Time trouble? Titan says no 'extraordinary' growth on cards

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Time trouble? Titan says no 'extraordinary' growth on cards

After a hint of disappointment from the second quarter results, Bhaskar Bhat of Titan says essentially, it is the costs that are affecting the margins of the company. "There is an impact of the USD and there is an impact of the price of gold and hence, we have taken a 5-20% price increase," he explains.

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After a hint of disappointment from the second quarter results , Bhaskar Bhat of Titan says essentially, it is the costs that are affecting the margins of the company. "There is an impact of the USD and there is an impact of the price of gold and hence, we have taken a 5-20% price increase," he explains.

While the company's watch division's EBIT margins have come off this quarter, Bhar says, "The idea is to pass on the cost increases and therefore protect our margins."

In an interview to CNBC-TV18, Bhat also says that on the jewellery side of the business, a value growth in excess of 35% is possible, although the FY12 volume growth on the jewellery side will be around 8-10%. Further, he says for FY12, all three businesses are still projecting a 30% top line growth at Rs 8,000 crore but the bottom line growth has not seen a change.

Below is an edited transcript of Bhaskar Bhat's interview to CNBC-TV18. Also watch the accompanying video.

Q: There is some disappointment about the performance of your watch division where EBIT margins have come off. There seems to be some realization pressure as well. Can you take us through what exactly happened in the quarter?

A: There is an impact of the USD; we have reasonable imports from both China and Switzerland. With the rupee weakening again, we have a bit of impact on cost as well. Also, there is an impact of the price of gold since we use gold in our gold platted watches. All that has been corrected by taking a price hike and that price hike effect will be felt only around mid November. So, we have taken a 5-20% price increase, starting with our low end watches to gold watches. Hence, essentially it is the costs that are affecting the margins.

Q: So, will margins rebound starting next quarter?

A: The idea is to pass on the cost increases and therefore we want to protect our margins.

Q: Jewellery volume estimates as well are being marked down for you now. People are talking about levels of about 15%. What is your own target of what kind of volumes you may see on the jewellery side this year?

A: Yes, we did have a challenge on volume increase, in the month of August and parts of September, but after the price of gold got corrected in a way, volumes have bounced back. However, 15% would be a healthy growth, we don't expect volumes to grow at that extent, but value growth in excess of 35% is certainly possible.

Q: So, what is your own expectation of how FY12 volumes will pan out on the jewellery side primarily?

A: Around 8-10%

Q: We believe that the current festival reason has begun on a sluggish note, do you seei any signs of a pick up or do you expect it to be more subdued than usual?

A: We have had a good Dhanteras experience. Up until now, yesterday was Dhanteras and growth is back but whether it will sustain is the question. In the next 2-3 days, we can figure out, if both watches and jewellery have done reasonably good business. Our growth last year was as expected but the extra ordinary growth that we had seen in the first quarter is certainly not visible.

Q: In the watches segment, apparently your lower price brands have done quite well. Is there an apprehension that they might skew or drag margins lower if they continue to contribute more?

A: No, in fact our Fast-track brand as well as our new premium priced watches in Titan has been pushing the prices up. HTSE and others have been doing extremely well. So, we are reasonably confident of our brands being able to pass on the cost increases. We have the pricing power; it is the volume which is a challenge for everybody.

Q: So, compared to the last year what would be a more reasonable expectation in terms of what you will see on sales growth this year given the environment that you are talking about?

A: All three businesses are still projecting a 30% top line growth at Rs 8,000 crore but the bottom line growth has not seen a change.