Titan is primarily an urban-focused company, while wedding rush and demand from tier-2 and tier-3 cities to add sparkle. Tanishq (jewellery) store network over the past 12 years shows 54% of its stores are now in semi-urban / rural areas (with <1mn population) vs 27% in 2011. We expect Tanishq to benefit from
Titan: Growing demand from smaller towns to add sparkle
(1) Long-term transition to organised,
(2) Strong demand from wedding jewellery and high-value studded jewellery,
(3) Consumers tend to see gold as an investment and indulgence,
(4) Hallmarking to benefit formalisation with increased consumer awareness on ethical standards, and
(5) Consumer desire for a better shopping experience (transparent pricing, buyback).
Tanishq store penetration increased in semi-urban/rural areas. Tanishq’s store network change over the past 12 years indicates that the share of stores in semi-urban / rural (defined as cities with <1mn population) has increased to 54% now from 50% in 2020 and 27% in 2011. It currently has 127 stores in 126 rural areas as compared to 32 stores in 31 rural areas in 2011.
According to the World Gold Council (WGC), 50-60% of gold purchases in India take place in rural locations. To capture this market opportunity, chained stores with national presence focusing on daily wear and fastmoving jewellery accounts are expanding their network in tier 2 and tier 3 cities.
In terms of the people considering buying gold jewellery as per a WGC survey, weddings generate ~50% of the annual gold demand in India. This also has to do with people buying gold for investment, the tendency to save more is visible higher in tier-2 and tier-3 cities than metros, where people have more options to spend money whereas such options are limited in smaller towns. The reason for rural spurt is because 60-70% of jewellery buying in these markets is wedding-driven unlike metros.
Company’s market share in jewellery was ~6%. Have a pipeline of 30-40 Tanishq stores for FY23, however if good locations are available this could go up to 50. The company aims to achieve consistent double-digit revenue growth over the next five years by strengthening core businesses such as watches, jewellery, and eyecare through efficient capital allocation.
Tanishq store presence in rural areas 2022
Sales during the Akshaya Tritiya quarter rebounded strongly after a 3-year gap. Q1FY23 growth was driven by both buyer and ticket sizes, with a new buyer contribution of 46%. The wedding season worked well for all brands and channels especially in April and May. The company added 24 jewellery stores (including CaratLane) in Q1 FY23, this includes 3 stores in GCC (Gulf Cooperation Council).
Prescription eyewear retail by Fastrack, a new initiative by Titan EyeCare, expanded the reach with addition of 2 new brand stores in Bengaluru. Division achieved its highest quarterly revenues of ₹183 cr. in Q1FY23 led by growth in all its major categories.
Jewellery division revenue increased by 18% year on year to Rs.6980 cr in Q2FY23 on a high base of Q2FY22, which included pent-up demand and spillover purchases from a COVID-disrupted Q1FY22. Walk-ins increased in the low double digits year on year, with consistent buyer conversions. New store commissions included eight domestic Tanishq stores, 16 Mia by Tanishq stores, and one Zoya store, bringing the total number of jewellery stores to 488.
The watches and wearables division grew 20% year on year, resulting in the division’s highest quarterly revenue. The other segment of Fragrances and Fashion Accessories (F&FA), Indian Dress Wear) remained strong. Taneira (Sarees) increased by 114% year on year in the latest quarter, with significant contributions from new stores opened in the last year. The brand expanded its reach to 31 stores across 14 cities by entering the cities of Madurai, Hubli, and Dhanbad, as well as deepening its existing city presence by opening 5 new stores during the quarter.
Expansion of retail footprints in Tier III and IV towns and the likely stabilization of gold prices at lower levels, are expected to drive volume growth for this sector, which will help maintain the long-term structural story of the company. Buoyed by strong festive/wedding season and a normalized quarter after a gap of two years, the jewellery division will register strong revenues.
The company is one of the top brands in the watches segment while in the jewellery space, it is gaining good acceptance because of the shift from non-branded to the branded space and expansion in middle income towns. The company endeavours to grow by 2.5x by FY2023 in its jewellery business.
Organised jewellery players, Titan, have gained market share from unorganised jewellers over the past few years – aggressive store expansion, growing share of studded jewellery, hallmarking initiation (with consumer awareness improving) and digitisation were the key catalysts.
However, the opportunity to gain further market share remains – driven by managing leverage and liquidity prudently by organised jewellers and the potential implementation of hallmarking effective Jan 1, 2021. Tanishq, with its largest penetrated store network and exquisite design among organised jewellers, stands to gain the most from this category formalisation.
Titan completely hedges its exposure to gold prices. However, some organised jewellers do not always completely hedge their positions.
Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar
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