Titan to re-introduce Golden Harvest Scheme

Sonia: If you can just tell us about the reintroduction of this scheme. Will the ticket size be lower now, what kind of interest are you hoping to see from consumers?

A: It is a scheme that we unfortunately had to stop. We had been running this for a long time; we had to stop because of the changes in the regulation in Companies Act. Now, we are in compliance with the new act and therefore we are commencing the scheme all over again. It is very similar to the scheme that we ran earlier except that the return has to be brought down to levels which are mandated by the Companies Act and which is what we have done now.

We have two schemes running now; one which runs for six months and the other one running for the usual 11 month period. The idea is that customers who want to take a shorter period can do so now and they can buy jewellery as early as April, May next year.

From our own perspective that makes sense because we also want to start seeing some revenues from this. We mentioned this in the past that we generally get about 30 percent of revenue from the Golden Harvest Scheme. So, the next six months we are not going to see any revenue from this because we had to close the scheme prematurely in the last quarter. However, having said that, from next year onwards i.e. from next fiscal, first quarter of next year we should start seeing revenues kick-in again.

As far as the return is concerned, as I said the return cannot be in excess of 12 percent per annum which is what we have pegged it to now. We are hoping that our customers would come back.

The only limit that we have now is that the deposits can only be to the extent of 25 percent of our net worth. So, that is the limit that we need to work with and we are trying to see whether we can resolve that also with doing business with somebody else as well. So, that is something which is on the anvil as of now.

Reema: Given the lower ticket size and plus the constraints which companies like you will face do you still expect the Golden Harvest Scheme to contribute about 30 percent to your revenues say starting next fiscal year or will it be a lot lower?

A: It depends how we do this because as I said the limit of 25 percent was roughly half of what we used to do earlier which means that earlier when we had a deposit, it was about Rs 1300 crore which was accounting to around 50 percent of our net worth. So, we would be therefore constrained to do only 50 percent of that now.

However, as I mentioned, we are working with certain other entities to see how we can do this as a collaboration. We will be obviously well within the ambit of law so there will be no issues on that; on the governance side. However, we are working with other partners and then with that possibly we may not have an issue on the ceiling overall.

Sonia: As a whole do you think this scheme will work at all because on one hand we have seen the demand for gold deteriorate quite a bit; other asset classes are doing much better and on the other hand as I understand the redemption now will have to be compulsorily done within 12 months of paying the deposit unlike what it was earlier. So, do you think the attractiveness of the scheme has dwindled quite a bit?

A: In the past, the schemes were not monitored by anybody and therefore the returns were as chosen by the company. We were giving one installment to every 11 as a discount at the time of sale. There were others who were giving two installments as free for 12 months and 15 months and so on. Therefore it was not a level playing field. Now, with the new Companies Act at least one thing is for sure that it becomes a level playing field.

Secondly, we have seen it as a habit here that most families, women in particular, want to invest in these schemes so that they can buy jewellery of their choice with a reasonable amount at the end of 12 months. It is just a savings habit of the middle class Indian which helps them.

The return by itself might not be fantastic but can you tell me who offers a 12 percent return even if it were to be computed on that basis. No bank offers you that at this point in time. Therefore it would still be better than putting it in a fixed deposit at this point in time and you can buy jewellery that you want.

So, we don’t see the attractiveness of this scheme therefore significantly lower than what it was earlier. If anything there will be more of a level playing field now.

Reema: With respect to this collaboration with other players which can at least remove that hurdle of 25 percent of your net worth and allow you to increase the scope of this scheme will you have to then share your returns with this collaborator, will it then reduce your margins? How will it work?

A: No it is not working on that. Unfortunately I am not able to share the details of this at this point in time. We are still working out with that and hopefully in a months time we should be launching the other one and then it would be amply clear that it doesn’t affect our margins at all.