Product mix enhancement to help push margins: Titan

Titan has seen muted sales, up just 2.3 percent, in the September quarter. But that is not just because of regulatory issues. Consumer sentiment has been rather weak in Q2 and that has affected discretionary spending, says Bhaskar Bhat, managing director, Titan. Though utility items and apparels have done better.

Also Read: Titan Q2 net profit up 3.8% at Rs 187 cr, margin expands
He hopes to continue with the margin improvement efforts in jewellery and watches through product mix enhancement rather than cost compression. He told CNBC-TV18: "Everybody in the government is appreciative of the business model of Titan in the jewellery business and therefore understands the need to provide us with that support on hedging, so it will take a while but we are confident we will be able to get that." Below is the verbatim transcript of Bhaskar Bhat's interview on CNBC-TV18 Q: Muted sales just up 2.3 percent, are you getting a sense that things will be better in this quarter or are those regulatory issues going to keep sales muted even during the festive season?
A: Sales have been muted but it is not merely because of regulatory issues. As we have mentioned consumer sentiment has been weak in Q2 and it has affected discretionary purchases of watches as well as jewellery. And I would attribute that as the primary reason for the lower sales. Yes regulatory issues did affect us quite significantly in jewellery but that was more from a supply, hedging, credit, funding and financing side, not so much from a consumer perspective. So we have to understand it in that context whereas utility items like eyewear has grown quite significantly so consumers are holding back on discretionary purchase, they were in the quarter and it is a trend we are seeing across. However there are categories in the market place which have grown better, apparel has done better. Q: In terms of the first half of the year, your second quarter numbers actually dragged down your average so your total revenues have grown by about 20 percent in the first half. What is the guidance for the second half, any ballpark estimate of how much you can grow in the second half and what the overall FY14 topline growth could look like?
A: We don't actually provide any guidance and companies focused on continuing to invest both in advertising, retail expansion led to our development. So irrespective of the market sentiment we believe that our brands and our ability to create this demand and desire continues. And yes the 2 percent is really the nadir I believe and we will certainly do much better. But 20 percent which you are seeing the average for the first half of the year is a challenging target but I wouldn’t be able to provide any guidance. Q: Anything more you can add on the margin front, you were asking permission from the RBI to be able to hedge gold outside. At the moment you do it on MCX. Any reply from the RBI on that and plus your overall view on margins. You all have done admirably well, can you all eke more bps on margins?
A: We have seen an improvement in margin both in watches and jewellery in the quarter and that effort will continue and that essentially will come as product mix enhancement rather than cost compression. Everybody in the government is appreciative of the business model of Titan in the jewellery business and therefore understands the need to provide us with that support on hedging so it will take a while but we are confident we will be able to get that.