Fact:
** Titan proposes to change its name to “Titan Company Limited” from “Titan
Industries Limited” (it was incorporated as “Titan Watches Limited” in 1984).
** It plans to amend the “Objects” clause of Memorandum of Association
enabling it to enter newer businesses (excerpts below):
1. Hearing aids and related accessories
2. Apparel, garments, sarees, writing instruments, mobile phones,
musical instruments, lifestyle accessories, etc.
3. Rendering content through educational workshops, conferences,
theater, entertainment shows, gadgets, toys, DIY kits, activity books,
sports products, food and beverages, etc.
4. Kitchen appliances, storage shelves, kitchen utensils, chimneys, hobs,
furniture and cabinets, etc.
5. Products powered by solar energy
Deutsche view:
** While we believe that Titan is unlikely to aggressively enter many of these
new segments, the intention seems clear—to diversify from jewelry (which
accounts for c.80% of profits) in the medium term.
** While the company believes in its ability to incubate and grow new
business lines, it will likely face organizational challenges. It would require a
significant mindset change to incubate smaller business at this point, as the
jewelry division is c.INR80 bn in sales (in our view, there are parallels in
Hindustan Unilever’s Foods and Ice cream business—top management
attention and adequate resourcing are challenges faced by small businesses in
large companies).
Retain Hold
Titan's jewelry business model's attractiveness has diminished substantially
with the recent Reserve Bank regulation which effectively bans the 'gold-onlease' model. Even if we look beyond the near-term earnings cuts, the
overhang of further regulation (likely curbs on advance purchase scheme)
cannot be ignored. Recent stock correction reflects some of the concerns.
Retain Hold rating.
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** Titan proposes to change its name to “Titan Company Limited” from “Titan
Industries Limited” (it was incorporated as “Titan Watches Limited” in 1984).
** It plans to amend the “Objects” clause of Memorandum of Association
enabling it to enter newer businesses (excerpts below):
1. Hearing aids and related accessories
2. Apparel, garments, sarees, writing instruments, mobile phones,
musical instruments, lifestyle accessories, etc.
3. Rendering content through educational workshops, conferences,
theater, entertainment shows, gadgets, toys, DIY kits, activity books,
sports products, food and beverages, etc.
4. Kitchen appliances, storage shelves, kitchen utensils, chimneys, hobs,
furniture and cabinets, etc.
5. Products powered by solar energy
Deutsche view:
** While we believe that Titan is unlikely to aggressively enter many of these
new segments, the intention seems clear—to diversify from jewelry (which
accounts for c.80% of profits) in the medium term.
** While the company believes in its ability to incubate and grow new
business lines, it will likely face organizational challenges. It would require a
significant mindset change to incubate smaller business at this point, as the
jewelry division is c.INR80 bn in sales (in our view, there are parallels in
Hindustan Unilever’s Foods and Ice cream business—top management
attention and adequate resourcing are challenges faced by small businesses in
large companies).
Retain Hold
Titan's jewelry business model's attractiveness has diminished substantially
with the recent Reserve Bank regulation which effectively bans the 'gold-onlease' model. Even if we look beyond the near-term earnings cuts, the
overhang of further regulation (likely curbs on advance purchase scheme)
cannot be ignored. Recent stock correction reflects some of the concerns.
Retain Hold rating.
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