Titan believes in the Indian market and will continue to invest in network expansion, says MD Bhaskar Bhakt. In an interview with ET Now, Bhakt also talks about how they have dealt with the government’s mandate about the requirement of PAN card for purchases above Rs 2 lakh. Edited excerpts:
ET Now: Market reaction is that numbers are better and the jewellery business is looking strong, so before we talk about what lies ahead, first let us talk about what has worked for you for the quarter gone by, and what were the key highlights.
Bhaskar Bhat: Well, the key highlights of the quarter really were pick up in sales post the festive season. Festive season sales were not as good as we would have liked it to be, but the wedding season was strong even through November and December. As you can see, jewellery numbers are good, but that also was because of the base effect of last year, because of the GHS.
We, of course, continue to believe in the Indian market and continue to invest in network expansion. So it is still early days for clearly saying green shoots are visible.
Unorganised sector, categories where we could bring great value for Indian consumers… and we are fundamentally focusing on the middle and upper middle class, large masses who are aspiring for a better lifestyle. We are giving them products of quality and elegance and style.
It is only that it will take time, we will have some effect because of the lowering of the limit. Having said that, the 30% growth that we have clocked is unlikely to continue at the same pace, because underly growth is not at 30%, it is essentially because of the advancement of purchases by several customers in anticipation of the PAN card limit dropping.
ET Now: I want to try and understand the basic purpose behind diversification by Titan. You have diversified into eye wear, you have already diversified into the perfume business. Now we understand that you are coming and diversifying even in the saree segment. I am trying to understand the thought process behind this. I know some of the areas where you are diversifying, they attack the consumer market per se, but do you need so much of diversification?
Bhaskar Bhat: On the last one, I do not know where you heard it from. It is completely false. I will address the eye wear part and the perfume part. We have always maintained that there are a lot of unorganised sectors in India in the lifestyle space, and they are categories which have great potential. Eye wear was one of them.
Eye wear is one of them, and will continue to be one of them, because of many reasons. The penetration levels are low, the service levels could improve, transparency is low. All of that which existed, let us say in the jewellery industry, which we successfully leveraged.
Of course the size of the eye wear business is much smaller, but the volume and the potential to transform is very, very high. Fragrance is similar. There are not enough national brands. We have the sweet spot in terms of pricing with an exceptional product. Therefore, again, unorganised, poor price transparency, lot of smuggled stuff, and India is on that path of now acquiring these lifestyle categories and trying them on.
That is the principal.
Unorganised sector, categories where we could bring great value for Indian consumers… and we are fundamentally focusing on the middle and upper middle class, large masses who are aspiring for a better lifestyle. We are giving them products of quality and elegance and style.
ET Now: Since you have picked the point on watches, it was a very weak performance in the quarter gone by, margins have taken a knock of about 80 bps. What is it besides the new launch and the product that you are talking about and sporting? As well as I can see, what is it that you are planning to do differently from the quarters ahead that could aid margin performance?
Bhaskar Bhat: Watch business is undergoing transformation, very rightly so. There have been several strategic steps we have taken, we have vacated lower price points, for example in Titan. That does not get immediately filled up by high performance.
This is a step we have taken quite courageously in the long term interest of brand Titan. That space, the lower end space is expected to be filled up by Sonata and to some extent by Fastrack.
So I think on the one hand the traditional watch business has still got potential because of design, innovation etc. But the launch of the JUXT, our smartwatch again is differentiated, it looks like a watch first and therefore design. There is a strong design element in it.
At the same time it has got features I would say which are very-very relevant to the Indian market, long battery life, for example, is a very important feature of this watch, which we have partnered with HP to launch.
Of course, it is not going to be a big part of the business, but certainly it is where many young customers whom, let us say, we were not able to attract barring through Fastrack, will come back to brand Titan.
ET Now: What will change for you in the course of next 12-14 months or 12-15 months, which will move the needle for Titan, last two years have been very poor as per your his ..
Bhaskar Bhat: Our ambition cannot be 10-15%. So our target will be much higher. But if the market is factoring that, that is really their judgement. I believe Titan is in categories and has a consumer base where people are still aspiring.
ET Now: What will change for you in the course of next 12-14 months or 12-15 months, which will move the needle for Titan, last two years have been very poor as per your historical standards?
Bhaskar Bhat: I think the reasons are very clear, is it not? We believe in following the letter and the spirit of the law, whereas we know the rest of the jewellery industry, not all of it, a large part of it does not follow that.
We have talked about this to government and not that we lament any of this, it is directionally right. Whether you looked at the Golden Harvest scheme having had to be curbed, stopped, in fact so we lost a lot of business there. The PAN Card, and we insist on PAN Card irrespective of whether others do it or not, we do not break bills and so on
If you take that as one regulatory, the introduction of GST for example, is going to hugely benefit companies like ours which have been paying taxes, and where other players do not.
I think the last two years performance, apart from the consumer sentiment having affected us, and maybe in some parts of our businesses our own inability to let us say, respond fast enough, with a smartwatch and so on, has got corrected. But what is going to change really is, as I told you, a transformation in the watch business, significant new segments that we are entering in the jewellery business, particularly weddings, Mia and the prospects in the eyewear business and and fledgling businesses like fragrances which are only going to grow much bigger.
Source: http://economictimes.indiatimes.com/opinion/interviews/introduction-of-gst-to-hugely-benefit-tax-paying-companies-like-titan-says-md-bhaskar-bhakt/articleshow/50767717.cms
