Titan Company Ltd (TITAN) Q3 FY23 Earnings Concall Transcript

Titan Company Ltd (NSE:TITAN) Q3 FY23 Earnings Concall dated Feb. 02, 2023.

Corporate Participants:

C K Venkataraman — Managing Director

Ajoy Chawla — Chief Executive Officer- Jewellery

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Saumen Bhaumik — Chief Executive Officer- Eyewear

Ashok Sonthalia — Chief Financial Officer

Manish Gupta — Chief Executive Officer, Fragrances and Fashion Accessories Division

Analysts:

Avi Mehta — Macquarie — Analyst

Percy Panthaki — IIFL — Analyst

Arnab Mitra — Goldman Sachs — Analyst

Siddhant Dand — Goodwill — Analyst

Shirish Pardeshi — Centrum Broking — Analyst

Abneesh Roy — Nuvama Institutional Equities — Analyst

Sheila Rathi — Morgan Stanley — Analyst

Nillai Shah — Moon Capital — Analyst

Manish Poddar — Motilal Oswal AMC — Analyst

Unidentified Participant — — Analyst

Vishal Gutka — PhillipCapital — Analyst

Sabyasachi Mukherjee — Centrum PMS — Analyst

Devanshu Bansal — Emkay Global Financial Services — Analyst

Latika Chopra — JPMorgan — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Titan Company Limited Q3 FY20 Earnings Conference Call. [Operator Instructions].

I now hand the conference over to Mr. C K Venkataraman, Managing Director, Titan Company Limited. Thank you and over to you sir.

C K Venkataraman — Managing Director

Thank you very much. Welcome to the quarter three earnings call of Titan Company to everyone on the call. As you would have seen from the presentation on the retail sales growth for the quarter has been very satisfying, and across all businesses. And the rest of the material is there on the presentation, and I presume you have had some chance to look at it and we can straightaway dive into the questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. We have our first question from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie — Analyst

Hi, Venkatesh, team. Just wanted to first of all, congratulations on the performance. Wanted to understand the demand trends, how have they been shaping up in January. And in particular, if you could give us some understanding of the jewelry business, given the sharp price — increase in gold price.

Ajoy Chawla — Chief Executive Officer- Jewellery

Hi, Avi. Ajoy here. Yes, Jan has been quite interestingly. Gold prices have been shooting up since December and in Jan as well. But having said that, we are seeing a very good demand in Jan. We are very happy. We know that last year Jan was impacted by Omicron and therefore it was a weaker Jan month, but despite that we are seeing very, very healthy growth in jewelry, including gold jewelry and both, despite the gold price raise.

So we are quite happy and gung ho.

Avi Mehta — Macquarie — Analyst

Would you say this is on a 3-year CAGR basis that you’re looking at as in pre-COVID just to — because obviously Y-o-Y base growth rate might be, as you rightly alluded there is Omicron in the base. So even on a higher trajectory it’s broadly in line with what we saw in third quarter.

Ajoy Chawla — Chief Executive Officer- Jewellery

Yeah, no, no. It’s good, it’s very good. Over a 3-year CAGR it’s even better.

Avi Mehta — Macquarie — Analyst

Okay, and on the other segments as well. If it’s possible to share, especially in the watches and the eyewear.

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Yeah, so this is Suparna here, Avi. Watches also — watches and wearable have seen a good Jan and like Ajoy mentioned, this is not only on last year’s base, but on the Jan 2020 base. So quite happy with the retail growth.

Saumen Bhaumik — Chief Executive Officer- Eyewear

Hi, Avi. Saumen from Eyecare. We had a good month. I mean, last year basis growth is over 40% and if I look at FY20 January it is held well. So full marks.

Avi Mehta — Macquarie — Analyst

Awesome. Okay, perfect. The second bit also on the margins, especially in the watch side. I mean, last quarter you had indicated that in the near-term we will — we see a 13% to 14% margin kind of panning out in the watch business. Just wanted to kind of clarify was this more an annual expectation or was this — and whether this quarter or would this quarter kind of changes that expectation that you have.

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

No, this quarter, the margin is lower because of some product channel and category mix issues. But if you see the YTD margin, it is in that ballpark of about 13%. And our outlook remains in that range.

Avi Mehta — Macquarie — Analyst

Okay, perfect. Just one clarification, Ajoy. When you say good, is there any range that you could share with us, any understanding of what do you mean by good, it would be useful? That’s all from my side.

Ajoy Chawla — Chief Executive Officer- Jewellery

I wish I could, but, I think there are some pretty stringent regulations on what we can share without having put it out on the stock exchange. So apologies for that, but we very happy is the best we can do.

Avi Mehta — Macquarie — Analyst

I’ll take it then. Thank you very much. Thanks a lot.

Operator

Yeah. Thank you. We have our next question from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL — Analyst

Hi, sir. Just wanted to ask on margins. So we have done around 13% in jewelry this quarter. For next year would you stick to that guidance of 12% to 13%, or do you actually think that it’s probably going to be sort of at the higher end of that band or might even exceed it.

Ashok Sonthalia — Chief Financial Officer

So Ashok here. I think — we have been answering this question quite consistently. But it will be 12% to 13%, which business we were targeting. Higher and lower comment into next year [Indecipherable], but that’s the channel where definitely team is trying to keep it, while achieving growth standards which are industry leading.

Percy Panthaki — IIFL — Analyst

Right sir. Secondly, just wanted to understand, you did mention that despite gold price going up, the demand is good. So what is really driving that, because in the past we have seen that when gold prices are sort of volatile the customer stays back and does not purchase. So why is it different this time around?

Ajoy Chawla — Chief Executive Officer- Jewellery

Yeah, actually, it’s something which we’ve been trying to figure out. In the month of November, mid-November or December onwards we saw a greater impact of that volatility on customer sentiment for gold jewelry. That time they started — picked up a bit, and therefore we were able to see some good growth. But having said that, in the month of Jan, somehow that has not held back customers.

My own hypothesis is that, people might have been deferring their purchases in November-December, because of these volatility, but come Jan, the outlook also looks like gold may continue to remain high and it might even climb higher. So and there is weddings, et cetera. So therefore. I think people are now — kind of decided to get into the market, having waited a little bit in December. But that’s a personal hypothesis. I really don’t have a database insight on this.

Percy Panthaki — IIFL — Analyst

Thanks. And for the quarter, for Q3, basically, can you give some color on, basically the split-up of SSSG between how much of it is due to higher transactions and how much of it is due to a higher bill value. I mean even if you can give the exact numbers any flavor would also help.

Ajoy Chawla — Chief Executive Officer- Jewellery

Sure. So happy to share with you same store growth. I think that 15%-odd of retail growth, which includes Tanishq, Mia, Zoya, okay. The Tanishq retail 14 as in the presentation, but if I look at the three brands put together it’s around 15.1%. And the same store growth during quarter three is around 9%. In terms of what has driven growth, very interestingly a majority of the growth has been driven through buyer growth. And some part of it is true ticket size growth. And ticket size growth is a function of both the gold price as well as the diamond prices have been on the higher end, so.

But yes, very happy to hear that from our side that it is a growth, which has been driven by buyers and specifically we have gained a little bit more on new buyers.

Percy Panthaki — IIFL — Analyst

Okay sir, that’s all from me. Thanks a lot.

Ajoy Chawla — Chief Executive Officer- Jewellery

Thank you.

Operator

Thank you. We have our next question from the line of Arnab Mitra from Goldman Sachs. Please go ahead.

Arnab Mitra — Goldman Sachs — Analyst

Yeah, hi Venkat and team. My first question was again on the demand side. I think last quarter you had mentioned that there was some slowdown in the lower end of your portfolio in jewelry. Has that been a trend which has continued and anything that concerns you on that side?

Ajoy Chawla — Chief Executive Officer- Jewellery

It’s a mixed bag. There is some pluses and minuses, which we are seeing in quarter 3. Yes, on the lower price end, on studded, there was a little bit of slowing down. But on the bold, it was on the positive. It was not slowing down. It seemed to show a upswing, maybe driven by testing. But in Jan again, I’m seeing that, that is no longer a concern. It’s kind of come back strongly. So it’s a bit volatile at this stage. We are at least pushing more aggressively on trying to increase the number of buyers and therefore feed the top of the funnel in terms of buyer and new customer acquisition. And that’s working.

So right now not a concern, but yes, it’s on the — we are watching out for it more closely.

Arnab Mitra — Goldman Sachs — Analyst

Got it. And there were some news reports that there have been times anecdotally that gold prices have gone at a bigger discount in the local market. Are you seeing more pressure on gold prices from local jewelers compared to what you were anyways seeing last few quarters, because possibly the import duty having, gap having increased six, eight months back?

Ajoy Chawla — Chief Executive Officer- Jewellery

So yeah, I think gold rate and price competitive intensity in quarter 3, in general was very high. National jewelers, local jewelers, everybody put together. And to that extent I don’t know this phenomena of the market being at a discount vis-a-vis MCX is more in the last few weeks, in the month of Jan, more than in the month of December and November. So — but because of that has the gold rate density in terms of competitiveness gone up in Jan? No, I think it’s pretty much the way it was in-quarter three. But yes, if it continues like this, there is always going to be pressure because finally there is a lot of unaccounted gold coming into the country and there is a 15% plus kind of — 15% CD and if you add GST is 18% arbitrage.

Arnab Mitra — Goldman Sachs — Analyst

Got it and just one bookkeeping question to Ashok. Is there an increase in gold leasing costs because of global intersects moving up, given that these probably are linked to those cycles.

Ashok Sonthalia — Chief Financial Officer

So at Titan it is minimum so far. We have not seen in past, about 15, 20 basis-points, but not more than that so far.

Arnab Mitra — Goldman Sachs — Analyst

Okay, thanks. Thanks so much. That’s it from my side. All the best.

Operator

Thank you. We have our next question from the line of Siddhant Dand from Goodwill. Please go ahead.

Siddhant Dand — Goodwill — Analyst

Yeah, hi. My question regarding TEAL. After all this time it continues to be 1% of revenue, and still be loss making. So is there some long-term vision over that company or if it’s is going to be like this?

C K Venkataraman — Managing Director

So TEAL had two distinct businesses. One part of business is continuing to do very, very well. The other part of business, which is automation solution has certain icon, certain cost elements and which kind of came on. But if you look at we are pretty much okay, that full year basis they would still be profitable. And the order inflow situation. If you have read about them, that business which kind of struggled from the profit point of view this quarter, won actually the highest amount of order in this quarter.

So future outlook is okay, and is stable. They will kind of pick-up from here and hopefully deliver reasonable profitability.

Siddhant Dand — Goodwill — Analyst

Okay, okay.

C K Venkataraman — Managing Director

We are not concerned about that.

Ashok Sonthalia — Chief Financial Officer

Yeah, the concern is it is like coming smaller piece of the pie. And then it’s a distraction. That’s the only concern.

C K Venkataraman — Managing Director

So Siddhant actually, it’s not a distraction because the manner in which Titan company operates, in the standalone and subsidiaries is a full leadership team dedicated to running each vertical. So there is no real distraction at all and there is a board which governs the TEAL company as well. And if you look at FY18, FY19, FY20 performance, it was really good and you must recognize that this is a global company dependent on the airline industry and therefore in the last two years, substantial churn happening on travel and all that.

So intrinsically everything is good for this company. And for both divisions as well. Last nine months were not good for automation solutions like Ashok shared, but we are quite convinced about it, and committed.

Siddhant Dand — Goodwill — Analyst

Okay, that’s perfect. Could you share some numbers or something about the UAE business because it’s been there for a while now. Is it profitable or what’s the top line, like over there?

Vinnie —

This is Vinnie [Phonetic] from the international business. UAE we’re up to six stores across the UAE. Five in Dubai and the seven stores — and the big store in Abu Dhabi. That business, all of the stores that we have launched are doing quite well and growing quite strongly. We are pretty much on track for whatever stores that we have launched.

We have had some difficulties in terms of rolling out or expanding the stores. They are a little slower than what we had planned because what we’ve realized is operating in some of these new markets requires a bit of time. And that is what we are attempting to stabilize.

Siddhant Dand — Goodwill — Analyst

So is it a profitable or no?

Vinnie —

Not as yet.

Siddhant Dand — Goodwill — Analyst

Not, okay. My last question would be, any thoughts on the lab made diamonds or the incentives that were announced yesterday, or is it too soon to think on that?

C K Venkataraman — Managing Director

Just repeat the question.

Siddhant Dand — Goodwill — Analyst

On lab made diamonds yesterday in the Finance Minister, or even the Prime Minister announced some incentives around lab made diamond. Do you any thoughts on entering that business?

Vinnie —

Actually you will remember that we invested about seven, eight months back in an American company that has great hype, which has a brand called Clean Origin and that is for us to understand the most exciting market for SGDs in the world, which is the U.S. So we already developed some kind of an understanding, We are not in a position at the moment to share any other plans to anyone.

Siddhant Dand — Goodwill — Analyst

Okay. Question would be what’s our outsourcing mix in jewelry? Is it that competitor ideally they outsource most of their jewelleries? So any margin that we can gain by manufacturing ourselves or something like that?

Ajoy Chawla — Chief Executive Officer- Jewellery

It varies between gold jewelry and studded. At an overall level, because a lot of the gold jewelry is outsourced, and a lot of the studded we make in-house, I think it’s about 70% will be outsourced, rough and ready.

Siddhant Dand — Goodwill — Analyst

Okay.

Ajoy Chawla — Chief Executive Officer- Jewellery

Also, nobody really mix gold jewelry themselves, not even other jewelers in the country.

Siddhant Dand — Goodwill — Analyst

That makes sense.

Ajoy Chawla — Chief Executive Officer- Jewellery

And there is so much of innovation that the vendor partners bring to the table, and therefore, between margin on the one-hand and innovation and therefore sales growth, there is a balanced approach that we’ve taken for a very long-term.

Siddhant Dand — Goodwill — Analyst

Okay, that’s perfect. Thank you so much.

Operator

Thank you. We have our next question from the line of Shirish Pardeshi from Centrum Broking.

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, hi, good evening. Thanks for the opportunity and hearty congratulations to Venkat. Finally New Jersey store is operational.

Operator

Can you use your handset please?

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, I am on the handset.

Operator

Can you speak louder?

Shirish Pardeshi — Centrum Broking — Analyst

Yeah, I said hearty congratulations to Venkat for finally, the New Jersey store is operational. I’m sure you could have gone through the pain. But just one commentary, over next 12 months or 15 months what kind of store expansion which we’ll see in the US geography?

Vinnie —

But Shirish, again, after having opened the first store we are looking at adding more stores. So over the next 6 to 12 months, we should see ourselves in the US, expanding across another four or so locations. We are going after the states which have significant Indian populations, which is what makes sense for us. And similarly across the GCC, we have fairly aggressive plans. Having established ourselves quite well in the UAE, we are looking at the other GCC countries that are Oman, Saudi, if possible.

Shirish Pardeshi — Centrum Broking — Analyst

So you mean to say that over next 12 to 13 months we should move from seven, eight stores to maybe doubling or tripling that count?

Vinnie —

Hopefully more than that. The intent is to get as high as 20.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. Yeah, thank you. Vinnie. My second question is on jewelry business to Ajoy. Can you share some numbers, what is the grammage growth out of that 11.2% what you have reported, and maybe new buyer growth number I missed?

Ajoy Chawla — Chief Executive Officer- Jewellery

Grammage growth actually may not be relevant, because we don’t use that many of our modeling work whether in top line builder. But in terms of buyer growth we’ve — as I said, we had a higher buyer growth than ticket sales growth. That was the bigger chunk. And within that, what I can tell you is that our new buyer contribution is 49%. It was 48% in the last quarter. It’s 49% in quarter 3.

Shirish Pardeshi — Centrum Broking — Analyst

So similar number is —

C K Venkataraman — Managing Director

Shirish just one perspective. We are an accessory company. We’re not a commodity company and therefore look — while of course, we know how many tonnes we bought and sold, that’s not a KPI for us.

Shirish Pardeshi — Centrum Broking — Analyst

I do understand Venkat. The only question–

C K Venkataraman — Managing Director

Volume, I understand. So I’m just giving a perspective. But as the number of customers, number of bill that is what we measure, yeah.

Ajoy Chawla — Chief Executive Officer- Jewellery

So buyer growths are very healthy and grammage growth we don’t really use as a KPI. And new buyer growth was marginally higher than the overall buyer growth. Therefore, we are now at 49% new buyer contribution to the total for quarter 3.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. That’s exactly which I wanted to understand from you, Ajoy. You mentioned that January, despite the gold prices are up, you have seen that. So the question here is that, the similar growth is seen in January, because I thought that because the winter was delayed, I think there is some spill over, which would have definitely happened in the festive season, also, some spill over, which has happened. At least the trade is saying.

So maybe the competition is one angle but the buyer growth which is coming back to the trusted players is one of the thing which is at least the trade is saying. So just wanted to understand your take on January, whether the same buyer growth what you have said, 49% contribution has continued out or its come down.

Ajoy Chawla — Chief Executive Officer- Jewellery

I don’t have the contribution figure for Jan on new versus repeat, and how it was even last year. But overall buyer growth in Jan has continued to be very healthy is what I can say. And even after you discount for a weaker Jan last year. New to repeat, I don’t have a Jan data readily available and we’ll analyze it for the quarter, not — it doesn’t make sense to do only Jan, because this activation and therefore inactivation. There is some SKUs that happen, et-cetera.

Shirish Pardeshi — Centrum Broking — Analyst

Okay, wonderful. My second question is on watches to Suparna. If you can break that 811 what is the core watches and the new Introduction which has happened over last two to three quarters. So basically, if you can say that the core business watches and wearables and the new product contribution which has happened?

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Sorry, is the question how much is variables as a percentage or is the question how much percentage of total turnover is from new product introductions.

Shirish Pardeshi — Centrum Broking — Analyst

So we met last time about two to three quarters before. Then you showcased lot of new products. So I’m more interested on a nine month, if I look at this number, what is the contribution of the new products which has happened?

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Contribution new product is about 20% to 22%, so — which is quite healthy. And now we are seeing that new product contribution is across all channels. Typically new product contribution is high in retail channel. But now we’re seeing that even in multi-brand outlets, new product contribution is actually around more than 20%. So that’s really where the pipeline — the power of the pipeline of new products has kicked in and given us growth.

Shirish Pardeshi — Centrum Broking — Analyst

Okay. Wonderful. Thank you. And my last question on the emerging business, I think finally we have women’s segment necessaries which is bag, I can see that and you’ve introduced very good models and the products. So any number, what are we doing? What are — where we have reached and what is the distribution we have done? And maybe this number if you can quantify?

Manish Gupta — Chief Executive Officer, Fragrances and Fashion Accessories Division

Hi, this is Manish. So you’re talking about the IRTH Venture. The women bag category we have two brands, IRTH and Fastrack. So IRTH is what we’ve launched in October. So currently it’s available on Shoppers Stop, Nykaa, Tata CLiQ and [indecipherable]. And we have about 25% coverage of Shopper Shop store, like, 27, 28 stores. And the response has been really a very, very good in the last 60 days. So we are planning to expand in the future across various go-to markets. And we are getting great response right now.

Shirish Pardeshi — Centrum Broking — Analyst

So is it Manish, the strategies that we will try and look at the large format stores first and then maybe try the e-commerce space. And then maybe get into retail. Maybe I’m looking for the strategy over next 12 to 15 months.

Manish Gupta — Chief Executive Officer, Fragrances and Fashion Accessories Division

So basically we want to be present in department LFS, as you said. Online, we already there on the vertical fashion portal site, Myntra, Nykaa, Tata CLiQ, Agio, these kind of portals. And we also want to be in the retail sectors as well. So we’ll also have a — we will try with a store in the quarter one.

Shirish Pardeshi — Centrum Broking — Analyst

So I got that. I think what I’m referring that in the vision discussion when we came and met Venkat there was a strong vision over the next five years. But if from the modeling purpose maybe another 15, 20 months, one year or two years, what kind of revenue this business will drive? That’s what I’m looking for your help.

Manish Gupta — Chief Executive Officer, Fragrances and Fashion Accessories Division

Like the FY27 target, you are aware, I think in that distribution.

Shirish Pardeshi — Centrum Broking — Analyst

I know.

Ashok Sonthalia — Chief Financial Officer

With this we want to take to 1,000 crore and. I think business is pretty confident and gung ho about it, and preparing themselves. This is very, very initial phase and preparing themselves to reach there. Next year, while there are internal targets, but I don’t think we are willing to share at this point. But keeping an eye on FY27, the internal preparation and target that we will go for.

Shirish Pardeshi — Centrum Broking — Analyst

Okay, thank you, Ashok. And thank you the team.

Operator

Thank you. Ladies and gentlemen in order to ensure that the management is able to answer queries from all participants kindly restrict your questions to two at a time. We have our next question from the line of Abneesh Roy from Nuvama. Please go-ahead.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Yes, thank you so much and congratulations on the strong performance. My first question was on the jewelry business. If I look at your growth in the festive period which you highlighted was 17%, 19%. Is it fair to say that November-December saw muted performance and then we’ve seen an uptick again in January? Has that been the trajectory over the last few months?

Ajoy Chawla — Chief Executive Officer- Jewellery

In a simplified form, perhaps you can come to that conclusion. But the answer is a little more complex, because the like-to-like period of 35 days, this year, last year — this year included last week of September and so on and so forth. So actually the growth can’t be derived in an additive form, weighted average or whatever. But somehow when you look at the entire quarter that is the reality of this year versus last year.

So it is true that our festive period was around that 17% 18%, but it is also true that the quarter 3 figure turns out to be around 15.1%.

Abneesh Roy — Nuvama Institutional Equities — Analyst

I understand. December itself was pretty close to the corporate average.

Ajoy Chawla — Chief Executive Officer- Jewellery

Yeah, and December was close to the quarter average. And Jan is continuing at — as somebody asked the CAGR of Jan, 3 year CAGR of Jan is in fact better than the 3 year CAGR of quarter 3.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Understood. This is helpful. The second question was on the jewelry margins. I know it is [indecipherable]. But just to deconstruct that versus last year, on a higher revenue base and similar studded, there has been a Y-o-Y contraction. Just to understand, would it be because of the store addition or the contribution from the international business or any other aspects, you could just help highlight?

Ajoy Chawla — Chief Executive Officer- Jewellery

Couple of things. One is we knew that the market is volatile and choppy. And therefore, when the going is good and customers in the market we said we will go aggressively after growth. And if that meant that we needed to invest in growth, by way of competitive offers, by way of higher marketing investments and overall in general a higher growth-oriented approach to the market, we have gone ahead and done that. Further for the quarter, we also actually ramped-up some investments in digital and talent, et cetera. That has also contributed to some extent.

So some of these things have possibly shown a slightly downward sense on the EBIT, as you are gauging. But having said that we had always maintained that it is better to look at a 12% to 13% range and it’s pretty much in that range. Compared to last year, it looks a little lower, but then last year also had some significant one-offs, which we had mentioned in the earnings call as well.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Absolutely. Just one final question if I may. This quarter I see a significant difference between the UCP and our reported figures. Any specific reason, maybe stocking to the entry channel in the Q2 quarter.

C K Venkataraman — Managing Director

So, actually if I if. I just look at UCP to UCP it’s a 15% growth for all our brands for the quarter. But when you look at primary, it may look like 10%, 11% growth, 10% growth on the domestic business. So the difference is entirely due to the timing of stocking down-stocking of LC channels between quarter two and quarter three.

Abneesh Roy — Nuvama Institutional Equities — Analyst

Thank you so much. I wish you all the best.

C K Venkataraman — Managing Director

Thank you.

Operator

Thank you. We have our next question from the line of Sheila Rathi from Morgan Stanley. Please go-ahead.

Sheila Rathi — Morgan Stanley — Analyst

Yeah, thanks for the opportunity, and congrats on great set of numbers. Especially when I look at the World Gold Council data for the quarter, it suggests that jewelry demand was down 18%. So in that context the growth has been very strong. I just wanted to understand, and just picking-up from the presentation itself, that the company is pursuing market share growth through high visibility marketing, inventory infusion and competitive offers. Just wanted to understand, what exactly are we doing that has resulted in such stellar performance versus the industry.

Ajoy Chawla — Chief Executive Officer- Jewellery

Quite a few things actually. There has been expansion of existing retail stores as a program, which has been on for some time, which is as big as the new store additions itself for the year. So that has helped. Inventory infusion and specifically in markets where we are low on market share and the opportunity is high, some South markets, some East markets, et cetera, and even in some of the mega stores, we have a bunch of large stores which we are pursuing more aggressive growth since. So we have infused inventory there as well.

We have also done a lot more work on the high value side, both on studded, solitaires as well as on Polkis and that has also given us very good traction. And lot of theme design collection launches during the quarter, whether it was Alekhya for the rest of the country or Chozha for Tamil Nadu, and several other introductions, Kalama Joy [Phonetic], which was in December. All of that design collections have also played a very big role.

So combination of many things. Very difficult. And we’ve also seen very good traction on gold exchange program and Golden Harvest enrollments. So we are now back to pre-COVID levels kind of contributions for these two growth engines as well. So pretty much most of the growth engines are firing very well.

Sheila Rathi — Morgan Stanley — Analyst

Just a follow-up here and sorry if I’m wrong in terms of my understanding, if I’m wrong. You said that South and East has done well. So probably that would have helped you with respect to the growth. But with respect to the market share gains, is it any particular market where we are gaining market share, is it the large cities tier 1 cities or something of that sort?

Ajoy Chawla — Chief Executive Officer- Jewellery

So across regions. I would say — so I didn’t say South and East have done well. I said we had launched specific collections in those areas, East has been a little muted as it has been for the rest of the market as well, perhaps driven by some amount of rural demand still kind of catching up. But this year metros have done particularly well. And I would say we have gained share certainly in the South, certainly across metros. Most definitely across certain markets of the West. In the East I think might be we have sustained our market share, but East overall has been a little more muted this year.

Sheila Rathi — Morgan Stanley — Analyst

Understood. Just one more final question. I have is what is the share of wedding demand this quarter. And also in the presentation, you mentioned that high-value share has gone up in the overall pie. So if you could just give us some quantitative number there and is it to do with wedding demand or anything else?

Ajoy Chawla — Chief Executive Officer- Jewellery

High-value studded has gained a percentage point from what it was. And it is now as I said, pretty much as it was pre-COVID level. So high-value studded has done well. Solitaires have done well. Wedding specifically has been little muted in the quarter. I am personally expecting it to become better in quarter 4 and perhaps some of that is showing up in Jan, but wedding has been a percentage point lower in terms of contribution. So we are at around 19% as opposed to the 20% that we were last year.

Sheila Rathi — Morgan Stanley — Analyst

Thank you. Thank you, Ajoy.

Ajoy Chawla — Chief Executive Officer- Jewellery

Thank you.

Operator

Thank you. We have our next question from the line of Nillai Shah from Moon Capital. Go-ahead.

Nillai Shah — Moon Capital — Analyst

Thank you. Hi, am I audible?

C K Venkataraman — Managing Director

Yes. Please go ahead.

Nillai Shah — Moon Capital — Analyst

Hi, okay, so the question essentially is on the demand again. Ajoy your are not giving the actual numbers for January. But can you benchmark, to the 25% of medium-term growth target that you have? Are they in-line with those numbers? And essentially over the past two quarters you have been giving us some of these numbers. So even last quarter you spoke about 17% to 19% growth. So given that we are in this uncertain environment, can you be a little precise in terms of what the Jan growth was? Or if you don’t want to give numbers just a benchmark sort of 20% that you have spoken about in the past?

Ajoy Chawla — Chief Executive Officer- Jewellery

They are certainly better than what have been there, if I look at the CAGR over three years, because it is difficult to conclude on Jan purely on a year to year basis because of last year being. So when. I look at a CAGR as I said, it is certainly better than the 3 year CAGR of Q3. And therefore is it in line with what we are hoping to grow going-forward? Certainly, yes. I would hope it’s even better as we go forward into the quarter.

So actually it’s pretty positive. We are absolutely happy with Jan.

Nillai Shah — Moon Capital — Analyst

Perfect, thank you guys. That’s very clear. The second question is on the margins in the jewelry business. Now I know that you have kind of put this down at about 13% margins. But if I take out the next two, three years, given the way we are growing, if the same percent growth rate were to sustain, how do we think about operating leverage going down into the margin line for the jewelry business?

Ajoy Chawla — Chief Executive Officer- Jewellery

It’s a good questions. We are also trying to put our heads together on this for an upcoming board meeting in which we’re going to discuss the next four years. And it’s ultimately a conversation around growth, profitability and ROCE, and how do we prioritize these three different metrics. Sorry to confused you in some ways on that front. But it is a function of what choices we make. And so I’ll leave it.

Ashok Sonthalia — Chief Financial Officer

Let me add on this, that while we may plan that market is always very dynamic where you need to respond almost on week and month and what everybody does. So whatever you may have planned and it looks like that this kind of operating leverage should be coming in, actual may be slightly different than that. Your question on the logic is right, as we are growing at the pace we are growing. There should be some amount of operating leverage coming in. And we should have a positive bias towards improving margin. But as I told you, market is very, very — sometimes dynamic and competitive. So that where I will leave it, rather. So we will play it as we go.

We are mindful that, yeah [indecipherable] deliver on that.

Nillai Shah — Moon Capital — Analyst

Ashok, I am not talking about the next one or two 475 [Phonetic] nominal term. Your predecessor used to say that if you are able to get this 20% growth, we will be very disappointed if margins don’t expand. So over the medium term would you still hold the same view that if you are able to grow at this rate and the market remains relatively buoyant, the extra point if you don’t get the operating leverage coming down [Technical Issues].

Ashok Sonthalia — Chief Financial Officer

Yeah so the point is that, that is what I am trying to explain you and Ajoy tried to explain to you that we need to make certain choices. You are right, that market competitive intensity and our kind of investments would decide that actually. But we have been maintaining that in next 12 to 18 months we want to deliver growth at 12% to 13% EBIT margin there, and that is -state — stays, and that’s the 12 to 18 months view.

C K Venkataraman — Managing Director

Nillai, don’t tied to the predecessors comment. Let me just give a perspective here. Currently the sales growth coming at the same gross margin levels in a business helps you deliver expanded EBIT margins. And the competitive situation in 2017 and 2018 of a certain level, the competitive situation on the jewelry industry in 2022-’23 is at a much higher more in intense level. Therefore the same sales growth may well come at a gross margin leverage. So that is the dynamic situation that Ashok is referring to.

And therefore, if that happens then the same leverage which was possible which Subu could — stated in that manner is not possible for us to state it with that much of clarity.

Nillai Shah — Moon Capital — Analyst

All right. I’ll close here. Thanks very much.

Operator

Thank you. We have our next question from the line of Manish Poddar from Motilal Oswal AMC. Please go ahead.

Manish Poddar — Motilal Oswal AMC — Analyst

Hi, thanks. So just two questions. One is, if I look at the presentation I think there has been a 1% market-share improvement from the previous quarter. So I believe this you generally do when you do some market study. So would you like to highlight any other data point or any other analysis which came out from the data set?

C K Venkataraman — Managing Director

Yeah, actually it’s an internal estimate. We are — because when we were looking at the deck, it looked like we had not reviewed that number. Last year’s number looked like a 6% share, based on an estimate of about INR400,000 crores. There are multiple views between INR380,000 crores to INR430,000 crores, Our internal estimate is about INR400,000 crores versus last year’s jewelry market sales overall. And we were around 6%.

It looks like — if I look at the trailing 12 months, we are 6.8% based on our internal estimates again. We keep doing this constantly and a competitive assessment month-on month, quarter-on-quarter. So it’s not a one quarter phenomena that you should read into. I think it’s more like taking the last — previous 12 months. And likely to be this fiscal kind of number. We may creep up towards 7% from 6.8% or whatever. A lot depends on the next few months as well.

Manish Poddar — Motilal Oswal AMC — Analyst

So would you have also done any let’s say, slice and dice, let’s say for wedding market-share or your spreaded market share, any sort of analysis on that front?

Ajoy Chawla — Chief Executive Officer- Jewellery

No, not really. It’s not easy because the industry quotes a lot of figures when it comes to wedding. They keep claiming 60% and frankly I have not been able to figure out how do they get 60%. It’s tough and how they calculate it and. On studded certainly, our share is higher. On high-value studded it is certainly lower. Yes, we have some estimates, but I think we would not share a segmented kind of market share, because it’s all heavy internal estimates and we would rather share with you more qualitatively.

Manish Poddar — Motilal Oswal AMC — Analyst

And just a second one is then, would you be able to help me understand what is the pricing inflation which you’re seeing in diamond prices?

Ajoy Chawla — Chief Executive Officer- Jewellery

What is the pricing inflation –?

Manish Poddar — Motilal Oswal AMC — Analyst

Inflation in diamond prices. Because if I look at Rapaport [Phonetic] prices they are up roughly about 35% to 40%. So I’m just trying to understand what is the sort of inflation which you are estimating?

Ajoy Chawla — Chief Executive Officer- Jewellery

So our estimate is around. 14%, 14% 15%, but this is a mix between solitaire and small. Smalls have gone up and have not come down and they remain higher. So smalls could be 20% higher. Solitaires went up and then they have corrected back down. But they are still a little bit higher. So the average between the two. I would say is around 15%. A lot depends on your buying efficiency as well as and when you bought it. We did take some calls on diamonds pretty early-on and bought them early.

So therefore that’s the number we are seeing.

Manish Poddar — Motilal Oswal AMC — Analyst

This is for this quarter or this is for nine months? Would you be able to help out with nine month number.

Ajoy Chawla — Chief Executive Officer- Jewellery

This is as it stands for the quarter, but it is the effect of — the input cost will be based on what we bought over nine months actually. So this is cost-of-goods-sold if at all you want to look at it from that angle in this period. I would think it’s about 15% rough and ready.

Manish Poddar — Motilal Oswal AMC — Analyst

Got it, great. Thanks. Thank you so much.

Ajoy Chawla — Chief Executive Officer- Jewellery

Thank you.

Operator

Thank you. We have our next question from the line of [Indecipherable] from Piper Serica Advisors. Please go ahead.

Unidentified Participant — — Analyst

Good evening team. I have two questions regarding the watches and wearables segment. What kind of contribution does these smart watches bring to the revenue of the watch and variable segment?

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

RIhgt now for this quarter it was 10% of the total sales from wearable.

Unidentified Participant — — Analyst

I see and what kind of growth do you expect in this segment, and what is the strategy for the company to compete with other pure tech competitors in this space?

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

We are looking at triple-digit growth numbers in this segment because the opportunity is huge. The smart watch market in India has exploded in the last 18 months and fueled by lot of new product introductions and lot of tech features from all the competitors. Our strategy at a broad level is to play with our two brands, Fastrack and TItan with the best feature and enhanced with better design and our own tech team that actually puts together the apps and the experience.

Going forward, this strategy will involve customer proposition that go beyond the mere device play that is currently going on in full swing.

Unidentified Participant — — Analyst

[Indecipherable].

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Sorry.

Operator

I’m sorry, you were not audible sir. Can you repeat?

Unidentified Participant — — Analyst

I said thank you very much. That was insightful.

Suparna Mitra — Chief Executive Officer – Watches and Wearables division

Thank you. Thanks a lot.

Unidentified Participant — — Analyst

Thank you.

Operator

Thank you. We have our next question from the line of Vishal Gutka from PhillipCapital. Please go-ahead.

Vishal Gutka — PhillipCapital — Analyst

Yeah, hi team. Vishal. I have just two questions. First is, what is the contribution of gold exchange during this quarter and has it gone up because the gold rates have been going up. Generally what we have in the past that contribution of gold exchange keeps on moving up in the month of Jan. Have you seen that? And that gold exchange earn similar margins or margin’s a bit different versus the normal business?

Ajoy Chawla — Chief Executive Officer- Jewellery

The Gold exchange contribution is up this quarter-over last year same quarter. It’s around 30%. It has gone up in the quarter also partly because we have driven some aggressive gold exchange related offers in the market, which is part of the investment. I spoke about. Especially given the fact that we saw gold prices going up and we are continuing that this — at least the next couple of months. Jan has been part of that. So yes that has contributed to the growth. And you’re right, the cost economics — unit economics are different for gold exchange. If we get a certain quantum of upsell people come in with x grams and they buy x plus y gram.

When the upsell is at a certain level, it breaks even. And so far so good. We are seeing that. It has some impact on capital because you’re buying on spot instead of [indecipherable]. But otherwise yes, we are happy and you’re right. When gold prices go up, there is a tendency, and we have also pushed for that.

Vishal Gutka — PhillipCapital — Analyst

Got. Sir, my second question on gold coated silver jewelry, our ground checks suggest that lot of jewelers have started gold coated silver jewelry. I just wanted to hear your thoughts on this segment? Are you into this segment? If you are not in this segment than what is your thought with respect to entering into the segment?

Ajoy Chawla — Chief Executive Officer- Jewellery

No we are not really into this segment and I don’t think we will be in that segment. In Tanishq the brand. I think it’s better that we stick to what is authentic and direct, if it’s gold, it’s gold it’s not gold plated silver. Yes, there is an opportunity. A lot of jewelers, do that. Price points are low. But we are not operating in that segment. I don’t have a cons on the size of that market.

Vishal Gutka — PhillipCapital — Analyst

Got it. And then my last question on the expansion given the gold prices are going up. So the working capital requirement for L3 kind of franchisees goes up in a very significant manner. So are we expected to see bit lower store addition with regards to franchisee expansion happening in the upcoming 12 to 18 months? L1, L2 can continue but L3 format, it could slowdown a bit.

Ajoy Chawla — Chief Executive Officer- Jewellery

Actually, not really, because ultimately and given the sales is a function of the gold price. So no, not, it’s not a big deal. I mean, there are enough and more franchisees very very keen to open up Tanishq. In fact, L3 is sometimes more than L2, because the margins are sweeter. So no, no issues on that and we see a lot of opportunity out there for franchisees who are wanting to come in L2 or L3. We are not seeing anything.

Vishal Gutka — PhillipCapital — Analyst

Okay, thank you, and sir wishing you all the best for the upcoming quarter.

Ajoy Chawla — Chief Executive Officer- Jewellery

Thank you.

Operator

Thank you. We have our next question from the line of Sabyasachi Mukherjee from Centrum PMS. Please go ahead.

Sabyasachi Mukherjee — Centrum PMS — Analyst

Yeah, hi. Thanks for the opportunity. So I have two questions. First, can you comment on the reason behind the gross margin decline?

Ashok Sonthalia — Chief Financial Officer

Gross margin at company level, you were talking about? Any particular business? I think you are — I think, we spoke at great length in the beginning of the call about jewelry segment margin performance in this quarter and that being the dominant business, it reflects at the company level. And in this quarter, we talked about our pricing, growth, investment offers et cetera. And we also talked about that in last quarter. See there were lot of one-off things. So you need to comparison accordingly. And some of the benefits, which we have sitting in earlier quarters also liking diamond pricing gains, the kind of significance, which were there in-quarter 2 over custom duty, they are also tapering off quite substantially in this quarter.

Sabyasachi Mukherjee — Centrum PMS — Analyst

Okay. Understood. Second question, I wanted to understand a bit more on the like-for-like, like-to-like growth of 9%. So if I were to break it down between let’s say the — the sales is basically a product of the average unit price of a jewelry and the number of items or articles sold. Now if I look at the gold price movement it is approximately 9% up year-on year. In your presentation that is mentioned. Then comes your comment on that, that the buyer growth has mostly delivered this 9% growth. So is it fair to conclude that the buyer growth was there but then the average item bought by a particular buyer had fallen this quarter? Is it a correct assessment?

C K Venkataraman — Managing Director

No, let me clarify. At the overall 15% growth the larger contributor is buyer growth. But when you come to same-store growth of 9%, I don’t have an exact fix but I think both ticket size and buyer growth are there. Now normally when the gold prices go up, let’s say, in this case 9% or 10% the ticket size does not go up in the same proportion. People do adjust the — because they have a certain budget. So they do adjust the grams that they purchase, may not be units, maybe units, maybe grammage depending on whatever works. They operate with a certain budget.

And therefore in that sense, we don’t — so there is buyer growth and there is ticket size growth, but the ticket sales growth may not be exactly equal to the gold rate increase.

Sabyasachi Mukherjee — Centrum PMS — Analyst

And between these two, the buyer growth and the ticket size growth, out of the total 9%, is it evenly poised, evenly split between the two or there is a skewness in one of these two?

Ashok Sonthalia — Chief Financial Officer

It’s good. Both are good. I wouldn’t be able to go further on that. Let’s say it’s a mix of both. It’s not one or the other.

Sabyasachi Mukherjee — Centrum PMS — Analyst

And any guidance on this same-store growth for the medium-to-long term that you called out?

Ashok Sonthalia — Chief Financial Officer

In what, in Titan?

C K Venkataraman — Managing Director

Certainly every store has a business plan and there is a same-store growth plan. So we hope to do better than that in the future. But yes there is — and depending on the age of the store, of course. But overall like to like growth has to continue to grow because stores have to be — continue to remain as profitable if not more.

Sabyasachi Mukherjee — Centrum PMS — Analyst

If we assume 8% to 9% kind of a growth you would be able to achieve in the medium to long term?

C K Venkataraman — Managing Director

Should be better, why only 8% to 9%.

Sabyasachi Mukherjee — Centrum PMS — Analyst

Okay, that’s great. Thank you. That’s all from my side.

Operator

Thank you. We have our next question from the line of Devanshu Bansal from Emkay Global Financial Services. Please go ahead.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Yes, sir. Hi, thanks for the opportunity. Sir, we are making in inventory investments through additional infusion at stores. While this is reflecting in a stronger growth profile, but do you expect working capital to increase from current levels?

Ashok Sonthalia — Chief Financial Officer

Working capital has gone up, but in our case, because of GOL the capital employed is still under control and pretty much where it was. But yes, of course, we expect inventory to go up. But it may not go up to the same extent because on capital employed we might be able to do a more efficient play out there.

C K Venkataraman — Managing Director

There are 2, 3 levels. One is of course gold rate and diamond rate also contributes to the value of inventory. That’s the number which kind of you see in the reported numbers, not this quarter, but last quarter and I think you will see that number. Then there is — so one is that rupee value and then that turn part of. We keep our eyes on the turn, but it is right at some of the places. And we are taking conscious call of some inventory intensity going up. But overall basis, we are keeping a close eye on our inventory.

And that trade off decision also some time, again gross margin carrying for us, it’s done meticulously.

Devanshu Bansal — Emkay Global Financial Services — Analyst

So the incremental growth et cetera should not necessarily result in to increase in ROCE profile for us. Is that a good understanding?

Ashok Sonthalia — Chief Financial Officer

So right now, idea is not to kind of significantly improve again inventory turns, but over the medium-to-long term period some improvement can be expected.

Devanshu Bansal — Emkay Global Financial Services — Analyst

Got it, sir. Thank you.

Operator

Thank you. We’ll take our last question from the line of Latika Chopra from JPMorgan. Please go-ahead.

Latika Chopra — JPMorgan — Analyst

Yeah, hi team. Thanks for the opportunity. I have just one question. And sorry, it’s again around the whole demand scenario. I wanted to know what’s your read on the consumer sentiment at a broader level. For jewelry I can understand, there are various nuances, probably there are more wedding dates. There is anticipation of gold prices going further up. And of course your own initiatives to drive market share. But when you look at other categories, and you do now operate across those two discretionary categories. How are you sensing demand, consumer sentiment, because most of the other companies are kind of calling out some caution on urban discretionary demand?

C K Venkataraman — Managing Director

Hi, Latika. This is Venkat here..I think the biggest advantage that Titan and companies like Titan has is the consumer segments from which the bulk of the business emanates. And those consumer segments are sitting in the top part of the income class pyramid in the country and they are much of the time substantially removed from the effects of inflation. And therefore from a near term and FY24 point-of-view and even further that is an advantage that Titan has, one.

The second is that exceptional data base that we have. We 20 million-plus in-circle membership with a deep understanding of their preferences, of their purchase history. And on top of that many millions of them personally known to our staff and therefore a sale is a telephone call in a sense, because of that relationship.

So the intrinsic ability of these segments to buy things and the relationships and the understanding that we have with many millions is the difference that Titan Company has in this overall situation that you described. And therefore we are quite positive about Calendar ’23 and FY24.

Latika Chopra — JPMorgan — Analyst

Great, Venkat. Thank you so much and wish you the best.

C K Venkataraman — Managing Director

Okay, thank you, Latika.

Operator

Thank you. I now hand the conference over to Mr. Venkatraman for closing comments. Over to you sir.

C K Venkataraman — Managing Director

Thank you very much for all the probing questions and all the best wishes. As always see you in the next quarter.

Operator

[Operator Closing Remarks]