No immediate plan to list CaratLane: CFO Ashok Sonthalia

Titan’s Chief Financial Officer (CFO) Ashok Sonthalia

Titan’s Chief Financial Officer (CFO) Ashok Sonthalia on August 21 said that the company has no immediate plans to list its subsidiary CaratLane in the near future.

In an interview with CNBC-TV18, Sonthalia mentioned that there are currently no immediate plans and Titan is not actively contemplating the idea of listing CaratLane. He emphasised that Titan's strategy is to manage a collection of jewellery brands under one umbrella, and having two publicly listed companies in the same industry doesn't align with their approach.

CaratLane is expected to grow quite faster when compared to the rest of their portfolio, added Sonthlia.

"If you look at EBITDA margin trajectory for last five year up to FY23, almost minus 9 percent to plus 9 percent it has happened CaratLane is largely diamond jewellery business. So the opportunity to keep inching up margin and gradually not only equal Titan jewellery portfolio margin but be slightly better than that exists and I think we'll see them working towards that," he added.

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The CFO places his faith in the fact that the business has a huge opportunities of growth ahead. He said: "Like we talked about that our jewellery business with respect to jewellery industry in India is current 7 percent market share and will go towards 10 percent by FY27."

Within the jewellery portfolio, Caratlane stands at about 6 to 7 percent, thus hoping to inch towards 10 percent, according to Sonthalia.

Tata Group's Titan also acquired yet another 27.18 percent stake in Caratlane Trading from the founder of the jewellery brand and his family for the amount of Rs 4,621 crore in cash.

Titan is also acquiring 9,190,327 equity shares in CaratLane from Mithun Sancheti and his family, post which its total stake in the company will rise to 98.28 percent, the Tata Group company said in an exchange filing.

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The latest transaction is expected to close by October 31, subject to regulatory approvals, stated Titan.

Funding of the deal

Sonthalia said that this deal with CaratLane will be funded partly via debt, and the rest by cash. As of now, Titan has over Rs 3,o00 crore cash on books.

"As far as this deal is concerned, our balance sheet is pretty healthy, we have a good cash position. But we are going to do part debt funding for this deal and we are working towards that. And by the time deal comes to closer in next two months kind of horizon, we should be ready with  financing plan. But part debt funding is contemplated," he noted.

The Tata Group had initially purchased a 62 percent stake in the beneficiary company in 2016 at a valuation of about Rs 563 crore, post which Titan bought shares of the omnichannel retailer in tranches worth Rs 440 to Rs 450 crore between 2016 and 2019, primarily through secondary purchase of shares from Tiger Global, the only venture investor in CaratLane.

Financial status

CaratLane crossed the Rs 2000 crore topline mark in FY23, thus posting a turnover of Rs 2,177 crore amounting to a 72 percent growth from Rs 1,267 crore that it had reported in FY22. In FY21, the company had recorded a revenue of Rs 723 crore.

The company has been reporting a positive profit before tax numbers for the past three years, thus increasing at 55 percent compound annual growth rate (CAGR) over a five-year period.

Within the June quarter of the current fiscal year, CaratLane witnessed a 32.4 percent year-on-year increase in revenues amounting to Rs 640 crore, with earnings before interest and taxes that stood at Rs 35 crore - an EBIT margin of 5.5 percent.

In the same quarter, CaratLane has managed to add 11 stores, thus taking the total count of the same to 233 spread across 93 cities in the country.