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Sowmya Sundar

FRESH exposures can be considered in Titan Industries at the current market price of Rs 63. The booming jewellery business and a strong growth in the watch business, despite tough competition, indicate better prospects. From an operational point of view, Titan has succeeded in reducing material and personnel costs. Its interest costs have been declining slowly, but steadily. But they are still on the high side and hold scope for further reduction. The higher cash flows could be used to reduce debt.

Booming jewellery business

The jewellery business, once a drag on Titan's business profile, is now growing at around 40 per cent. In 2002, when gold prices ruled high and the entire market faced a downtrend, Tanishq posted an impressive 40 per cent growth.

In a market dominated by unorganised players, Tanishq's positioning of the product as a fashion accessory paid well. The upward growth curve continued for the jewellery business in the June 2003 quarter too. The jewellery business now contributes 43 per cent of the turnover as against 37 per cent a year ago.

Watches: Right timing

The watches business too have not been lagging behind. After a sluggish phase, the watch industry is now growing, especially in the mid-segment. Despite the slew of foreign brands entering the Indian market, Titan has held to its market share across segments. Responding to competition, it expanded its range in the mid- and upper-middle segments by introducing trendy and stylish brands such as Fastrack, the Steel range and Edge. As these brands gained popularity, Titan clocked an average 20 per cent growth in the mid segment in 2002-03.

On a year-on-year basis, the watches business grew 29 per cent in June 2003 quarter as against 10 per cent in June 2002. As watch sales usually peak in September-March, one can expect the growth to sustain.

Bottomline: Shaping up

With the topline ticking, Titan is also working towards improving up its bottomline. The effects of the VRS are reflected in the declining personnel costs. Raw material costs too have been under check. Amortisation of consulting fees, VRS costs and a huge jump in ad-spend will affect the margins in the near term. For the long run, Titan is well on a turnaround path.

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