. The volume growth is actually on a very dismal quarter one last year, where we had very low sales. Like I mentioned earlier, last year, the watches consumer sentiment was very weak and the recovery was very slow. I think the 466 should not be seen in any other context except that the base was terribly low. Can you just repeat the second question? What does it explain the lower growth in EBIT? The EBIT is actually, last year we had a loss of INR 164 crores in Q1. This year, we have had a loss of INR 56. It's largely, to a very large extent, explained by a much better top-line performance this year in Q1, as opposed to last year. That's the difference in the EBIT. Okay. Suparna, just one follow-up on watches. What is the wearable contribution now in this quarter one? Maybe if you can talk about last two, three quarters, how it should be? The wearable contribution is still less than 5% in the overall value, but it is growing year-over-year. The growth in wearables is higher than the growth in watches. Even the recovery on wearables so far has been better than in watches, but it's on a very small base. Okay. My last question is to Ajoy. While speaking to few of the channel partners across geography, what we are also seeing, and you also acknowledge that the industry participants are pushing the deferment of hallmarking. How truthful is that? What their thought is that if it is deferred, probably they can sell off the inventory. If that doesn't happen in extreme situation, we expect, people are saying that there could be a discounting which will happen. There is no need of discounting, but obviously, the lower carat gold which is there in the inventory, probably you will see more heightened promotions. In that scenario, how do you see the competition behaving normally, abnormally, or heightened? We were also anticipating because of this, in July, August, the two-month window given by the ministry to kind of get all your stocks hallmarked or sold. We were expecting a lot more competitive intensity discounting. It is pretty much the way it has been. I don't see any further, it's not taken it up much more. I'm sure the industry is also seeing some good growth in the month of July and they are also hopefully going to see good growth in the month of August. In any case, even after that, the window doesn't close. You can just go and get your opening stock hallmarked. Which is what we did in the first place, so that as on 1st July, everything was already hallmarked. I'm not seeing much. In fact, the greater issue here is, as we build up towards festive season, October, November, everybody is going to start upstocking. In that period, therefore, the entire supply chain is coming under some stress due to this hallmarking HUID process. That bottleneck can actually create greater chaos for the rest of the players. In that sense, maybe, because we are a little better prepared for it, we may have some marginal gains there. Ajoy, you don't anticipate that it will take little different turn in around festive season? I don't think so. I think the ministry seems to be very confident and clear. Mithun wants to add something to this. The government has also plugged that gap in. By August 15, it was originally July 30th, now it's August 15, all opening stock, either by pieces or by grammage, has to be reported into the BIS portal as well. That doesn't allow for the scenario that you're looking at for it to play out. Thank you for that commentary. Where I'm coming from, just to clarify, that there are some glitches, even BIS is also acknowledging in terms of certification and on-the-ground infrastructure. Maybe because of that, I'm anticipating some kind of super competitive pressure which can happen. Yeah. We don't know. I'm not worried. Sure. The kind of significant competitors that we play with is not the kind that you're describing. Surely customers would be wary of some local jeweler suddenly knocking off to stock at INR 74. It'll only increase the worries that they already face about such possible brands. Sure. That's fair, Venkat. Sure, Venkat. Thank you and all the best. Thank you. Thank you. The next question is from the line of Vishal from PhillipCapital. Please go ahead. Yeah. Hi, guys. Congrats on a good set of numbers. I have two questions, both are book-keeping one. Share of old exchange gold during this quarter, and store opening guidance for Tanishq during the second quarter. Yeah. Share of old gold exchange has been a little subdued since the last year. I think people's interest in bullion has not gone away. Also because of the curtailed wedding-related purchases during this period, the total quantum, we see a lot more exchange during wedding purchases. We saw a good one in April, and then June was not really a great month for wedding-related purchases. To cut a long story short, the gold exchange percentage contribution to sale in quarter one this year was 24%, compared to, let's say, 30% if I go to year before last. Last year, I think is irrelevant. What is the second question you asked? Store opening guidance for Tanishq for FY 2022. Yeah. We are targeting around 34-35 store openings, and we are pretty much on track for that. We've opened seven and another four. Totally we have opened 11 so far as we speak for the current financial year. Okay. Sir, most of them would be on a L3 kind of, it would be franchise-based store operation, L3 kind of format or, sorry, L2 kind of format, or what kind would it be? Yeah, L2. Most of them are L2. A few will be L3 in very small towns. Got it. Thank you so much, and all the best. Thank you. Thanks. The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises. Please go ahead. C.K. Venkataraman, sir. Congrats on a fine performance. You have said that you will not give a quantification of the July sales. How has been the trend? Have we been good? Yes, we have been good, Rakesh Ji. Can you tell me what is the cash we are holding in our books on 30th June? How much cash? Cash. As of 30th June, we have in excess of INR 2,000 crore, Rakesh Ji. What about Favre Leuba? Is it going on? Is it closed, or is it still being ? Yeah. Favre Leuba, there are some procedural matters on the plate, but for all practical purposes, otherwise it is closed. The entity still exists and we've not yet sold the entity, so to speak. No investments ever since we decided to close it, other than winding down expenses that we had estimated and running to that plan. I was thinking what is any effect on the eyewear division because of the vast quantity of money that the other company is raising. What is the main? I forget the online company which has now got offline stores also. Lenskart. Lenskart, yeah. Lenskart. The amount of money they've raised is quite amazing. Yeah. Is there competitors effects on our eyewear division? It is shown in here, Mr. Jhunjhunwala. Yeah. Actually, the opportunity seems large enough, although they have been able to generate a lot of money and they are expanding. Their business is doing well. Our business is doing very well. We've also got a model which is quite sustainable. I'm looking at very rapid across both in big cities as well as in the smaller towns. Prospects are very good. We are quite excited with this. Also, Rakesh, if you really think about it and even go to the stores and speak to customers, we are an expert in this business. Now the name for the division is Eye Care, not Eyewear. The competitor is playing in a way in the fashion space with a lot of youth, which is a different space. To that extent, I think like Saumen Bhaumik says, the opportunities are different and equally large. No, there's no question. The way the eyewear division has been turned around, you receive a big pat on your back, all of you, especially Mr. Sunil. You can tell that personally again to Saumen Bhaumik, Rakesh Jhunjhunwala. What did you say? You can tell Saumen Bhaumik once again about this appreciation. It's been a remarkable thing. Titan has been trying for 10, 15 years, but they couldn't produce a profit. Second, I personally feel this is a very large market with a very big potential. Yes. Without doubt. Second thing I want to say is that are we going to continue with all this Taneira and as I see it's looking towards the quarter, does it befit the size of our company after trying for three years, four years? Of course, we want to make Taneira in the ethnic wear industry what we made with Tanishq in the jewelry industry, Rakesh. That's our ambition. We're very clear about what levers of Taneira are working. The women who have got Taneira's love Taneira. They've not seen sarees like that anywhere. The scale has been held back because of the last 18 months of COVID, but we will speak soon at an appropriate occasion about the ambitions of Taneira. Without doubt, it's going to go somewhere else. You just wait and watch, and you will applaud from the sidelines. How is the perfume business doing? Perfume business is doing very well. At the moment when people are all sitting at home, you and I are the only two people who seem to be going out, Rakesh. Most people are sitting at home, therefore, the need for perfumes is a little less. I think it's just a matter of time. January, when all of us, the nation is vaccinated, socializing starts. People also should start hybrid working as opposed to just sitting at home and working. That's a constraint for some categories like perfumes. Any- We are bullish about the business. Any plans to add items to Fastrack? In terms of categories, not yet. We want to actually make the Fastrack, for example, the perfume business of Fastrack much bigger. The bags business. You may not be aware that we make very wonderful bags for girls. Fashion bags. We want to make that big. Not enter any new category Make much bigger. The basic point you are making that some of these categories are so small in a company of such a large size, you are very right, and it's our collective, me and three of the heads of those businesses, to make these much, much bigger, much more prestigious, much more profitable from the company's point. Maybe I suggest that all things large start small. Yes. Thank you so much and welcome, Mr. Sonthalia. Thank you. Thank you for and best of luck. Thank you, Rakesh. Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead. Hi, good evening. Thanks for the opportunity. Question is again on the eyewear business. If you look at scaled up from INR 150 crore to about INR 900 crore top line in a span of 4 to 5 years, and recently they were valued at $2.5 billion. Just want to understand, what are the growth aspirations that we have for Titan Eye+, and what are the investments you're making to sort of strengthen the omni-channel play, especially in the digital side? We hear a lot of thrust from Tata Group on building digital assets. Just want to understand what are Titan's plans for Titan Eye+. In the last 18 months, we have established some of the basic things that were kind of ailing us. Having done that, we are getting into a rapid expansion mode, both in the top 7, 8 cities as well as India. Therefore, if today our net store is 722, in 2 to 3 years' time, it crossing 1,000 won't be surprising at all, maybe even earlier. Plus, we have also sort of cleaned up our trade channel, which is the multi-brand outlets. We are seeing a significant scope for actually playing both the channels, EBO and MBO combination. Therefore, outlook for the business actually could be very strong, meaning our last 5-year projection was somewhere around 1,800, 2,002. That was when the last presentation was shared some 3 years back, I suppose. I do not have a number or anything in mind right now, but I think we feel very strongly about the category given the opportunity that is available, as well as the digital exposure people are going through the last 18 months. Understood. Is there any gap in product portfolio? When I look at the store count of 750 and top line of INR 900 crore, INR 1,000 crore versus INR 600 crore and INR 500 crore top line. Definitely, there may be some B2B component, distribution component. At a product portfolio level, how do you sort of benchmark yourselves? We had certain gaps lower end of the price point. I think in the last 6-8 months, we have more or less filled it, and we therefore today don't see any real gap in the portfolio side. Of the 2 brands that we use in the frame segment, which is Titan and Fastrack is also going to scale up the play very soon, and significantly so. Thank you. Good luck with that. All the best. 1 bookkeeping question on other expenses. This is the other expenses that you sort of report in the presentation on Slide 40 this time. This quarter was INR 240 crores. Last year, same quarter was INR 187 crores, and March quarter was INR 400 crores. I just want to understand what's the breakup between variable and fixed costs, because it seems to be a little bit lower than what I would have otherwise sort of anticipated or expected. Coming to the specifics, last quarter, which you are referring to, of course, it was a very different quarter completely. April was a complete closure. May was also, most of the time, everything was particularly shut down. Anything which comes under this category, whether it is software, whether it is professional services, whether it is some of the rent concessions were also sitting here, traveling, zero. Those things were there in Q1 2021, and that is what that number you see. Of course, this quarter was better off compared to last Q1 situation, and that is what you are seeing. No, sorry. My question INR 400 crore in March, it has gone down to INR 240 crore in June, there's a 40% decline. It's a fairly good sort of cost. Is it because of a large part variable or No, it is not that large part of. It is basically the travel, rent savings, professional services, which we hire a lot in our factories as well as everywhere. All those things are there. They are, of course, curtailed because of closure, et cetera. War on waste. Yeah. War on waste sustainable part is, of course, built in, which was done between Q4 and Q4. I understand. Okay. Thank you so much. We'll take the last question, please. Thank you. We take the last question from the line of Vivek Maheshwari from Jefferies. Please go ahead. Am I audible now? See if you can speak closer to the handset, please. Is this better? Yes, sir. Okay, thanks. Good evening, everyone. My question is again on hallmarking. Two, three bits over here. One on the hallmarking bit. Over time, let's say in the medium term, if let's say one of the important USP of Tanishq was or has been around purity. If, let's say, the neighborhood stores start selling hallmarked gold, wouldn't that change the perception in the minds of customers that from a purity standpoint, whether Tanishq or a neighborhood store, then the battle is, or the competition is more on the designs. Is that a fair assumption?You are right. Over a period of time, that will happen. We have to compete on design, we have to compete on other practices, for example, when you take back gold, exchange gold, et cetera. We also think because of this, they were currently parking some of their margin from making charges into purity. Over a period of time, they cannot sustain. They will land up having to take up their making charges. In a way, this would then make our making charges more competitive. That is my reading. Vivek, for the last 3 decades, the exchange jewelry caratage has been in the 19.2 carats for Tanishq. That 2.8 carats is actually what Ajoy is talking about, that 2.8 carats is something like 11%, 12%. That will have to kick in, otherwise they'll go bust. That's 1 point. The second is, it's not only the purity, it is the Tata trust. 50 years from now, I can come back to that store, the store will exist, I'll get my money back. Whereas with others, we don't know whether the store will exist. We don't know whether the money will come back. That part is not spoken about so much, but it's very much there with customers. I mean, Tanishq is a brand which is aspirational, desirous. All that may not be articulated by customers to investing circles, but very much a power of the brand. Got it. The other part, I know this may not be the best forum, but if you can briefly elaborate, how does this hallmarking work? Let's say whether it's a Tanishq store or a neighborhood store, the gold physically actually goes out to a center, comes back. Maybe offline or something. Yeah. You can reach out to me offline, Vivek. I will walk you through it. Maybe through Pulkit or somebody from our investor relations. We can talk about it. I will do that. Last bit, a small bit on hallmarking. Does this increase your cost in any way in the medium term as it does for the industry, or it is, let's say, cost-wise it is fairly neutral for you as well? It's negligible. Okay. Got it. Thanks, and wish you all the best. Thanks, Vivek. Thank you. I now hand the conference over to Mr. Venkat for his closing comments. Over to you, sir. Thank you very much, everyone. As always, supportive, encouraging, probing, and leaving us with a good feeling at the end of it. Au revoir till we meet again. Thank you. Ladies and gentlemen, on behalf of Titan Company, that concludes this conference. Thank you all for joining us and you may now disconnect your lines. Thank you.