Titan looks to stable growth

The watch and jewelry leader, Titan Industries, is likely to see robust sales growth on the back

of rising income levels and stable gold prices. The company’s volumes in watches and jewelry segments grew 12 per cent and 50 per cent, respectively, in FY ’08. They later slipped to a negative five per cent for watches and 18 per cent for jewelry in FY ’09, but recovered in FY ’10. Meanwhile, as gold prices stabilize, volumes in the jewelry segment are expected to bounce back.

Its overall revenues and earnings have managed to rise at a compounded annual growth rate of 33 per cent and 66 per cent, respectively, since FY ’05. But higher gold prices had taken a toll on the jewelry business. Before 2008, the company not only faced lower volumes due to high prices, but also faced other risks, especially inventory gains and losses.

The company generally uses gold on lease facility and pays rent on the yellow metal till it is consumed. It closes gold contracts at the time of product sale, and not at the time of purchase. This strategy ensures 90 to 95 per cent hedging and the company does not need to carry any naked inventory on its balance sheet, thus preventing it from any market-to-market losses or gains. The watch segment, which contributes 22 per cent of to its revenues and 46 per cent of earnings before interest and tax, has also been seeing better volumes.