Despite gold imports falling in the recent trade data, Bhaskar Bhat, MD of Titan believes demand for gold is robust and that’s why the company is launching a new brand called the Skinn Titan. (Read More)
”Economic situation keeps fluctuating but consumers are also looking for ways and means of spending their well earned prosperity,” he says in an interview to CNBC-TV18.
Bhat expects the new launch (Skinn Titan) to make money in three-four years just like their any other product category. He believes the investment for this new range will be around Rs 50 crore.
Going ahead, Bhat expects 10-15 percent profit-before-tax (PBT) margins.
Below is the verbatim transcript of Bhaskar Bhat's interview on CNBC-TV18
Q: It appears in the current macro environment that supply of gold is a bit of a concern because in the recent trade data gold imports have fallen off the cliff. How do things stand for Titan because the situation seems very fluid now?
A: Economic situation apart, people are still spending money, which is why we have introduced a fragrance brand called Skinn Titan. If you have a good enough reason, people are willing to spend money.
We have just launched a new product category from Titan Skinn for men and women made in France, high quality, very reasonably priced. Economic situation keeps fluctuating but consumers are also looking for ways and means of spending their well earned prosperity.
Q: Reserve Bank of India (RBI) again banned gold on leasing model in August. How has cost impacted Titan and have you been able to pass some of that to consumers?
A: Nothing has changed since I spoke last time. Availability of gold is difficult and cost has gone up but desire of consumers to buy gold jewellery is still very high. So, we have to manage the backend not so much the front.
Q: What about hedging because gold prices over the last four-five months have been so volatile, what has been your hedging strategy offlate?
A: Hedging is difficult. It is a challenge and the government is aware of it.
Q: How much investment have you outlined for this new launch and when can Titan start making money out of this? Are there any financial models that you can help us with?
A: We have launched it today and will be available from tomorrow. It is a very small investment but very high potential because this is an underserved, under-penetrated, under-organized sector. It is a very good price point and the investment is barely Rs 40-50 crore because there is no manufacturing. It is all made in France and made for Indians but with international class and style.
We expect to make money in three-four years from now as any other product category of ours between three and five years take and the investment would be of the order of magnitude of about Rs 50 crore.
Q: What are your expectations from the margins?
A: We expect very high margin business because finally all the margins, all the investment is in brand building so the material cost is very low compared to the selling price but there is a big tax because it has to be imported, there is a big import duty. It will be eventually settling down at the level of 10-15 percent profit-before-tax (PBT) margin.