CRISIL Ratings expects Titan’s top-line to grow by 7-10% in fiscal 2022, while operating margin is expected to improve to 9-10% (adjusted for leases), driven by expectation of a healthy product mix in the jewellery segment, stronger performance in the watch segment and continued benefits of cost optimisation measures implemented by the company in the last fiscal.
In the first quarter of fiscal 2022, Titan reported strong revenue growth of 117% (excluding sales from bullion), on account of lower base.
The growth in the quarter was driven by a 107% growth in jewellery segment (excluding bullion), 280% growth in watches segment and 117% growth in eyewear segment. For the jewellery and watches segment, over 90% of the stores were operational as on June 30, 2021, CRISIL Ratings said.
In fiscal 2021, company reported revenue growth of over 3%, largely attributed to disruptions caused by covid-19 pandemic. Operating margin is estimated to have contracted to 6.7% (adjusted for leases) from 10.7% in fiscal 2020, on the back of higher sales of lower value added jewellery in line with the market demand, and losses in the watch segment due to high operating leverage.
The ratings continue to reflect Titan’s leadership position in jewellery and watches segment, healthy operating efficiency and a strong financial risk profile with robust liquidity. These strengths are partially offset by the company’s exposure to regulatory risks in the jewellery division and high competitive intensity in the sector, as well as moderating performance of its watches division.
For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of Titan and its subsidiaries, which are strategically important to Titan, and have a significant degree of operational integration.
Furthermore, CRISIL Ratings has amortised the goodwill and intangibles arising from the acquisition of 66.59% stake (current stake is 72.3%) in CaratLane Trading Private Limited (CaratLane; ‘CRISIL AA/Stable’) over a period of five years starting fiscal 2017. CRISIL Ratings has also considered gold on loan as short term debt for its analysis.
The stock ended at Rs1,680 down by Rs15.8 or 0.93% from its previous closing of Rs1,695.80 on the BSE. The scrip opened at Rs1,683.05 and has touched a high and low of Rs1,709 and Rs1,675.55 respectively.