Titan Company Ltd

NSE:TITAN

Q4-2025 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to Titan Company Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. C.K. Venkataraman, Managing Director of Titan Company Limited. Thank you, and over to you, sir.

[C. Venkataraman, executive]

Thank you very much. Good evening everyone. It's wonderful to meet at the end of wonderful quarter performance, very, very satisfying across segments, across. And clearly, when -- despite the surround being challenging, whether it is gold rate on the one side or pressures on discretionary consumption. I think the innovation engines of Titan Company, execution excellence on all fronts, assets in the air, on the ground, partners of exceptional caliber deep and wide across the world now. And the tens of thousands of what we broadly call titaniums, putting their heart and soul into everything that they do has delivered a very good performance, very satisfying.

And over to you for the questions.

[Operator]

[Operator Instructions] The first question is from the line of Manoj Menon from ICICI Securities.

[Manoj Menon, analyst]

First of all, good luck to Venkat for all the future endeavors, and I would like to Ajoy, as you take on the new role. Good luck and good bless to both. A couple of questions from my side on the jewelry business. One, given the intent sort of price increase, which you have seen in the gold commodity, I just want -- just some snippets from you in terms of your research as well as [indiscernible] evidence on what the consumer is telling you, right? I mean so either consumer cutting back on the volume side of it, either the consumer asking for more 18 carat? And more importantly, what is -- how do you see this evolving? And what are the plans in place? That's the first one.

[Ajoy Chawla, executive]

Thanks, Manoj. Just reminding you that this is effective 1st Jan. So we have still a way to go. But thanks for your good wishes. And answering your question on what the consumer says. So 2, 3 things are coming out. And this is now -- I'm seeing this over the last several months as gold prices have kind of clicked up so sharply. We are seeing in the INR sub-50,000 price menu, very specifically, more in gold? But also, there is an impact on the consumer sentiment there. Now some of it is us vacating price points because simply gold price goes up. The same product goes into a certain higher price math. That's the story. Let's say, customer sentiment in that lower price band, where we are seeing some buyers being a little reticent. Second piece is, yes, customers are more open to 18 carat gold. So we don't really have the full information as we have just launched some collections in carat gold in certain parts of the country for traditional customers as well. And we hope that we'll see good response. And I know that in CaratLane, we've launched something in 9 carats as well. So there is early traction and I think more and more customers are going to be open to lower caratage, simply because the price point has become quite a bit.

On the higher price bands, while there is buyer growth, we are seeing -- some of the customers actually scaling down the complexity of products they are willing to buy. So it means that if earlier, they were open to buying a higher making charge product, they are sliding down a bit, but they are still buying a certain quantum of gold and a certain value. So there is some indications there. And if I were to answer your question on what are customers telling us in terms of our conversation. They certainly are feeling the pinch. And therefore, they are looking for solutions, both in terms of lightweight jewelry, lower caratage jewelry as well as probably lower making charge. So they still want gold, but they're looking at how they can manage it within their budgets.

[Manoj Menon, analyst]

Understood. Just one quick follow-up and then I'll have a second question. So the quick follow-up here is if, let's say, in a hypothetical scenario because end of the day, gold is just a commodity, if gold corrects 20%, 30% and probably stays there. I know that it may not last for longer. I'm not taking a commodity view here. Even the interim consumers may have more from tenet great deal. Does it have some sort of, let's say, an impact on your medium-term absolute revenue in a situation?

[Ajoy Chawla, executive]

Actually, we would welcome any world price correction because a lot more customers will come in the market. Evidence of that was seen when the finance minister had reduced their duties last year and so many [indiscernible] kind of just jump in. So it's the best situation to be in. It also helps us improve margins actually on various fronts. So actually, we would welcome it. And any value or ticket size drop being compensated by a jump in number of buyers is a fabulous situation to be in. That's it. Can cultivate them.

[Manoj Menon, analyst]

That's a fair one, sir. And it on the second one, I say I understand the diamond prices, let's say, in the wholesale market has declined materially over the last few years, whereas in the retail market, it is probably flat. I'm thinking from a consumer point of view, who, let's say, bought diamond from any jeweller 2, 3, 4 years back with let's say, an explicit or implicit understanding that I can actually come and exchange it at the market drive. Now is there a situation that consumers are coming and looking for an exchange and realizing that my diamond prices has not inflated at all where gold -- and does that have any implication for, let's say, what you actually buying today in an exchange? Is the [indiscernible] more gold over stated or diamonds rather?

[Ajoy Chawla, executive]

So one clarification that. There are different behaviors in the Solitaire segment and especially the bigger sizes 1 carat, 2 carat plus and then smaller carats in solitaires and then the small. More than 90% of us started -- 95% of our started business is non-solitaires, which means we are small. Have the prices really come down in wholesale market or in retail? No. In solitaires, there's a different story. 1 carats plus 2 carat plus in the wholesale, they have come down. But if I were to go back 5 years ago, if somebody has bought, vis-a-vis 5 years ago, the price has not really -- I mean, it went up and it's come down. So the index, it's difficult to kind of mathematically concluded because it's to do with the type of diamond and [indiscernible] big spec BBS, et cetera, simply too many elements, but I'm just giving you an index feel to it. So this is at the wholesale level. And in retail, certainly, anybody who's bought diamonds from us 5 years back, is not going to experience a drop. They may say, okay, it's not really appreciated much. But somebody who bought it 2 years back, may think that the price has come down, but actually, that is more narrative in the media that he might be leading, whereas when she comes to the store, she may say, there may be a 5%, 6% impact. So -- but coming to the question you asked because of this, let's say, narrative or otherwise, if this perception exists, are people saying, let me stick -- go to gold. There is a bunch of people who are saying, especially the high carat solitaire buyer -- and there's a very small number in the entire year that we send to them. That customer has become a little wary of using the solitaires big stone as a means of investment. And therefore, because the price volatility is saying, let's see where this settles and let's see if it starts coming up. So they are holding back. Are these guys going and buying gold? Some of them may be doing so. I don't have exact data to correlate. But we do know that some of the high lifetime value customers are all feeling gold is certainly the flavor at this point in time, and they have no hesitation in buying gold, whereas they may have some hesitation in buying these solitaires. On stated small stones. I don't think this story is at all playing out the way we might be imagining and that is more than 90% of our started. So different stories sitting here in different kinds of segments and very -- we are also leveraging that. And by the way, on the solitaire side, smaller stone sizes, we are seeing a whopping increase in buyers. And at overall level, stated buyers is outpacing gold buyers, whether solitaire or otherwise not now, but the last 2 quarters, and it carries on into this month. April month also it has been that way. So actually at a buyer level, the story is different from the value level that we are seeing. I don't know if I answered you or confused you, but I'll just give you 4 different it.

[Operator]

The next question is from the line of Avi from Macquarie.

[Avi Mehta, analyst]

Yes. Just wanted to spend some time on the jeweller margin. Could you please help clarify this overhead management, which you carried out this quarter? And how sustainable are these gains? Essentially, the context is that despite a weakening mix, we have seen almost 12% standalone EBITDA margin. And hence, is there an upside possibility to that 11% to 11.5% range that we were indicating in prior to this quarter?

[Ashok Sonthalia, executive]

We are so there actually, 9.9% domestic jewelry business is kind of 11.6%. You can see in our disclosure that there has been higher primary for international business, and they had some positive impact on the reported number, okay? But 11.6% nevertheless, had element of a small element of operating leverage as well as some hedging gains sitting it whenever robust growth happens, some element of operating leverage coming in, in jewelry business is quite normal and which has happened. So it is not that extraordinary effort to squeeze out the normal cost which we need to invest for the growth of the jewelry business. It is just the scale going up for last 2, 3 quarters has given that benefit. Of course, we have been mindful of what costs we are incurring and how we are incurring. But it is a combination of operating leverage as well as some hedging gain, which you are seeing that started ratio is slightly lower, but still we are able to deliver. As far as coming to 11% to 11.5% margin guidance, I think that is we're not guiding you or any upside considering the uncertainty of gold prices and many, many uncertainties for future. 11% to 11.5% seems to be more reasonable to think about.

[Avi Mehta, analyst]

Got it. Fairly clear. sir. And the second and last bit is on the demand side. Now you did clearly allude towards the consumer behavior asking for more value, more making charge, and we've been able to deliver that in this quarter as well, it seems like. Now if I were to kind of look at this going forward for FY '26, how would you parse the growth? Are you in a scenario where the last year is giving you confidence of moving upwards of 15%. If you could give some sense on how should we look at the next year?

[Ajoy Chawla, executive]

Sorry, what is 15%?

[Avi Mehta, analyst]

I mean sales growth, sorry, Jesus growth when I say, how should we -- if you were to look at your earlier midyear targets and what kind of is expected for the next few years as on -- in average basis? It does imply upwards of 15% to reach at 2 -- 2.2, 2.25x. And that's we're...

[Ajoy Chawla, executive]

That's the derived figure, yes. Yes, yes. Okay. So I think demand outlook has been driven, especially in this last quarter and even to an extent in quarter 3 by the average ticket size growth, which has certainly been influenced by the increase in gold prices. And therefore, buyer sentiment and buyer growth have been rather muted. And now how this will play out as we go forward very difficult. But certainly from our end, we continue to target high double-digit growth, whether it comes in value, whether it comes out of buyer or ticket size or a combination of the 2, that is a very quarter-to-quarter fluctuating scenario, very difficult to predict. But certainly, we are targeting and we are preparing and aiming for these high double-digit growth. What turns out, of course, depends on the situation.

[Avi Mehta, analyst]

But Ajoy, do you see international at risk because of this tariff stock, et cetera? Or is that not anything to get so much bothered out?

[Ajoy Chawla, executive]

Diny will try and answer that for you.

[Kuruvilla Markose, executive]

This is Diny here. Tariffs as of the way we are seeing things now in both -- in the U.S. market, it's not really caused any significant thing, but that we've not taken any price increases as yet. We're waiting, we will watch how the whole situation unfolds and then basis that depending on what competition also does, it's quite likely that if tariffs go up, then we will take price increases. That how that's going to play out? Will it mute demand. At this point in time, the view would be that it doesn't look likely. And it also looks like between India and the U.S., the bilateral trade agreement is progressing well and it looks that we will reach some kind of an agreement on that. I mean, Trump has just announced that he struck a deal with the U.K. first. And since India has already done a similar deal with U.K. India and the U.S. doing a deal looks quite likely.

[Operator]

The next question is from the line of Videesha Sheth from AMBIT Capital.

[Videesha Sheth, analyst]

Congrats on the numbers. My first question was on the competitive landscape. Last quarter, you had mentioned that the element or the competition element on the gold pricing has stabilized around making charges it was still elevated. So given the inflation that we've seen in the fourth quarter, can you comment on how the landscape has changed? That is my first question.

[Ajoy Chawla, executive]

Yes, I think it is broadly in the same zone as what I said last. Competitive intensity continues to be very high. Price warriors are there. On gold rates, we have not seen that much activity making charge continues to be. It fluctuates, but by and large, I would say, it remains what I said last time.

[Videesha Sheth, analyst]

Got it. Got it. And then the second question was on the studded jewelry part of things. As a category leader, how would you think about revising consumption in this segment going forward? In the [indiscernible] partnership is a in that direction, but any others or have you identified any additional initiatives on this front that could stimulate the one?

[Ajoy Chawla, executive]

Actually on studded, as I said, there are 2, 3 segments. You think of it as solitaires within that, there is lower sizes and bigger sizes. Lower sizes, the demand has already revived and we've, in fact, aggressively pushed forth on. Using our distribution network as well as our ability to source and supply. So that we are seeing very good growth. So that's been one lever. We've pivoted away from larger carat sizes to smaller ones, and it's showing up in numbers very well.

In terms of jewelry, studded jewelry, if I think of our portfolio across Tanishq, CaratLane and Mia. And if you were to look at it in the sub-50,000, sub-1 lakh range. I think we've still been able to clock in maybe early double-digit growth in that area. Thanks to the portfolio play and therefore, pushing the portfolio play, including network pension across CaratLane, Mia and distribution debt even in the Tanishq stores. I think that is the second lever. Third lever that we are really looking at is reducing the price points for customers by looking at lower caratage. So if people have been used to buying 18 carat studded, they're also now beginning to get comfortable with 14 and in case of CaratLane, they've also introduced 8 carats. So these are 3, 4 different levers, but nevertheless, desire creation and excitement by each brand continues to be at the heart of it all because finally, it's an adornment product, and she is wearing it to experience an emotion. So I think that continues to be a very big lever.

[Videesha Sheth, analyst]

Understood. That was helpful. Just a small follow-up to this on the CaratLane and you launching the 9 carat -- jewelry had the 9 carats as well. But given not hallmark in nature, how do you expect consumers to react?

[Saumen Bhaumik, executive]

This is Saumen. We launched this in 9 carat jewelry sometimes around Valentine and we saw a good response. This is not hallmark. We are not claiming it is hallmark. But it is stated as 9 carat, diamond jewelry, it is sold like 9 carat diamond jewelry. But it is also quite likely that 9 carats going to come under hallmark very, very soon is a space. So I think that will settle down very soon. And otherwise, we saw recent response. And in the gold rate increase, I think it's a lot of adoption for customers. We're also looking at adornment rather than in just the investment.

[Operator]

The next question is from the line of Arnab Mitra from Goldman Sachs.

[Arnab Mitra, analyst]

Congratulations on our trade performance across all the businesses. My question has been around studded where I'm coming from is when you anecdotally speak to a lot of people who historically have gold, diamond [indiscernible] to rich families. That segment seems to almost suggest anecdotally that we are not going to buy diamond or they are going to buy much lesser of diamonds going ahead. But your growth rates, buyer growth are all very good. So are we like dealing with completely different sets of consumers here? Are you getting the growth from people who are buying diamonds for the first time in your view? Just trying to understand the disconnect that a lot of people feel between -- when you speak anecdotally and versus actual numbers, which show good growth for you?

[Ajoy Chawla, executive]

Yes. Actually, there are many segments. And frankly, some of us anecdotally speak to only some other people like us and they may be all already diamond buyers and fairly well off and very world diamond buyers. So -- and again, if you happen to be speaking to the type who is seeking solitaires as an investment buy, then that's another -- subsegment within that. So I would say that there are simply too many different segments. And the segment whom you are referring to, the ones who buy diamonds for investment is a rather small percentage of the total stated buyers, existing or even if I think of the penetration of -- I mean, amongst new, of course, we started buyers the vast ocean of this. So I'm not even saying -- certainly, there are new people coming in, but even existing studded segment, this is a rather small percentage of people that we may be anecdotally receiving such pieces of information. And even they might be fluctuating in their behavior. When it comes to adornment, they may have no comms in buying, smaller stones, et cetera. And when it comes to investment, they may be having a different point of view.

[Arnab Mitra, analyst]

Right. So from the data that were this is buyer growth is pretty strong, that -- the fact that the value growth is not keeping up is purely a function of the fact that gold is a smaller component of the jewelry and therefore, the unit price hasn't gone up as much as gold?

[Ajoy Chawla, executive]

No, I didn't -- No, no, see, buyer growth is higher and studded than gold, but gold has been rather done because of the INR sub-50,000 segment, okay? Now that's the only piece here. At the high value and is there a customer for studded jewelry certainly. Value growth will come. It's a mix of both. I don't think I cannot conclude that growth will come only in the lower end and studded and higher end in gold, nothing like that. There is opportunity both is. In fact, India is minimizing and there are a lot more Indians we're happy to spend on high-value studied as well. So it's not a commentary of this piece at all. There is opportunity in gold. And I was just making the point, even in the INR sub-1 lakh studded, we are seeing -- because of a portfolio play, we are seeing an early double-digit growth, which this is not a commentary on what is happening on the higher-value studded.

[Arnab Mitra, analyst]

Got it. Got it. And my last question was just on this -- we had obviously a lot of moves around lease costs going up during the quarter due to tariff speculation. So has it impacted this quarter in any way for you? And is there any lingering impact going forward on that? That would be my last question.

[Ashok Sonthalia, executive]

So you see, like, of course, you are right that as major reaction to gold on lease rate. The rate has gone up, almost doubled and more than doubled, and it is settling down now. But more than that, even gold price, gold rate also impact our financing costs because now the same quantity of GOL is far more expensive 30%, 40%, and I have to pay interest on that 30%, 40%. So just the rate increase had a small impact, but overall gold price increase had a larger impact for the full year as far as GOL interest cost is concerned. But the good news is that after that GOL rates have been settling down. And I think they are now about 75, 80 basis points above the historical number. And we will see how do they play out in FY '26.

[Operator]

The next question is from the line of Kunal Vora from BNP Paribas.

[Unknown Analyst]

Just one question. From the market that the wholesale price of LGD have been crashed in different months. Why are you picking up about the state of LGD retailers? And is LGD coming up in your conversations also if you can update us on your retail used on entering the LGD space?

[Ajoy Chawla, executive]

So I can share with you what has picked up about the retail and wholesale prices of LGD. Most Certainly, the wholesale price has -- was anyway coming down continuously and it continues to drop. And I think that will not stop because even automation will happen and many other tech developments and productivity developments will push costs down like any tech product. But interestingly, even on the retail side, many of the players were retailing LGD products at roughly INR 60,000. Now this is to be taken with a pinch of salt because the caratage is not exactly straightforward. That has now come down to INR 30,000 for many players, barring 1 or 2 players who are continuing to retail it at INR 60,000. And there are new players coming in all the time. So our estimate is that the market will continue to drop the retail price of LGD per carat, and that will make it much, much more affordable. And I'm not sure how the unit economics is going to play out for a bunch of these players. -- unless we see a large number of totally new buyers coming into studded which, of course, if it happens is great news for the industry overall. So it is a choppy situation. But nevertheless, even at INR 30,000 a carat retail price, the markups are quite healthy. So I suspect there will be more price warriors who may come. But this is just to give you an overall narrative and where this will end very difficult to predict.

[Unknown Analyst]

And what about your thoughts on entering the space the drop in prices, does it make it completely enviable or would you give it a thought at some stage?

[Ajoy Chawla, executive]

We'll keep thinking about it. It's the best I can say because the stability has not been reached, and it's not that everybody is coming and asking for LGDs, et cetera. And many shares are jumping in any way. So I think it's too premature to comment.

[Operator]

The next question is from the line of Percy Panthaki from IIFL Securities.

[Percy Panthaki, analyst]

I just wanted some clarity on this hedging gain -- so my understanding was the purpose that we hedge is that the EBIT margins of the business remained by any volatility in the gold price, but you are saying that the reason why margins are higher is because of some hedging gains? And the second question related to this is that when the gold price is going up, we should actually have a hedging loss because we are recovering higher from the consumer and to offset that inventory gain, actually, we are entering into a future contract. So that contract should give us a hedging loss. So can you just address these 2 issues, gaps in my understanding, please?

[Ashok Sonthalia, executive]

So gold is volatile at this point of time. And we have -- if I can use the word contango gain when you are doing forwards in gold thing. When you do the future, there is a different economics when you do the forwards with the gold on international exchanges, then there is a different economics. And we have been able to do some of that transactions in quarter 4, which gives us contango gain. And that is what the region is. And it's not so because every time it keeps moving, and there are thousands of transactions, which get us quired up on everyday basis from our side. So overall basis, when I compare that we have a small hedging gain. We are not -- and your idea is correct. When we move from cash flow to fair value, if you remember, the idea is to not disturb P&L through hedging actions, but we have contango gains because we are able to do forward transaction on international exchange.

[Percy Panthaki, analyst]

Understood, sir. Understood. So this contango gain is a onetime permanent gain? Or will it reverse next quarter?

[Ashok Sonthalia, executive]

No. So there is a part which is a timing while the period of forward will kind of keep accruing and then there could be a part which can reverse also depending on the gold price.

[Percy Panthaki, analyst]

Okay. So part permanent and part phasing. Is that how I should take it? .

[Ashok Sonthalia, executive]

Yes. Yes.

[Percy Panthaki, analyst]

Understood. Sir, second question is on the outlook for jewelry growth next year. So see, while the gold price inflation has definitely dampened the buying sentiment number of buyers are coming lower, et cetera. But still, there is some amount of inflation, which is sort of at least partially benefiting us. because the gold price has, let's say, doubled in the last 3 to 4 years almost. So the person will not cut down his volume by half. He might cut down is volume, but there is still a net-net gain in the overall outlay per customer. And that has benefited and you have done close to about 25% kind of top line growth this quarter. So my question is that if we assume that the gold price remains where it is currently, then should we expect this 25% kind of top line growth to continue for the next 2 to 4 quarters?

[Ajoy Chawla, executive]

So Percy, this is Ajoy here. The 23% or 24% growth that you have talked about, I'm not just 25%, maybe domestic primary sales growth reported in SV is showing up as 23-point-something percent. But that percentage is because there was also some amount of upstocking that happened in the year-end because of an early upset, right? So if I go down to the secondary growth, actually, the retail growth it is around 20%. So I just wanted to correct you there. Certainly, what you said is true, when gold prices are going up sequentially, there is a benefit. There is a value growth and therefore, there's a ticket size growth that we see. And in our mind, as I mentioned in an earlier question, we are certainly planning and targeting and also hoping for a healthy double-digit growth, either driven by ticket size or by buyer or by both. So outlook for jewelry continues to be positive. If I may pick up 1 or 2 other threats, while we've spoken a little bit about the headwinds on price of gold, See, this year is a very good wedding season in quarter 1. Last year, there was elections in quarter 1, and there were no waiting days. infrastructure spending by government has continued and will continue for the first 4, 5 months, which was not there last year. There is also the largest from the finance ministry on the for a large number of people in the country, maybe not directly, but at least a secondary and tertiary second order, third order benefits of that will start flowing into the economy. There is also a lot of liquidity being injected. So a lot of positive tailwinds are there despite the uncertainties that exist in the market. So our outlook for jewelry, not just for the year but for the next few years, continues to be bullish. And we are committed to driving healthy double-digit growth year-on-year.

[Percy Panthaki, analyst]

Got it, sir. If I might just push this a little bit, can we say that the growth rate trajectory has possibly, at least in the next couple of years move up from high teens to slightly higher than 20%?

[Ajoy Chawla, executive]

I can't say that because that would be getting ahead of myself. We happen to have delivered a 20% growth in 1 quarter. I -- we have to be a little bit more careful in making the statements. I would still say it is heavy double-digit growth, whether it is going to be 15% or 20% or something in between the two. We would still leave it at that. Between 15% to 20% is a fairly good rate, I would say.

[Operator]

The next question is from the line of Vishal Gutka from ASK Investor Managers.

[Unknown Analyst]

Sir, I have one question on the franchisee format. So my channel tips are suggesting that you're piloting a format where capital will grow by franchisee and you'll be running the store, I think Kalyan run filler kind of store. Is this true? And if it's true, then historically, capital hasn't been ever been a challenge for us. Just wanted to get your comments on this.

[Ajoy Chawla, executive]

We have -- there is -- we are always learning because we expect competition and what we do and there's not something we learn from them. So we study what they are doing and what a few others have done also in different ways. The second piece is we have also many associates and partners who may not have the succession planning in their own firms or in their family. And many of them have been with us for a long time. So we also start thinking about how do we kind of ensure some continuity. And yet they have an ownership because they have a relationship in that neighborhood in that catchment -- there's a lot of respect. And we also have a lot of care because they've been with us for 25, 30 years.

[Unknown Analyst]

So that's another factor that we are keeping in mind. And therefore, yes, we will continue to experiment formats. It's not so much from capital scarcity, but also from the point of view of, is there some merit and advantage in doing so?

[Ajoy Chawla, executive]

Because increasingly, the business is more complex also. And many franchisees may not have that level of organization depth to be able to manage some of these things. So we are also looking at it from that perspective. But having said that, as an organization and as a brand, we are not wanting to run too many stores on our own, especially not beyond the top 10, 12 cities in the country because it's more complex for us to manage. Whereas our presence is across 300-odd towns. So we will still be a largely franchised network with limited cities where we will do. And the 2 only stores where we have large turnover actually.

[Unknown Analyst]

Got it. Got it. Sir, and just one book keeping question. What is the store opening in for Tanishq for domestic business? How many should we are planning to open?

[Ajoy Chawla, executive]

40 to 50 stores. But importantly, we are also looking at 50 to 60 stores of existing stores being either renovated or relocated or adding additional space, and I say additional space, it's like adding an entire store. So transformation program is underway in the last 2, 3 years, and it will continue in the next 18 months. And the headroom on that front is rather more high compared to even the headroom on the network. While we'll continue to grow network into new catchments and cities, even this is a big piece of our growth.

[Unknown Analyst]

Got it. Got it. And then [ 50 ] most of them will be L1 format, right, for you?

[Ajoy Chawla, executive]

No, no. No, no, no. Most of the -- in fact, new ones are likely to be the franchise L2 or L3. Very few will be L1.

[Unknown Analyst]

I'm talking about the renovation part to all [ 50 ] distribute planning to renew for...

[Ajoy Chawla, executive]

No, no. No, no, no. Those are also mix L1, L2, L3, all formats. We have, in fact, transformed 160-odd stores in the last 2 years, which are a mix of franchise and company.

[Operator]

The next question is from the line of Devanshu Bansal from Emkay Global.

[Devanshu Bansal, analyst]

Congratulations on a performance. Sir, from a balance sheet perspective, there has been an increase in our working capital, and that has sort of made to some fall in our return ratios also -- this is obviously due to increase in gold price and related volume consumption. How do you plan to deal with this as gold prices are continuing to increase. So there is a significant working capital increase. So how do you plan to be...

[Ashok Sonthalia, executive]

Yes. So largely, you are right. This is all on account of gold price increase. And of course, some investment of inventory is done in some of the catchment. If gold price continue to rise like this, while we have some levers of increasing our GOL level, et cetera, et cetera. But it would certainly require some more capital investment from our side and for which our balance sheet can be levered, it is capable. But idea would be then to leverage UL more. We -- and it is very unpredictable to what would be the gold price trajectory going forward. we will wait, watch and see and kind of keep responding to the evolving situation. But yes, you are right, in the current context, a little bit of strain on working capital has come in. And that year end number, which you see, Ajoy, had spoken about, Akshay [indiscernible] being early there has been up to stocking towards end of March. So the balance sheet number, which you see is a point number, that's not the story for the full year.

[Devanshu Bansal, analyst]

Understood. Ashok, also, if you are open to sort of call out the that quantum of the hedging gain this quarter, you are calling that out.

[Ashok Sonthalia, executive]

No, it's not that significant that we should call it out. It's not that significant. But it is one small factor in that marginal EBIT margin, which you see. So nothing so significant that we start calling it down.

[Devanshu Bansal, analyst]

Understood. Sir, last question from my end. The overall jewelry UCP is 20%. Can you call out the secondary growth in studded sales, so reported is 12%. What is secondly, growth in studded sales for Q4?

[Ajoy Chawla, executive]

Yes, I'll tell you. This growth -- I'll tell you. one minute. It's around -- it's around 12%, I think 10%, 12% there. Maybe not 12%. I don't have the exact figure here. Almost similar to what [indiscernible].

[Operator]

The next question is from the line of Jay Doshi from Kotak.

[Jaykumar Doshi, analyst]

And my question is on industry practice of exchange and cash back in case of studded jewelry. Now in a hypothetical scenario, if the consumer behavior changes and consumers are sort of exchanging more steady agility in future and by gold jewelry on visited cash back that could have a significant impact on profitability for overall inventory. So I just wonder, is this something that comes up in both discussions or industry association discussions. As an industry leader, how comfortable are you with this policy that you have today? Maybe anyone who has potentially bought any studded from you in the past 10, 15 years, can always come back and give it to you at 10% lower price or 15% lower price versus the current pricing. And that's because partly, there's a big gap between your procurement costs for Diamond and your retail pricing for diamond. So I want to understand from a risk management perspective, is this something which you think about.

[C. Venkataraman, executive]

Yes. Venkat here, just some perspective. In India, the category of jewelry is so much about store of value. And in a way, the exchange policies reflect that customer need, and therefore, even the lower -- relatively lower gross margins in this industry in India, because of the store of value concept because customers don't want to lose when they exchange. I'm talking in general, I come to our diamond jewelry point in a minute. So that depresses the markup potential in India versus, let's say, in the U.S., it's not a store of value. It's an accessory. The markets are like other accessories. Now in a way, related to the store of value concept because also of the connections to culture, tradition, feeling of wealth, people don't like to sell jewelry, the exchange jewelry, but unless there is a calamity in the family, they don't sell their tools. And it's in a way related to the store of value and of course, also related to the done aspect of jewelry. And therefore, like we have had this policy for -- you can exchange gold as well as diamond jewelry for cash. That policy has been there for more than 2 decades, but the incidence is us really in the decimals, in the small decimals because of this. So unless generational views on the subject changes, which maybe 20 years, 30 years for yes, and that's a very long time for us to talk about here. this is not -- because it has not materialized in its actual increments on this. And even what you're asking, which is people coming in with diamond jewelry exchanging it for gold, even that incidence is very, very low.

[Jaykumar Doshi, analyst]

Understood. So basically, exchange proportion is broadly similar and that has not changed whether it is for gold or diamond in the...

[C. Venkataraman, executive]

Gold to diamond, yes, because diamond is an upgrade product. for those who never had diamonds.

[Jaykumar Doshi, analyst]

Yes. And just to add a little bit. I have personally seen many customers we are extremely delighted when they come back after several years and say, wow, diamonds, my gold, everything is appreciated. That feel good factor is so much that she is very happy to, in fact, upgrade and add some a lot more. And therefore, the upsell we see on exchanges out of that goodwill. And in fact, the statement is only a data company like this would be such appreciation and thing. So actually, we are.

[Ajoy Chawla, executive]

We see a lot of positivity and the risk factor hypothetically does exist, but it hasn't played out like this so far. And we hope it is it.

[Jaykumar Doshi, analyst]

that's very helpful, very clear. Second question is in FY '25, you have standalone every growth was 21% and EBIT growth was 12%. Now [indiscernible] with maintaining your EBIT margin guidance, and the ballpark expecting growth between 15%, 20%. Do you think FY '26, even notwithstanding the volatility gold we are seeing and the mix changes that we continue to see. Do you think that the gap will now narrow and your EBIT growth also will be ballpark in that range, 15% to 20% or maybe a couple of percent points sort of top line growth?

[Ashok Sonthalia, executive]

If we are going to maintain EBITDA margin, then it has to be. Otherwise, there is no way we will be able to maintain EBIT margin. So that that's the expectation. But market is very, very -- and while this is the current view and if circumstances change dramatically, then we may have to get back to you guys talking about it. But right now, whatever we see with that, we think, yes, will be able to grow at a similar pace.

[Ajoy Chawla, executive]

I'll just add one more piece. Our priority to continue to grow top line and acquire customers is the highest and sometimes we may be willing to invest some of that margin into growth. And that's been the outlook, and that's also been the guidance from our Board and [indiscernible]. So margins may sometimes come down if the competitive situation or the consumer sentiment is adverse.

[Operator]

The next question is from the line of Harit Kapoor from Investec.

[Harit Kapoor, analyst]

I also had a question from competition. So in an environment of -- the 2 aspects to it in an environment of top increase in gold prices. Are you saying that we have not seen a pickup from, say, regional private smaller guys who probably would be sitting on higher inventory gains on schemes, et cetera? Have has that intensity not accelerated? And the second part of that was, you may explain gold metal loan quite well. I just wanted to understand is the availability of the gold metal loan and the fact that it is stretched because of the higher gold prices also a source of competitive advantage for you because your item and you can kind of get it at a lower rate as well as have probably a finite kind of working capital and so just could you some shed some light on these assets?

[Ashok Sonthalia, executive]

Yes. So gold on loan, your observations are right. We are in the best position in the industry as far as India is concerned to leverage gold on loan, get the best rate and a substantial amount of limit without any concern from the banks compared to other where they would kind of beyond the point will not like to extend that gives us a competitive advantage and ability to invest in inventory at higher gold prices. The first question was on the demand side, competitive intensity. Yes, those who don't hedge do sit on inventory gains and they are willing to let go of margin and they play it out in the form of heavy discounting on making charges. And it is not just restricted to small players, which is also even larger players, not every large player is hedging 100%. So it does play out. So yes, but we also then respond in whichever way is appropriate for that market. And therefore, it's a complex constant gain share, invest in providing value to the customer in some brand, customer experience, product design, making charges, everything comes together as a value proposition.

[Harit Kapoor, analyst]

Because my question is just why again the question is because the pace of gold rise has been so sharp this time, maybe that there could be more investment by large private small dilatation in -- you're saying it's a manageable scenario right now.

[Ajoy Chawla, executive]

Yes. I mean I think it's not new now. I think it's -- if you ask me last 12 to 15 months has continued to play like that. And we have got used to this.

[Harit Kapoor, analyst]

Got it. And the second part is on a couple of data points in the World Gold Council data. One was you said that exchange as a percentage has not dramatically gone up in spite of prices going up so sharply. We see that the new buyer growth might have been a little bit more surprising, I should have probably fallen off a little bit more in the industry. And the second was on the fact that the overall demand growth has been valued on this 3%. So on these 2 points, you are growing far, far faster as you have been historically? Is that -- has the shift kind of further accelerating in this rising board price environment towards organized players? And are you surprised that you're still seeing [indiscernible] growth in spite of the market increase in the gold price and exchange is not dramatically gone up. Those are my questions.

[Ajoy Chawla, executive]

No. So exchange has gone up somewhat. If I look at this quarter 4, the contribution of change has gone up by a couple of percentage points. That's one. new buyer growth, especially gold has flagged off. And certainly, as I said, in the lower price bands, so it's not that we are glazing away to new buyer growth in gold. No. In fact, quarter 3, quarter 4, it has been very muted. And therefore, higher growth in ticket size. It usually comes from higher repeat. So the skew between repeat and new has been there. Some of the overall new buyer growth percentage figures we are seeing is to do with the overall portfolio because Mia has opened a lot of stores, et cetera. And that is giving us some benefit in the new buyer growth. But if I dissect it by brand and go into by store and channel, there is -- and by category, there is a similar point as what World Gold Council has said. But exchange has gone up certainly in contribution by a couple of percentage points in quarter 4.

[Operator]

The next question is from the line of Tejash Shah from Avendus Spark.

[Tejash Shah, analyst]

Congrats on good set of numbers. Sir, just one question. You mentioned that our wait in what [indiscernible] MGD continues. But just to clarify, is the focus on assessing long-term customer relevance of this offering? Or are we still evaluating the economic liability of the business model there?

[Ajoy Chawla, executive]

I think it's both. The first one is certainly very important, what do customers think and customers are not that clear. They are be confused and many others, there are people who would like to experiment. There are people who are getting a little worried about the prices, and there are many new customers who come into diamond jewelry and won the authentic piece they are not so confident. So right now, I would say in the balance, there are many more people who are already diamond buyers who may be buying LGDs and many new to the category are still a little hesitant. And I think the store of value that Venkat talked about pretty much plays up higher demand. But definitely, the customer piece is more important. Economic piece, we can figure out funds we know what the customer really wants and how it plays out. Economic piece is how we manage the business.

[Tejash Shah, analyst]

Okay. And lead to the same cross our engagement with customers here and abroad? Or is it changes because the store of value understanding also changes?

[C. Venkataraman, executive]

Sorry, what is the question?

[Tejash Shah, analyst]

Is readthrough on customers, is it same across in India and abroad? Or then about because the store of into is different over there, it is slightly different than how we are leading customers in India are eligible?

[C. Venkataraman, executive]

At the moment, and Diny can add. At the moment, our focus in the U.S., the most are market in our overall situation. Indians are more Indian in the U.S. than in India. And the store of value is quite pronounced there as well. So...

[Tejash Shah, analyst]

And lastly, are there any reasonable nuance that we would like to call out in this quarter's number in terms of North, South or any red there on demand?

[Ajoy Chawla, executive]

I think East and South continue to lead the growth and Western North have been a little more sluggish. And within that, again, West maybe a little bit more than Mark has been sluggish. But that is -- I think this -- that seems to have been the trend of the current -- the financial year that just ended 31st March.

[Operator]

The next question is from the line of Moksh Venkat from Aurum Capital.

[Unknown Analyst]

All my questions have been answered.

[Operator]

The next question is from the line of Vivek [indiscernible] from Jefferies.

[Vivek Maheshwari, analyst]

Three questions from me. First, on LGD again, one more question. On the LGD side, is your worry more about given you are the market leader in jewelry, you do not want to, let's say, create -- or create is the wrong word, I think, expand the market because we have seen someone like, let's say, a retailer like trend, which has also entered into this. So is it more about you don't want to innovate cannibalize your own business by existing diamond business by creating more awareness. Is that the hesitation reason for hesitation?

[Ajoy Chawla, executive]

See, we are trying to understand what the customer wants. And frankly, that is what guides us. And how is the customer thinking about it? And we are still seeing customers are a little unsure. The trend has got into it as purely an independent decision, and it's not something that is not playing in mind at all. We need to be clear what is the value proposition we need to offer to the customer. And at the next level, we need to be clear what will be the source of differentiation and continued competitive advantage in a category which could get very easily commoditized because of price. So these are important considerations for us. And I don't know whether you should call this hesitation or examining and reflecting as to what is the right thing to do.

[Vivek Maheshwari, analyst]

Okay. And is your internal view also that LGD will have no impact on, let's say, natural diamonds or where you are on that bit?

[Ajoy Chawla, executive]

Very difficult to answer that question because how it plays out will depend on whether new customers will the market expand? That's the big question. And if the market expands and penetration of diamonds, which is as low as 15% in our country. It goes up even by a few percentage points, it can be many new customers and it can be a win-win. In the short run, there may be a lot of ups and downs in industrial set somewhere. Very difficult to predict. Some pluses and minuses can happen. But I think we need to look at it over a very longer period and see where it has to settle.

[Vivek Maheshwari, analyst]

Got it. Got it. My second question is, there are obviously, at least globally, whatever -- and I have admittedly very limited understanding on this, but I hear that part of the reason why natural diamond prices actually went down were because of LGD. But what we -- what -- there was a recent media article which said that natural diamond prices actually moved up 10% this was in the month of March or April -- end of March, I think. Do you have any insights as to what drove this change? And is that something more, I don't know, secular is the right word or not, but I would still use that. So is there something which is happening, which is why natural diamond prices moved up?

[Ajoy Chawla, executive]

Again, I think it which reflects the wholesale prices of RAF and again on the higher caratage second. It is probably on the back of Chinese demand perhaps coming back. I don't have more insights on whether it will go further up or that was the bottom and from here on, it's up difficult. Only the rough suppliers. And what happens is in international markets will really determine the price on that. Very difficult. I don't have an answer to your question. Sorry.

[Vivek Maheshwari, analyst]

No, I appreciate. My last question is on the sequential basis, we have seen jewelry margins actually moving up, and Ajoy, clarify that there is no major hedging impact because of which the margins have moved up. And are channel checks actually indicated in the last few months given how gold prices moved up, especially in the fourth quarter fiscal there was a lot of, let's say, discounts or making charges promotions given by regional players, local players. Why is it that this has not shown up in your numbers? What am I getting wrong over here?

[Ajoy Chawla, executive]

See, the gross margins have been impacted because of the product mix. No question. I think Ashok did share a fair amount of, let's say, answer observations on the fact that there's a mix of operating leverage and some hedging gains on time go, et cetera. So those pieces have probably played out in the -- not probably have played out in the EBIT margin percentages that you are seeing. Gross margins have certainly impacted on 2 counts. One is product mix. The other is the price of gold itself playing a role in the stated margin line item level as well. We've explained that earlier before when prices of gold go up relative to the diamond. There is an impact on the gross margin for the studded jewelry line item it set. So combination of these 2 has impacted gross margins. sorry, and sequential piece that my colleague here reminds me. This is also because we started the ratio in Q4 versus Q3 is different. You'll see the rather more gold season. In Q4, we have a lot more diamonds, so that would be another factor.

[Vivek Maheshwari, analyst]

Right, right. I mean when I said sequentially, I mean, I was looking at all the rolling 4 quarters, for example. The only thing was what Ashok mentioned was there is no big impact of -- any one-off on the EBIT side except the operating leverage, right? So in that context, basically, the discounting or whatever we saw on the ground, it was miniscule compared to -- or you did not face that pressure as much, except for a slight impact on gross margins, which got offset at the, let's say, due to operating leverage. Is that a fair understanding?

[Ashok Sonthalia, executive]

Yes, I think you are right.

[Operator]

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. Venkataraman for closing comments.

[C. Venkataraman, executive]

Thank you very much for all those posing questions and the encouragement as always. See you in the next quarter, and good night.

[Operator]

Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.