Titan Company Ltd. (NSE: TITAN) Q4 FY22 Earnings Concall dated May. 03, 2022
Corporate Participants:
C.K Venkataraman — Managing Director
Ashok Sonthalia — Chief Financial Officer
Suparna Mitra — Chief Executive Officer in Watches and Wearables Division
Saumen Bhaumik — Chief Executive Officer of Eyewear
Ajoy Chawla — Chief Executive Officer of Jewellery
Analysts:
Abneesh Roy — Edelweiss — Analyst
Vishal Gutka — PhillipCapital — Analyst
Amit Sachdeva — HSBC — Analyst
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Manoj Menon — ICICI Securities — Analyst
Kunal Vora — BNP Paribas — Analyst
Ash Shah — ES Capital — Analyst
Jaykumar Doshi — Kotak — Analyst
Vaibhav Ghaisas — SBI Life Insurance — Analyst
Jay Gandhi — HDFC Securities — Analyst
Pratik Rangnekar — Credit Suisse — Analyst
Shirish Pardeshi — Centrum Capital — Analyst
Ashish Kanodia — Ambit Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q4 FY22 Earnings Conference Call of Titan Company Limited. [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 everyone on the call from my colleagues and me at — from Titan here from Taj Bangalore on this Q4 FY22 earnings call. Very, very satisfying quarter in a very challenging situation with COVID wave three lockdown for some weeks and the international conflict starting late February going all the way to the end of the year affecting oil prices and including the prices of gold surprise pulled and creating a lot of uncertainty in consumer sentiment. But despite all that, we ended FY22 in a very good note and equally, and as importantly, our preparations for a very, very ambitious FY23 were also completed in that same quarter and we prepared well enough to make a very good ambition for FY23 as well.
So I have nothing really more to say and I would request the questions to come in for us to answer.
Ashok Sonthalia — Chief Financial Officer
But before question come in, Venkat, I would just like to call out few specific items related to Q4 and FY22 performance. Ashok Sonthalia here, and welcome to everyone to the call. And it’s great to be talking to you guys on this auspicious day of Akshaya Tritiya. You are all well aware that Titan has a long-standing philosophy of sharing its prosperity and success with all people in an equitable manner. This year, 2021-2022 has been exceptional for all of us in multiple ways and our profit performance has been — is good and therefore an ex gratia amount of INR72 crore at a standalone level and a total of INR82 crore at consolidated level have been provided for — in the Q4 accounts.
During the quarter, the company also came up with a voluntary retirement scheme for employees in the month of March 2022 and a charge of INR51 crore at standalone level and INR54 crore at consolidated level on this account also has been recorded in Q4 P&L as an exceptional item. Both items put together a total charge of INR123 crore on a standalone has been made in P&L and significant part of this ex gratia amount is reflected in the employee cost line item. Normalizing for the ex gratia amount and VRS amount like-to-like EBIT and PBT for the quarter are at INR841 crore and INR787 crores, respectively. It’s EBIT margin of 12.1% and PBT margin of 11.3%. For the full year FY22, PBT before ex gratia and exceptional item stood at INR3,054 crore. EBIT margin and PBT margin is 12.3% and 11.6%, respectively.
With this, I would like to open the floor for questions. Thank you.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead.
Abneesh Roy — Edelweiss — Analyst
Good morning. Thanks. My first question is on Fastrack. Fastrack is the only format wherein in FY22 there has been no store addition, in fact there has been a net closure of five stores. And when I see the retail growth also, in both full year FY22 and Q4 the like-to-like and sales growth has been pretty disappointing. I understand Omicron impact in Q4, but FY22 32% sales dip in Fastrack retail, so what is the way forward here? What has been the issue in FY22?
Suparna Mitra — Chief Executive Officer in Watches and Wearables Division
So this is Suparna from the Watches and Wearables Division. [Indecipherable] Fastrack store format has been — is in the process of being reimagined and that is why we didn’t add any stores this year. We have a new store design ready and that’s been [Indecipherable] Once that is fine-tuned, we are going to roll out. In fact in Q1 itself, we have [Indecipherable] at least seven store locations finalized and awaiting the new store design. So the — I think, there are two parts to it. One is the revival of this Fastrack store format and bringing in a lot more exponential inputs into the store format. I think the larger point also is that, for some people, online is the natural default thing and we have, in Fastrack, do very well in both our own brand e-commerce as well as in marketplace performance. So, therefore, the need to totally reimagine the store experience [Indecipherable] work in progress and next financial year we have a plan of opening another 10 to 12 stores [Indecipherable] at various parts of the country.
Abneesh Roy — Edelweiss — Analyst
Okay. Thanks. My second question is on Taneira. So sales growth of 4% in Q4, so I understand the Omicron impact, but on a base of 14 stores for the full year you added six stores, which is a big addition on that kind of a base. So this 4% growth, would you say that you are a bit disappointed with that or is it more of Omicron? How is the model is shaping up? Are you now much more confident versus, say, when you started the year?
C.K Venkataraman — Managing Director
Abneesh and everyone else, I’m introducing Ambuj Narayan, who joined us as the CEO of Taneira business two months back [Indecipherable]. Ambuj Narayan Yes. Good evening, and welcome to the call. We hear [Indecipherable] so yes, we’re disappointed, but when I look at the [Indecipherable] and January was okay.
Operator
I’m sorry to interrupt you, sir, but we cannot hear you clearly. Ambuj Narayan but it was largely due to Omicron. Now we are — we have opened six — opened six stores last year and there is a very good pipeline of stores that’s coming up and we are confident about the Taneira and doing very well in the coming year.
Abneesh Roy — Edelweiss — Analyst
Yes. And last two questions. Titan EyePlus minus 4% sales value growth, so dip in Q4, so any competitive intensity increase has happened or it’s again coming to the Omicron itself in terms of retail world?
Saumen Bhaumik — Chief Executive Officer of Eyewear
Abneesh, this is Saumen from the Eyecare Division. Like you said, Omicron was certainly a factor for the month of January and in the month of March, while Titan EyePlus channel has done sales more or less positive, we also had to deal with some store closure and overall for the division we also have to do a certain amount of channel correction. That’s why overall figure is muted. Otherwise, we haven’t seen any different kind of a competitive activity. It is just really the combined effect of Omicron and year-end correction, that is done to make sure this system is clean [Indecipherable] take off from the day one of the next year.
Abneesh Roy — Edelweiss — Analyst
So thanks for that wonderful answer.
Operator
Thank you. The next question is from the line of Vishal Gutka from PhillipCapital. Please go ahead.
Vishal Gutka — PhillipCapital — Analyst
Yes. I had just a couple of questions. First thing is on the loan facility basically, like Bajaj Finance provide for consumer durable, if there is a regulation restricting what do you call to provide finance for purchase of jewellery, because lately two — couple of jewellers were filed their IPO, there they stated that they are — there are some parties providing finance for purchase of high value studded jewellery. I just wanted to know your thoughts on that? And I just wanted to do know what is the contribution of Golden Harvest scheme as well as gold exchange program for the quarter?
C.K Venkataraman — Managing Director
On the first point, I think there is an issue there, because then RBI with [Indecipherable] EMI on jewellery and have made them three years back and the whole view point [Indecipherable] enhanced the acquisition of monetary assets. That was a review that RBI taken and I guess that would apply equally to loans as well. We had a very, very vibrant EMI program that we had begun as a pilot in Bangalore in 2016 and we were planning to take it national when RBI came up with this monetary assets not financed. And the Golden Harvest?
Ajoy Chawla — Chief Executive Officer of Jewellery
Hi, Ajoy here. On the Golden Harvest contribution, the contribution has gone up compared to last year. It’s at 18% contribution to the sale for the — in the quarter versus 15% in the previous year in quarter. However, in FY20, in Q4, it was at around 20%. Due to disruptions in enrollments in the subsequent two years, it is still catching up, but enrollment levels are very good. In fact, Q4 we have seen very good in enrollments in Q4 and even — and that has continued in the month of April. So, going forward, I think, post these two years of disruption, maybe this quarter it — we will continue to see the effect of last year’s disruption in Q1, but thereafter I think we should be on a steady wicket. But, overall, 18% contribution versus 15% last year.
Vishal Gutka — PhillipCapital — Analyst
Okay. And the contribution of gold exchange program for the quarter?
Ajoy Chawla — Chief Executive Officer of Jewellery
That’s also been good. It was 28% versus 27% in the previous year in terms of contribution.
Vishal Gutka — PhillipCapital — Analyst
Okay, sir. Sir, last question from my side on the international front. I think we have opened one more store on the — I think in the USA apart from couple of stores in UAE. So what is the outlook going here? What is the guidance in the medium term? How many stores we’re looking with regards to international expansion for the Jewellery business?
C.K Venkataraman — Managing Director
Please wait till next Friday. Investor conference with government.
Vishal Gutka — PhillipCapital — Analyst
Okay. Thank you. Thank you.
Operator
Thank you. The next question is from the line of Amit Sachdeva from HSBC. Please go ahead.
Amit Sachdeva — HSBC — Analyst
Hi. Good afternoon everybody. Thanks for taking my question. Just a small question on the demand outlook, Venkat and Ajoy. Given the gold price surge in March was pretty precarious, but I assume February was going okay and January was somewhat impacted, but wedding season seems to be very good and there was a hope at least that demand outlook should be robust if not disruption continuing on gold prices. So can you give us some thoughts on how April has gone and given the base is also very benign, but how I should think about demand picture in the current outlook as some challenges, which you mentioned, are still persisting?
C.K Venkataraman — Managing Director
Yes. So I’ll get Ajoy and others to come in in a minute. Amit, while the conditions in Q4 were finally not conducive to overall demand and we also have to measure our performance from a competitive point of view and not just our growth or decline in sales. And our sense is, from a competitive point of view, we will continue to be strong in every category where we operate in Q4 and therefore a blip, which is such a large external factor, we don’t have to think about it or worry about it, just move on. That sort of putting it behind us kind of thing. April has begun very well. We are very, very satisfied with the first month of the year and we are quite running for the targets that we have set out for ourselves for the year and on that we are on target.
Amit Sachdeva — HSBC — Analyst
So that’s very good to hear, Venkat. Sorry, Ajoy, you were saying something, please.
Ajoy Chawla — Chief Executive Officer of Jewellery
Yes. Yes. I’ll just add on to that. Gold price volatility has been — has impacted, let’s say, big ticket value purchases, especially for wedding. And this is particularly true in March, to some extent in April. Being said that, I mean, we are very, very happy with our April topline. We are expecting now that gold prices in the last at least few days, at least last one week, seems to have kind of moderated downwards perhaps people were also just waiting and holding back to see how things shape up on the gold price front. We are actually quite hopeful. In fact, we are also seeing, as you said, there are lot of wedding. It’s been a quarter one with the Akshaya Tritiya and weddings coming after two years now, three years actually. Last two years has been tough. So we are very positive and hopeful and in fact we are seeing good traction. Very happy with it.
Amit Sachdeva — HSBC — Analyst
Great. Great. That’s really good to hear, Ajoy. So in that context, I had — also good to hear that Venkat mentioning that there is an ambitious target for FY23 without giving guidance, what — how we should read that statement?
C.K Venkataraman — Managing Director
It refer to what it means.
Amit Sachdeva — HSBC — Analyst
Yes. I mean, because given the FY22 has been at least a very good year and are we looking at 20% kind of growth or higher, or how do you — because, at least, there was a larger plan to go in strong double-digit growth as such structurally jewellery, but given this — but when you say ambitious, how one should think about those numbers?
Ajoy Chawla — Chief Executive Officer of Jewellery
Actually, we are not giving guidance on that for FY23, Amit, not yet at least.
Amit Sachdeva — HSBC — Analyst
Sure.
Ajoy Chawla — Chief Executive Officer of Jewellery
But the opportunity for the company in every category it operates, where it is leader today in three businesses. But in others, picking up, but a huge headroom. So in every business, we are looking at a good growth, which together translates as a very ambitious growth for example. And you can just sort of look back to the past about whenever we have used the word ambitious, what is the kind of figures we have talked about. Imagine the best.
Amit Sachdeva — HSBC — Analyst
Okay. Understood. Understood. Perfect. Now I didn’t want a guidance, to be honest, I just wanted to understand whether this confidence is coming from the good demand condition you’ve seen in April and continuing into whatever this week, etc, and just —
C.K Venkataraman — Managing Director
Yes. The ambition itself was set both 10 weeks back, middle of February, then we are — even in the middle of, in fact, wave 3, but looking at the opportunity country’s represents for the company. So —
Amit Sachdeva — HSBC — Analyst
Sure, sure. That’s helpful, Venkat. I just have a small question on VRS and a couple of exceptional items that you talked about. Well, we see also margins in watches, etc, are very weak. So is it something to do with disproportionately impacting watches we are as in other things or is there something to read in margins? And can you give us a bit of margin anatomy of what has happened this quarter so that we could clearly appreciate what has really gone on there?
C.K Venkataraman — Managing Director
So you are right. Like watches from the manpower and both these exceptional points are related to manpower and headcount. So watches have a share of manpower and headcount in the business and that is why they have kind of — have to absorb higher proportion of ex gratia as well as VRS and that is reflecting in the slightly subdued margin.
Amit Sachdeva — HSBC — Analyst
Yes. Got it. And if you were to sort of exclude that, what would be the watches’ margin?
C.K Venkataraman — Managing Director
The watches EBIT margin for the quarter would be 6.7% and for the year would be 6.9%.
Amit Sachdeva — HSBC — Analyst
Got it.
C.K Venkataraman — Managing Director
But you must also factor in, they have not yet kind of fully recovered due to pandemic level, they have grown, but, yes — there is opportunity to further improve the nature of the category, especially if you compare it with Eyecare or Jewellery. It is the most challenging category from a consumption point of view in these times of everything, working from home included.
Amit Sachdeva — HSBC — Analyst
Sure.
C.K Venkataraman — Managing Director
And we are hoping and expecting FY23 will be rather different.
Amit Sachdeva — HSBC — Analyst
Got it. Thanks so much that’s.
Operator
Thank you The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises. Please go ahead.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Yes. Good evening, sir. What is the reason for losses in these watches and eyewear?
C.K Venkataraman — Managing Director
Sorry?
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
What the reason for losses in watches and eyewears?
Ashok Sonthalia — Chief Financial Officer
So let me answer, Rakesh. Ashok here. If you take out these ex gratia and VRS, then watches actually in Q4 had a INR42 crore of EBIT and on a full year basis INR160 crore of EBIT. And as far as eyecare is concerned, they had for the quarter INR three crore EBIT and INR61 crore of EBIT for the full year. In watches, also, there is one more item is sitting in their P&L in March. Like we have Business Associates Meets — I’m sorry, eyecare. Eyecare Business Associate Meets happened in this quarter and which also had about INR10 crore of impact on their profit.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
INR10 crore cost?
Ashok Sonthalia — Chief Financial Officer
Yes.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Business is earned INR60 crores a year?
Saumen Bhaumik — Chief Executive Officer of Eyewear
Actually, Rakesh, we have this tradition of what is called a Business Associate Meet which happens —
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
You should get your associate to pay for it also.
Ashok Sonthalia — Chief Financial Officer
We are preparing for FY23, Rakesh. So that is why in March linking everyone together for the associate —
Saumen Bhaumik — Chief Executive Officer of Eyewear
It happens — used to happen once in two years. And the last time we did it was in June of 2019, so we’re doing it after three years. It’s been a significant part of building confidence, camaraderie, team esprit de corps across the company system to deliver results year-after-year.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Where was it held this year?
Saumen Bhaumik — Chief Executive Officer of Eyewear
Sorry?
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Where was it held this year?
Saumen Bhaumik — Chief Executive Officer of Eyewear
This was at Dubai. Rakesh ji, this is Saumen. It was done in Dubai.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
And, anyway, congrats on a fine result and anything [Indecipherable] markets are burnt anyway, congrats, and thank you for your good dividend. I thought it — I hope it could be better. [Foreign Speech]
C.K Venkataraman — Managing Director
Correct. [Foreign Speech]
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
[Foreign Speech] But we have a defined policy once we were on a 41st quarter.
C.K Venkataraman — Managing Director
We have a range.
Ashok Sonthalia — Chief Financial Officer
So we have a range, 25% to 40%, and this payout translates into about 31% and keeping the growth ambition in mind and our requirement, I thought, this is a good level, which we can — consistency and the good performance, everything is reflecting —
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
We are not giving a bonus also now for 15 years, so company’s trajectory has changed since completely [Indecipherable] repayment of that the bonus is.
C.K Venkataraman — Managing Director
So, of course, we can bring that feedback and we can discuss at some point in time or
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Yes. [Indecipherable] feeling high time we do it. And clearly market [Indecipherable] or brand [Indecipherable].
C.K Venkataraman — Managing Director
Sorry, what was that Rakesh?
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Our brand tonnage has both — all the brands are [Indecipherable] actually when [Indecipherable] I feel great. I think we got to work, that lady who — that man who asked, you got to work on Fastrack, sir. India is such a young country, I think Fastrack is about desired brand.
Suparna Mitra — Chief Executive Officer in Watches and Wearables Division
Yes. Feedback noted.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
[Indecipherable] not be able to exploit, because India is such a young country, 25% of world are below the age of 25 years.
Suparna Mitra — Chief Executive Officer in Watches and Wearables Division
That’s true. The potential is huge and we are working on a big revival plan for Fastrack with products exercising —
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
[Indecipherable] unless you increase the range of products, I don’t know why we don’t have a deodorant like brand and we don’t know the [Indecipherable] somewhere I think you don’t have a biggest market [Indecipherable] with Titan’s marketing and Fastrack advertising, I think we should go with deodorant, handbag, ladies handbag.
C.K Venkataraman — Managing Director
We have big plan on bags. Such things, we will talk about it.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
What did you say, sir?
C.K Venkataraman — Managing Director
In the 13, we have this Investor Conference in Bombay.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
But I might not be able to come.
C.K Venkataraman — Managing Director
Sure. Somebody from Rare will be there actually.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Are you doing in person? —
C.K Venkataraman — Managing Director
No, no, in-person.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
I know it is, but I will not — if I am not able to come to in person, then —
C.K Venkataraman — Managing Director
—
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Pardon?
C.K Venkataraman — Managing Director
ITC [Indecipherable] Marata, I think. Yes. Virat Marata —
Ajoy Chawla — Chief Executive Officer of Jewellery
ITC franchise [Indecipherable]
C.K Venkataraman — Managing Director
Sorry, sorry, Bombay. [Indecipherable]
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
No, I’m saying, you’re going to Zoom it?
C.K Venkataraman — Managing Director
No, in-person.
Ashok Sonthalia — Chief Financial Officer
It is in person.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
— pardon?
C.K Venkataraman — Managing Director
We are not planning to have a parallel Zoom on that.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Why — so we can — we can also [Indecipherable] we will be abroad and we may also head in. I request you to have it here.
C.K Venkataraman — Managing Director
We will explore it. Yes.
Rakesh Jhunjhunwala — Rare Enterprises — Analyst
Okay. It’s nothing. There is no problem on having. There is no regulation, there is no problem, I don’t know why you exclude, please have it. [Indecipherable] Anyway, congrats on a fine performance. [Indecipherable] God bless.
Operator
Thank you. The next question is from the line of Manoj Menon from ICICI Securities. Please go ahead.
Manoj Menon — ICICI Securities — Analyst
Hi. Just two quick ones on jewellery and a bookkeeping question after that. One, on just give an update on the gold hallmarking implementation, the regulation, law, etc, has been around for a while. It will be helpful on how are you finding actually on the on the ground implementation? Second question on jewellery to Ajoy is, look, as a consumer, I’ve been observing — or it’s my interpretation of what I see is that, there is a lot of action which you seems to be taking to actually make the brand younger, basically if you agree with the hypothesis or no? And if yes, it would be super helpful on what exactly you’re trying to attempt here? Thank you.
Ajoy Chawla — Chief Executive Officer of Jewellery
First one, on the hallmarking. I think, hallmarking as a process has kind of stabilized across the districts that were identified, have not gone beyond that. Within those districts also we see that there is a greater tendency, because of the nature of the way hallmarking laws have been framed it is at the point of a sale. So wherever jewellery is getting manufactured, those centers are getting loaded, other centers are not. So it’s [Indecipherable] in the long run, they will have to modify it, I think, so that across the country hallmarking can be spread out. Right now, it looks like there is a traffic jam that lines up at the bigger cities where jewellery gets made. But at a way — in a way they are checking, they are — the authorities keep coming to the stores, they keep visiting, BIS authorities are trying to ensure it is implemented well. Having said that, we have still received anecdotal feedback.
In some of our stores, hallmark jewellery which continues to be inappropriate when we look at it in our carat meter or when we melt. So we can’t say whether some of it was recently hallmarked or it had been an older hallmarked jewellery. I think a big initiative like this for such a large fragmented industry will take a little longer to stabilize. The outcome of this I can share — well, I don’t know whether it’s an outcome of this or it is a general outcome. We are seeing that the migration towards organized retail or towards stronger players continues and therefore every organized player is kind of aggressively pursuing very strong expansion plan. The other piece that I can share from a data point is that we continue to see very good traction amongst new buyers or new customers who are new to Tanishq or new to Titan as well.
That indicates that there is a certain migration taking place from family jewellers, etc, simply because people want to kind of get towards a more trusted name. On the second piece, where — the brand — what is the direction of the brand? So, I think, the brand has always stood for a certain progressiveness and the certain modernity get rooted in tradition and I can’t say whether we are trying to be younger, because we are appealing to a fairly large age group from 25 to 55, I would say. And, however, what we are [Indecipherable] that the brand does [Indecipherable] it remains [Indecipherable] outlook and therefore a lot of the communication that you’ve been seeing [Indecipherable] in a way reflect [Indecipherable] one is the customer [Indecipherable] lot of stuff happening [Indecipherable] And on the other hand, you will also see that [Indecipherable]
Operator
Sorry to interrupt you, sir.
Ajoy Chawla — Chief Executive Officer of Jewellery
We are continuing to push very strongly on the brand front [Indecipherable] especially Mia and CaratLane continue to target a much younger audience, and both of those brands are also doing pretty well. So, yes, at an overall level, we are aggressively investing in these brands and we are seeing good results. [Indecipherable] the customer feedback as well as our brand scores.
Manoj Menon — ICICI Securities — Analyst
Understood, sir. Sir, I actually missed the last one statement, there is some bit of disturbance on — when — the last statement on Tanishq and then I could hear Mia and CaratLane sub-25, younger, etc. If I may request that one last statement on Tanishq, if you remember, if you could repeat will be helpful, sir?
Ajoy Chawla — Chief Executive Officer of Jewellery
Yes. So, as I said, Tanishq is continuing to push strongly on the progressiveness index and we have a very wide target audience from 25 years to 55 years. Whereas in the case of Mia and CaratLane, they’re targeting much younger audiences and there too we are pursuing good brand investments and brand visibility. So, overall, as a portfolio, we are investing strongly in all the brands, including Zoya, if I were to add that.
Manoj Menon — ICICI Securities — Analyst
Okay. Fair point. Fair point. Thank you, sir. And, Ashok, one clarification with you if I may. The INR72 crores of ex gratia, if I understood correctly, it’s been called out, let’s say, as an exceptional or a one-off. I’m not going with accounting standard part of it, I’m just going by the highlighting part of it. Now when I — basically there are companies which I cover, which I historically had EVA-based model etc that makes you meet a certain target, you get paid variable accordingly. So my basic question is, why is it considered as something not a normal and why is it an exceptional or one-off without getting into technically of it, because you’re done well, you paid a bonus, it should be in the normal line item, right. I’m sorry for my ignorance if I’m missing something here?
Ashok Sonthalia — Chief Financial Officer
No. So what — let me give you something in this. One is that principle behind determination of amount is consistent over at least last decade or even more so, whenever Titan is standalone, that’s consistent. But the determination of it only happens after the year-end and there is a great achievement. So that is why you cannot be making provisions for this etc, we never do. We just decided at the end of the year when there is actually a good performance and based on that determination, the principles which we apply, and that is why from accounting point of view you find out — you will see that it is under the employee cost. But because you want to see also the quarter comparable to whatever you are looking at, that is why we have decided to tell you the amount.
C.K Venkataraman — Managing Director
And this was not part of the normal variable pay of the employee.
Ashok Sonthalia — Chief Financial Officer
Yes. [Indecipherable] So it is completely equitable in a democratic manner distributed to everyone.
Manoj Menon — ICICI Securities — Analyst
Okay. So I’ll take it offline, sir. Thank you. And it’s not material to take the time in the call. Thank you, sir. I appreciate it.
Ashok Sonthalia — Chief Financial Officer
Okay. Yes.
Operator
Thank you. The next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Kunal Vora — BNP Paribas — Analyst
Yes. Thanks for the opportunity. First question, Titan has recently acquired a stake in lab-made diamond company. While it’s a small investment, can you share your thoughts on lab-made diamonds in the context of Indian market?
C.K Venkataraman — Managing Director
Thank you, Kunal, for that question. For the last many years, there has been very little conversation that we have heard or seen in the stores relating to lab grown diamonds, because the desire for natural diamonds in the Indian middle class is so high that for the next many, many years given the kind of affluence that’s waiting to happen. They’re very confident that the power of the natural diamonds will continue to exist, especially given the penetration of natural diamonds in the Indian households. However, in the US particularly, the share of natural diamonds — household penetration of natural diamonds is very, very high, especially because of the work done by De Beers over the last six or seven decades.
And so, on the one hand, the natural diamond penetration is very high; on the other, the subject of sustainability is at a greater level of consciousness in the western countries, especially in the US and the Gen Z and to some extent the millennial are looking at options and therefore the traction of lab grown diamond jewellery in the U.S. particularly is quite strong, and we wanted to — given our international ambitions on the one hand and given the fact that sometime in the future, maybe distant but nevertheless in the future, then Gen Z of India will also start looking for these kinds of things. We wanted to dip our feets in the pool and be ready when the time comes. So that’s the background.
Kunal Vora — BNP Paribas — Analyst
Sure. But how large would the contribution be in India? Will it be in single digits now or is it larger?
C.K Venkataraman — Managing Director
In India?
Kunal Vora — BNP Paribas — Analyst
Yes.
C.K Venkataraman — Managing Director
In India, we can’t even pursue it. Actually it’s that low.
Ashok Sonthalia — Chief Financial Officer
It will be less than single digit, maybe fraction. Very, very early days. Even in volumes, I would say, it would be less than single digit.
C.K Venkataraman — Managing Director
Not really, it would be less than 0.1%, maybe it’ll be 0.01%, it will be like that.
Kunal Vora — BNP Paribas — Analyst
Right, understood. Okay. So it’s a very, very insignificant. Okay. Second and last question. Losing some moderation in growth across categories this quarter compared to last. So, like, while I understand the Omicron, do you think the pent-up demand played out earlier this year and because of that we are seeing some moderation? And, also, how would you gauge your performance in the April to June quarter considering that the last two years deals are really ideally, it’s very small, so what’s a good way to look at your April to June performance?
C.K Venkataraman — Managing Director
Going back to the first part, I think what affects demand is not just the real things which are around you, like Omicron was a real thing, but also what are the news that you are reading and seeing and listening to all around through newspaper, through WhatsApp shares, through other kinds of social media post and all that, which makes you feel it’s not a great time in general and that overall depresses demand and that is at the backdrop of our Q4 performance. And we’ve always maintained that we are not a company which is looking so obsessively at every quarter, we are looking at it at a one year and more than one year kind of time horizon, because real value creation in any enterprise happens in that kind of timeframe.
So from that timeframe point of view, the manner in which the country is poised on multiple accounts for growth, especially in the segments where Titan Company plays and our overall competitive advantage, which we have built over so many years and we have substantially sharpened in the last two years gives us a lot of confidence about FY23. Our ambitions for FY23 were set in that context. Our performance in April without getting into detail confirms that confidence — I mean, the ambition and prepares us really well for the thrust in the next 11 months. I was not — completely clear about your second part of the question about —
Kunal Vora — BNP Paribas — Analyst
Yes. Second part of the question was, how are you looking at this April, May, June? Because if I look at the last two years, April, May, June were disrupted. I mean, like you were not really — clean number — so —
C.K Venkataraman — Managing Director
Our reference is not the FY21 Q1 or FY20 Q1, sorry FY22 Q1 or FY20 Q1. Our reference is the market opportunity there and to some extent the FY19, FY20 way and that’s the — those are the principles that we’ve used in setting our ambitious target for FY23 and we are running to that.
Kunal Vora — BNP Paribas — Analyst
Okay. Understood. That’s all from me.
C.K Venkataraman — Managing Director
Thank you
Operator
Thank you. The next question is from the line of Ash Shah from ES Capital. Please go ahead.
Ash Shah — ES Capital — Analyst
Good afternoon, sir. Thank you for taking my question. So as the previous participant asked about lab grown diamonds, I wanted to pick your brains on the same subject. So you said that in India it’s a very low proportion as compared to natural diamonds. But if you start advertising, if you start putting more marketing efforts into it, don’t you think that will create a lot of awareness just the way you mentioned that De Beers did over the past 6, seven decades for natural diamond in Western market? And they also have a sister concern by the name of Lightbox, which they run in US, so why can’t we have it in India also, like a sister concern company dealing into lab grown diamonds in India?
C.K Venkataraman — Managing Director
See, the reason why De Beers created Lightbox is because the natural diamond penetration in the US is such a high level and the demand for sustainable materials across categories is rising in that country. So the Lightbox rationale is sitting in that. The natural diamond contribution in annual sales as well as the total penetration in India is so low and this is the very directly middle class aspirational item as it has been shown even in China over the last couple of decades. So the opportunity for natural diamond jewellery in India is so large that we have no plans at all to get into that in such a big way. And — but it is — the point that you’re saying that, wouldn’t there be a small opportunity that Titan Company can capitalize of? Of course. And at the right time, I’m sure the jewellery division would look at that in a way the investment in great heights is also to build the overall understanding capability in these areas, so that as and when we believe it’s time for us to act, we are able to act more effectively than others.
Ash Shah — ES Capital — Analyst
Okay. Okay. Thank you. Thank you so much.
Operator
Thank you. The next question is from the line of Jaykumar Doshi from Kotak. Please go ahead.
Jaykumar Doshi — Kotak — Analyst
Hi. Thanks for the opportunity. Just a quick bookkeeping question. What was the ratio of net sales to UCP in FY22, if you can give us some sense?
Ashok Sonthalia — Chief Financial Officer
For the company level? Because for every business, it is separate and —
Jaykumar Doshi — Kotak — Analyst
Company level, standalone jewellery, so excluding CaratLane.
Ashok Sonthalia — Chief Financial Officer
Come again.
Jaykumar Doshi — Kotak — Analyst
Standalone jewellery segment.
Ashok Sonthalia — Chief Financial Officer
That is 90%, 89%, 90%, that’s the number. So we didn’t see any variation, Jay, on that. It’s almost at the similar level what it was in the previous —
Jaykumar Doshi — Kotak — Analyst
Over the last 3, four years, so net sales to UCP has not changed in the — at all?
Ashok Sonthalia — Chief Financial Officer
Half a percentage here and there quarter-on-quarter can happen, but nothing much.
Jaykumar Doshi — Kotak — Analyst
Thank you so much. That’s it from my side. Thanks.
Ashok Sonthalia — Chief Financial Officer
Yes
Operator
Thank you. The next question is from the line of Vaibhav Ghaisas from SBI Life Insurance. Please go ahead.
Vaibhav Ghaisas — SBI Life Insurance — Analyst
Sir, just on the recent news items are mentioning some increase in the making charges, are we having some infusion cost or is it some deliberate effect, something which has done to compensate either on the cost part or [Indecipherable] we are making gold at attractive rates, how does this work?
Ajoy Chawla — Chief Executive Officer of Jewellery
Hi. I don’t think — this is Ajoy here. I don’t know where you picked it up from, but we have not taken any increase in making charges in the domestic business at all. So I don’t know about this.
C.K Venkataraman — Managing Director
And also when we do that, I don’t think we will — it will be in the press, not on this.
Vaibhav Ghaisas — SBI Life Insurance — Analyst
No. Obviously, sir. This is why I was trying to understand. No worries. Okay. When this is not done, then nothing to move away. Thank you. [Indecipherable]
Operator
Thank you. The next question is from the line of Jay Gandhi from HDFC Securities. Please go ahead.
Jay Gandhi — HDFC Securities — Analyst
Yes. Thank you for [Indecipherable]. I just wanted to ask you one thing, sir. Sir, if I see the 1Q, there has been a INR3,000 crore jump over six months, around INR5,000 odd crore over the year. But the gold on lease hasn’t really moved as much. So I just wanted to understand if my review is correct that in FY23 we may — we’re choosing a more expensive route to acquire customers? In other words, is the gold on yields or the fresh purchase is maybe lower versus gold exchange given the fresh for the period?
Ajoy Chawla — Chief Executive Officer of Jewellery
So next year, Jay, of course, gold on lease can go up and so there is no deliberate attempt. Every time when there are opportunities between GOL, SPOT and GEP, DEP focus will continue. I don’t think we are going to dilute that. That’s a great customer acquisition tool for us and that will continue. But beyond that, whether we buy SPOT or whether we go GOL, that’s a continuous theme on the economics of that and that is how we decide, but our preference for GOL has not at all diminished, that much I can say.
Ashok Sonthalia — Chief Financial Officer
We had lot of repayments in GOL in the current year, because the previous year it went up significantly on account of inventory recall, melting, etc, to manage the working capital and, therefore, you’re probably seeing this fluctuation year-on-year. [Indecipherable] maybe two years back, etc, it’s pretty much comparable.
Jay Gandhi — HDFC Securities — Analyst
So if I have to just ask in FY22 overall, the GOL, exchange and SPOT buying would be what percentage of the sourcing, I’m sorry if I missed this question before?
Ajoy Chawla — Chief Executive Officer of Jewellery
GOL typically would be around the range of 50% in terms of kgs and SPOT buying will be much, much smaller. The exchange, etc, would work out to about 40%. Between exchange and this outright also, we purchase some jewellery directly from vendors, that also as a gold company. So GOL is between that 50% to 60% range typically, and that is what you will see also in the month of — in the year of FY22. I don’t know if you are asking for FY22 or —
Jay Gandhi — HDFC Securities — Analyst
FY22. For FY22.
Ajoy Chawla — Chief Executive Officer of Jewellery
Yes. So it’s broadly in that range.
Jay Gandhi — HDFC Securities — Analyst
Right. And, sir, just one last thing if I may squeeze in and forgive me if it’s a naive question. But on this hallmarking thing, if everyone has to hallmark, right, the key issue within the industry was, and this was probably a tailwind, is the trust deficit. Now this worked in your favor over the decades, but if everyone hallmarks, the trust deficit gets called for, then how does the self be organized for?
Ajoy Chawla — Chief Executive Officer of Jewellery
Yes, a very good question, Jay. [Indecipherable] We started — the Tanishq brand started in 1996, it’s 26 years now, and if you look at the purity of the gold that we buy, the other jewellers — jewellery that we buy from customers, the purity has even — I’m sure if you were to look at yesterday’s purity, it is still in the 19.5, 19.75 carats, as of today 22 carat is supposed to be. So in 26-years, the purity stock of customers has not dramatic — it has improved, but it has not dramatically improved. Which means, when the hallmarking happens on the jewellery and that [Indecipherable] two carat is about 8% in terms of value and that represents 8% making charge difference that [Indecipherable] talking about [Indecipherable] were to remain the same place [Indecipherable] when it comes to their own margins, which means if they hallmark, they have raise their prices and in which case the competitive situation will dramatically change at Tanishq. So that is the [Indecipherable]
Jay Gandhi — HDFC Securities — Analyst
Yes. So that is only plus that we have, basically we — they make it less competitive, is that — is the only argument.
Ajoy Chawla — Chief Executive Officer of Jewellery
[Indecipherable]
Operator
[Operator Instructions] Thank you, and over to you.
Ajoy Chawla — Chief Executive Officer of Jewellery
Jay, I didn’t get your response, there was a lot of disturbance.
Jay Gandhi — HDFC Securities — Analyst
Yes. So I was saying that because they become less competitive to the extent of what 7% to 8%, that seems to be the only argument for this — for it to be working for organized, right? I mean, I was actually hoping that you would shut me up by saying you need to buy to understand what the difference is.
C.K Venkataraman — Managing Director
But isn’t an 8% making charge difference very important argument?
Jay Gandhi — HDFC Securities — Analyst
No, in the sales, I say, anyway if you look at the gold rates in Tanishq sold or any other jeweller, there is a certain premium you charge on gold rates also, which obviously is almost absent in some unorganized folks. Now you already enjoy a certain premium there.
C.K Venkataraman — Managing Director
Possible.
Jay Gandhi — HDFC Securities — Analyst
I understand that we will — they will get less competitive at time, but that’s a one-time thing. I mean, people do eventually get over hello.
C.K Venkataraman — Managing Director
Yeah, daily will not be a one-time. For me to continue to offer 22 carat every day, when I was offering 20 carats every day earlier, it’s a daily thing that my — for me to operate my business with a certain gross margin that I should get. For me to be viable, I will have to raise my prices. That’s the point there.
Jay Gandhi — HDFC Securities — Analyst
Fair point, sir. Fair point. I’m done here Thank you.
C.K Venkataraman — Managing Director
Thank you.
Operator
Thank you. The next question is from the line of Pratik Rangnekar from Credit Suisse. Please go ahead.
Pratik Rangnekar — Credit Suisse — Analyst
Yes. Hi. Thank you for the opportunity. And just one question from my end. On the jewellery business margins, you did call out the staff cost related one-offs. So even if we maybe adjust for that, it seems like there is a sequential drop in margins. So can you provide some context to that considering that probably the studded share has also increased versus third quarter and probably there is an inventory gain that you alluded — in diamonds that you alluded to last quarter as well? Thanks.
Ajoy Chawla — Chief Executive Officer of Jewellery
So if you exclude the one-time, the EBIT margin for jewellery in Q4 is — stands at around 13.1% and I remember mentioning even in the last earnings call that in Q3 we had an exceptionally high benefit on many counts and therefore those margins of — EBIT margins of 13.5%, 14% are not something which we could expect because we were planning to continue to invest back in the brand and in certain other areas for the business and we had clearly indicated that on a stable run it is going to be between to 12% to 13%, may be trending closer towards 13%. Having said that, Q4 is the one quarter which had certain costs which we have consciously taken in.
We also wanted freshness in merchandise, so we start the year well. We’ve invested something a little bit more in IT, we’ve had a few meets for our frontline staff, etc, to kind of thank them for their exceptional work done over the last couple of years. We have met some of our sales team. So that they are all primed and energized. So, first of all, I don’t think the EBIT margin is anything to be worried about. It’s quite good and healthy. At the same time, yes, there are some costs which are there in Q4, which may or may not repeat extensively in the remaining quarters.
Pratik Rangnekar — Credit Suisse — Analyst
Got it. Thank you for that.
Ajoy Chawla — Chief Executive Officer of Jewellery
Thanks.
Operator
Thank you. [Operator Instructions] The next question is from the line of Shirish Pardeshi from Centrum Capital. Please go ahead.
Shirish Pardeshi — Centrum Capital — Analyst
Yes Hi. Good evening. I’m really sorry joining the call late, so pardon me for the repetitive questions. Have you said anything qualitatively how the US and UCP market for us? I mean, I do pickup from the press release saying that you’ve done one pilot or very soon we are getting it. So maybe in the medium term, next two to three years, how we are going to develop or one should look at this business?
C.K Venkataraman — Managing Director
Actually, Shirish, if you can wait just for one week, next Friday is our Investor Conference, and I will be talking about this — to some extent a bit detail at that time.
Shirish Pardeshi — Centrum Capital — Analyst
Sure, sir. My second question is on the eyewear. I mean last 10 quarters if I put numbers together, our estimates versus the delivery, there is a lot of volatility. I mean, last con call also I asked this question, when do we see a steady-state growth and margin delivery for this business? I mean, is it that another two quarters we’ll have to wait or maybe four quarter we’ll have to wait?
C.K Venkataraman — Managing Director
Actually if you exclude the quarter one of FY22 as well as the quarter one of FY21, you would see almost three plus three, six steady quarters. PBT margin ranging between, I think, 15% to 20%. Okay. Q4 this year, as I said, sale was affected because of Omicron in the month of January. And in the month of March, we needed to make certain correction to clean up some of our channel, especially the distribution channel. Apart from the fact that we had some one-off expenses like it was explained by Ashok, there was a large expenditure of what we do once in two years. We did in this case after three years for Business Associate Meet. If you look — if you actually adjust for all these things, Q4 PBT — EBIT would have been in the ballpark of INR15 crores to INR18 crore. Okay. Just to sort of give you a sense of. So it was not significantly different than the last three plus three, six quarters and so we are not seeing that as really an aberration. It is a bit of a correction that we did. And if you look at just what happened in the month of April, it just reinforces that we are just in the right track.
Shirish Pardeshi — Centrum Capital — Analyst
Sure, sure. My next question to Ashok ji, in FY22, could you quantify what is the saving in terms of the numbers we’ve got it on the War on Waste?
Ashok Sonthalia — Chief Financial Officer
So War on Waste program, which was run last year, where we were doing quantification and we had at that point of time said that there are certain items which got induced because of the environment, like travel, power, etc, etc, and there were certain things which were ingrained into our business processes, which are sustained now. So they have become part of thing and now we are not calling them out separately. And the natural savings have almost disappeared, because you see all the activity and velocity of travel in Q4 particularly, and we also took that opportunity to travel a lot and meet people. So — but the other process part of it are sustaining and we are not now anymore calling them out
Shirish Pardeshi — Centrum Capital — Analyst
That’s really helpful, Ashok Ji. But one follow-up on here. We have done the hedging and now I’m sure two quarters has gone in, related to this hedging would you think there is some more savings which we can extract because of the quantum and the demand situation?
Ashok Sonthalia — Chief Financial Officer
So hedging change which we did was basically to remove volatility, because we were on cash flow and cash flows were becoming unpredictable because of the COVID induced lockdowns, etc, and we moved to fair value of inventory hedging, because inventory and gold is far more certain and far more this thing. And that is what is giving results that now you don’t see any kind of quality we’re pointing out in our P&L because of gold hedging. Hedging is just to insulate us from price risks. Idea is not to make money out of that.
Shirish Pardeshi — Centrum Capital — Analyst
Okay. Okay. Ashok ji, my last question pertaining to this VRS and the ex gratia charge, which has come. So this is fully charged for FY22 or is there anything which is — which will flow to in FY23?
Ashok Sonthalia — Chief Financial Officer
FY22, everything has been taken care of. All the future liability on account of VRS have already been accounted for, so there is no further charge coming in either quarter one or FY23.
Shirish Pardeshi — Centrum Capital — Analyst
Thank you. Thank you for the team. All the best for you.
Operator
Thank you. The next question is from the line of Ashish Kanodia from Ambit Capital. Please go ahead.
Ashish Kanodia — Ambit Capital — Analyst
Yes. Hi, sir. The first question is, in terms of inventory gain on diamonds, so last time you called out that there was a one-off and there was some flow-through in 4Q as well. So can you please quantify what was the impact of that inventory gain on diamond? And the second question is on ingot sales. So again in 4Q, there was some ingot sales of around INR375 crores, so what led to that?
Ajoy Chawla — Chief Executive Officer of Jewellery
The total, let’s say, benefit on account of diamond-related price increases and inventory gains in the second half of the year is about INR190 crores in the previous fiscal, okay. So it’s split between Q3 and Q4. It was, I think, about INR60 odd crores or something like that in Q3 and some balance in Q4. In terms of gold sale, we try to see some amount of optimization on gold on lease. It was a question which came earlier on and we also look at our inventory position and cash flows. We do some amount of optimization and based on, of course, how much exchange gold has come, we try to only sell out of the exchange gold, so that you can try and make some optimization. So that happens from quarter to quarter basis and internal conversation on how to optimize.
Ashish Kanodia — Ambit Capital — Analyst
Sure, sir. That’s helpful. And last question is, I think, for a couple of quarters, we have been trying to try new initiatives in the southern markets and in some of the Bharat markets as well, so in that context our channel check suggest that you are also trying to implement, maybe, pan India a similar gold price, right. So from a gross margin perspective or from an EBIT margin perspective on the jewellery business, are we seeing some impact from that perspective as well that when you maybe focus more on southern markets, but in some of the Bharat markets there is higher discounting or higher marketing and because of which the margins are kind of taking some hit?
Ajoy Chawla — Chief Executive Officer of Jewellery
Yes. So let’s put it this way, the geographic mix has an impact on the gross margin and you are right that as we increase our contribution from Southern markets, there is a some amount of dilution in the gross margin of the business. On Bharat markets, we don’t see that much of an impact on gross margin, but yes marketing investments — yes, but the marketing investment is not that material when you look at the overall NSV of the jewellery business. It may be to the extent of 0.1%, 0.2% here and there. So — but as we had mentioned even in the previous earnings call and we continue to mention that there is intense competitive intensity in the jewellery market, because all organized players are seeking to expand, there is gold rate related activities;
While we haven’t taken any call on whether we will have a single gold rate or no, but we are being competitive in different markets and we are certainly going for aggressive market share gain. Therefore, the investments that we continue to make either in the form of gold rate or offers or marketing spends or even the kind of product mix that we are willing to supply as we try to maximize the opportunity in every geography will, in a way, therefore have a slight dilutive effect on the margin. But the overall operating leverage because of the growths in the topline that we get will more than offset it. So to that extent these two will keep kind of balancing each other out and therefore the guidance that — or not guidance, the indication that we had given that we will operate within this 12% to 13%, trending close to 13%.
Ashish Kanodia — Ambit Capital — Analyst
Sure, sir.
Ashok Sonthalia — Chief Financial Officer
Yes. Operating leverage vis-a-vis other initiatives that we are planning to invest to continue growth.
Ashish Kanodia — Ambit Capital — Analyst
Thank you very much. That’s all for my side.
Operator
Thank you Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. C K Venkataraman for closing comments.
C.K Venkataraman — Managing Director
Thank you very much everyone on the call. Very, very exciting quarter and a whole new exciting year ahead of us. As always, all of you asking the right things, I think, probing questions to make us reflect on everything we do and continuously strive for an improving financial performance. Thank you, and see you next week, most of you.
Operator
[Operator Closing Remarks]