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Edited Transcript of TITAN.NSE earnings conference call or presentation 5-Nov-19 11:00am GMT

Q2 2020 Titan Company Ltd Earnings Call

Hosur Nov 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Titan Company Ltd earnings conference call or presentation Tuesday, November 5, 2019 at 11:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ajoy Chawla

Titan Company Limited - CEO- Jewellery

* C. K. Venkataraman

Titan Company Limited - MD & Additional Director

* S. Subramaniam

Titan Company Limited - CFO & Head of IT Function

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Conference Call Participants

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* Alok Shah

Edelweiss Securities Ltd., Research Division - Research Analyst

* Amit Sachdeva

HSBC, Research Division - Analyst, Consumer and Retail

* Amit Sinha

Macquarie Research - Analyst

* Arnab Mitra

Crédit Suisse AG, Research Division - Research Analyst

* Avi Mehta

IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary

* Chanchal Khandelwal

Aditya Birla Sun Life AMC Limited - Fund Manager

* Manoj Bajpai;Barclays Wealth and Investment Management;Head - Equities

* Nillai Shah

Morgan Stanley, Research Division - Equity Analyst

* Rakesh Radheyshyam Jhunjhunwala

Rare Enterprises - Executive Officer and Partner

* Richard Liu

JM Financial Institutional Securities Limited, Research Division - Research Analyst

* Tejash Shah

Spark Capital Advisors (India) Private Limited, Research Division - VP of Research

* Vishal Gutka

PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst

* Vivek Maheshwari

CLSA Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Titan Company Limited Q2 FY '20 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded.

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

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [2]

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Thank you very much. Hello, welcome to all of you for listening in. I'm Venkat from Bangalore, and with me are Ravi; Ronnie; Subbu; and Nandu that you know -- all of you know very well; and also joining me is Ajoy Chawla, the new Chief Executive Officer of the Jewellery division of Titan Company. And with me in the room are Suparna Mitra, Vice President, Sales and Marketing with Watches and Wearables division; Saumen Bhaumik, Vice President, Sales and Marketing of the Eyewear division; Dinesh Shetty, Company Secretary; and Pulkit (inaudible) from the Finance Department. Thank you very much. I just introduced the members. Thank you very much, once again.

And let me start by refreshing 3 months back when we had the quarter 1 call. We were on a declining performance in the Jewellery division in the month of July. And we were looking at a better August and September. And as it turned out, we grew about 15% in retail, in Tanishq in August, and about 11% if I correct for the season in the month of September, and net-net 6% -- between 6% and 7% in total retail for Q2, which was, I would say, moderate on plan of that time of the first week of August. I think 2, 3 percentage points below plan perhaps. And in total, like I said, between 6% and 7% of the Jewellery division, which is not in line with the kind of growth that we have seen in the past. The pressure on public sentiment as well as -- because of the price of gold which kept rising, it kept consumers away and the whole of industry as well as Tanishq end up having to rely a lot on human promotions to drive traffic to the stores.

The Watch Product division was also under pressure, particularly the EBO channels, World of Titan, Fastrack did struggle in the quarter. And the department store channels typically where we have a much better choice of brands and even our own (inaudible) optic did relatively better.

The Eyewear division did exceptionally well in the quarter in terms of retail growth as well as the distribution push. The coverage estimate in quarter 2 was, one is, our usual difference between the primary sales growth and the retail growth because of the L3 billing that many of you will be familiar with. On top of that, because of our hedge positions, we have to write back about INR 120 crores of income on account of hedges that mature. And we can speak and clarify to you exactly what happened, what this means, down the road when the questioning happens. So because of this, the Jewellery division's income actually declined over Q2 FY '19.

The season itself was a little mixed. The 33 days leading up to Diwali, which is the 28th of September of '19 till about 31st of October '19, compared to the same 33-day period was a growth of 10% for the Jewellery business. Much better for the Watches business relative to Q2 and decent for the Eyewear business because it's never out of season for that category.

So in a way, the pressure on the jewelry industry appears to be continuing. And our assessment is that we have done rather better compared to the -- most of the players in the industry. The total imports into the country declined by 17% in H1 of FY '20. Compared to that, we were flat on retail and a very small minus on our reported company income. So this, along with our actual measurement of competitive performance in many of the cities where we operate, confirms to us -- the continuing market share gain of Tanishq brand is going on without any hiccup. And we were quite satisfied with the initiatives that we had implemented across all the businesses. And from an overall competitive position, we're confident that we have moved further in our strength within each of the industries where we operate.

So while the financial performance was depressed on account of overall pressures of public sentiment and gold rate, we are confident that our position in the category has become stronger. And therefore, from medium- and a long-term point of view, we are very well placed to achieve the goals that we have declared to all of us.

So that's broadly the performance on quarter. The slide presentation which has been uploaded has got the various details relating to the individual businesses as well as the income and the profit picture.

The other important achievement is the network expansion in Tanishq. We are likely to exceed the number of stores that we opened in the whole of 2018, '19 by December of '19, which is in 9 months. And we are looking right tracking to -- in the 16-store mark by end of March '20.

So I'll pause here and seek questions from all of you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have a first question from the line of Avi Mehta from IIFL.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [2]

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Sir, this is regarding your first comment, Venkat. Just to clarify, you said the 10% growth was in the festive period? Is that what I kind of heard correctly?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [3]

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Yes. In the 33 days running up to ending with Diwali this year, Avi, compared to the same 33 days last year, the growth was 10% for Tanishq.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [4]

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And given this weakness that you're seeing in the industry, would you like to revisit your target of 20%-plus growth in the second half?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [5]

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Yes, yes.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [6]

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So is there any revised target, sir, that you would like to share?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [7]

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We're looking at between 11% and 13% for H2.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [8]

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Okay. Okay, sir. And the second picture also on the margins. You had a 5%-odd adjusted growth, started share was higher. There was a INR 15 crore one-off compensation in the base and still margins were flattish. Was this only to discounting? Is that how I should understand it?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [9]

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Yes, because the income growth was -- actually, there was a decline in income which is -- I have the slide up. This is for income, as it relates to income [according to Q2]. Just one second, I'll just confirm. So we determined a 2% decline in income, Avi, in Q2.

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [10]

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So -- okay, I'll probably take that off-line later. But -- okay, if I may, sir, then is it going to offset this negative -- this impact because of the changed procurement mix? Or is it the timing of the festive period?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [11]

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Which one?

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Avi Mehta, IIFL Research - Assistant VP & Lead Analyst of Consumer Discretionary [12]

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The operating cash flow for the first half.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [13]

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Operating cash flow. Yes, yes. There are multiple reasons. One is that the price of gold is now gauged highest as we speak around those times. And even though the tonnage that we held was below the budget adherence, the price was much higher than the budgeted levels, and that was one reason.

And the second is that the season this year is about a week to 10 days ahead. And therefore, so the shop, as I said, came in the last 3 days of -- started in the last 3 days of September and therefore, we had to advance production to be ready for the Diwali season earlier than that. So both these -- the budgeting itself took the second point in the (inaudible) and the price of gold contributed in return to the -- total inventory level is higher, and therefore, it impacts on the operating cash flow.

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Operator [14]

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We have next question from the line of Abneesh Roy from Edelweiss.

Sir, we can't hear you. Mr. Abneesh Roy, (Operator Instructions)

We have the next question from the line of Arnab Mitra from Crédit Suisse.

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Arnab Mitra, Crédit Suisse AG, Research Division - Research Analyst [15]

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First question was on the margins. So if you could highlight if there were any kind of significant one-offs in the quarter regarding hedging gains/losses, which impacted the margin.

And secondly, this INR 120 crores which you are saying is the hedge -- this thing. Effectively, if the hedges haven't been there, the revenue would have been higher by that much, but the percentage margins would have largely remained in the same zone. Would that be the right way to look at it?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [16]

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Yes. Arnab, that's right. If this hedging loss had not been there, you're right. The revenue would have been higher. And -- but the gross margin overall would not have changed. So the percentage to that marginally change here. And the other...

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Arnab Mitra, Crédit Suisse AG, Research Division - Research Analyst [17]

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And any other one-offs you've highlighted...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [18]

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The only one-offs, there was not much of an impact as far as inventory valuation, et cetera, is concerned. So on the gross margin side, there was not much of an impact, okay? We did have some fluctuations during the quarter, but that was within the quarter itself. So the net impact was not much overall. But there are certain things that because on the overhead part, particularly on the employee cost, which was the actual valuation result from our (inaudible). Now we took a big hit on that because of the lower interest rates. And that did impact us quite significantly on that employee benefit cost. So that is in a way something that's not planned or expected.

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Arnab Mitra, Crédit Suisse AG, Research Division - Research Analyst [19]

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And would you be able to quantify approximately how much is the impact of the actuarial impact?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [20]

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For the quarter, it was INR 16 crores.

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Arnab Mitra, Crédit Suisse AG, Research Division - Research Analyst [21]

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Okay. Okay. And just last question was on Watches. Now the growth rate last -- are you seeing that Watch business also remaining sluggish during the festive season which extended into October? Or has there been any kind of recovery there in the festive also there?

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Unidentified Company Representative, [22]

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Actually, the month of October was very good and even the whole buildup from India to Diwali, the growth numbers are very encouraging. So we expect to do -- I mean, look at, at least double-digit kind of growth for the second half.

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Operator [23]

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So we have next question from the line of Vivek Maheshwari from CLSA.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [24]

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Firstly, can you explain this INR 120 crore hedge impact on the top line? And is it going to get, let's say, unwind as we go ahead? Or it is a permanent difference?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [25]

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No, these are permanent differences. Let me explain how it works.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [26]

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Sure.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [27]

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Vivek, if we were to buy gold at, say, INR 3,500 that you have at any point in time, you hedge it for the next 5 months or so. That's the average holding period that we have. Now INR 3,500 will give you maybe INR 3,550 or so as the loan value that we will get at the end of 5 months, okay? I'm just giving you estimates that this is across our business, for example.

So we will -- during that period, at the time of the [day], if you think at 3 months later, going up to INR 1,300, what we receive from the customer is INR 1,300. But when the hedge is over, you have to return back that INR 3,550 effectively. So the INR 250 of reversal is what this INR 125 crores when we talked about [reference], okay?

These are permanent losses. These are not something that gets reversed in the next succeeding quarter. So this is just a hedging pattern. And it -- fluctuations of this nature happen. Now this happens every month, but never having seen this sort of an impact in any quarter.

This was -- the sharp increase in gold prices is what lead to this. Typically, gold prices go up by a percent of 2 and therefore (inaudible). But this was really very, very sharp, particularly in the month of September. That month alone, you have something like INR 120 crores of impact, just in that 1 month. So this is a result of that. And as I said, this does not reverse. But we have low impact on gross margin. That's the point, okay? This is both by revenue and might call for a lower [baseline] as it would impact on gross margin. My [making] charges are based on the selling price of gold at that point in time. And typically, therefore, we think that has a slightly higher gross margin percentage.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [28]

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Okay. Because to the earlier question, you have -- you mentioned that there is -- so if I understand correctly, does EBITDA -- or EBIT neutral, then?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [29]

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Yes, it is. It is. Yes.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [30]

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So if I adjust this number in revenues, then your -- actually, your -- optically, your margins are higher by around 40 basis points. So against 10.9 what you have reported. LFL is 10.5.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [31]

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You are right. You are right, Vivek. Yes.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [32]

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I see. Okay. And second is, how big will be exchange in this quarter?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [33]

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The share of exchange, Vivek?

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [34]

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Yes, sir.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [35]

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Just 1 minute.

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Unidentified Company Representative, [36]

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Is the question for next quarter or what?

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [37]

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No. No. No. For second quarter.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [38]

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The second quarter. We have, for H1 here, Vivek, and I can tell you later on the Q2, H1 is 44%.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [39]

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So goal on exchange in first half is 34%, you're saying?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [40]

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Yes. Yes.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [41]

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Isn't it lower than what it used to be? Or it would be probably much higher in the last year, right? Around the same time?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [42]

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No. No. You had the -- because there is also the Tanishq exchange. These are -- the exchange Tanishq and the gold exchange program, the general exchange program as we call it, is the non-Tanishq gold. This is representative on Tanisq gold. 31.5 last year.

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Vivek Maheshwari, CLSA Limited, Research Division - Research Analyst [43]

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Okay. So when you...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [44]

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The gross is 40%, yes.

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Operator [45]

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So we have next question from the line of Amit Sachdeva from HSBC.

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Amit Sachdeva, HSBC, Research Division - Analyst, Consumer and Retail [46]

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So Venkat, my question, again, on the exchange program because, obviously, launched when July was bad, and this zero-cost exchange scheme was launched, which was, I think, resulted in a bit of a good response from customers. And probably the run rate of revenue sort of started rising. And now you, obviously, rolled back debt scheme very, very quickly when the Q3 started.

So if my understanding is correct that this level of scheme which was launched, which was very margin dilutive and part of the effect we've seen in the quarter as well? And sort of -- what sort of trade-offs did you see? Would you rather maximize the revenues and let the margin be slightly hit? Or would you rather have margins stable and whatever revenue as a result of it?

And which framework are we really operating as we launch these schemes to sort of generate demand and effectiveness of the scheme in generating demand and the cost attached to it? How should we think about margin in that context considering that demand remains mixed as lackluster as you go into the second half? How we should think about the margin thinking around which the 13% odd you want to achieve as well?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [47]

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So specifically on the exchange itself, Amit, what we typically do is when we launch it for a 4- or a 6-week period, there is a certain target that the team takes in terms of growth. And the ROI of that particular offer is determined on the basis of that targeted growth, which -- and there is a breakeven level of growth at which it makes sense. And beyond that, it's actually going to be shared and all that.

But while there's been some competition in recent times is when the overall sentiment is poor, then customers are not coming into the market, then your calculation go off, and therefore, you don't achieve the growth that you ended up -- the growth you started off targeting. And before you know it, the discount of cost per sales rising, then that's the point that you are implying in that.

So that will continue to remain a challenge. When we began, we have certainly gone for a growth which justifies the cost, but when it ends, it's not so easy to switch it on and off, sort of in between also because there's a momentum to that.

So I don't have an immediate answer to the H2 question that you're asking because currently, given the kind of pressures in the market and the sentiment that we directly spoke to a lot about, high-value customers, and what I sense that a lot of them are deferring purchases and most are conserving money. So in a situation like that, even an attractive offer may not necessarily make them spend that money as they want to convert.

So the sales at whatever cost is certainly not an approach. I mean just to clarify, it's a very calibrated that the growth should get us some [additional]. That's how we would approach it. It just so happened that at the end of the scheme, because of the circumstances, it will not happen. But our main priority would be to actually increase the net margin after the cost of the scheme.

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Amit Sachdeva, HSBC, Research Division - Analyst, Consumer and Retail [48]

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Got it. Got it. And that's very helpful, Venkat. My second, Venkat, is that obviously, you have looked at international expansion as another viable sort of option as well. And this has been, in the past, we talked about. But are you looking at a period where Tanishq needs to seek other markets as well for expansion in FTS?

Are you sort of looking at in a recent future international forays as well? And is there any plans to do so? And how they should think about this? And what's the go-to-market approach you are taking for this?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [49]

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We are certainly looking at GCC, Amit. And because as you've heard, that's sort of a place to go where there are lots of NRIs. The Tanishq brand is very well known. We can hit the ground running. But our sense is that the GCC markets are also under some kind of economic pressure. And therefore, we have decided on a very calibrated approach to entry. And therefore I would say from a capital [peer] point of view and from a shareholder point of view, it's not a material item either which way. The point thereafter, both from the return on the capital employed there, we think that the market is delivering. We will start making any kind of relevance to the overall P&L and the balance sheet all the time. But we are going to be entering shortly. It's just -- testing the water is our approach.

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Amit Sachdeva, HSBC, Research Division - Analyst, Consumer and Retail [50]

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But given that when we are doing CaratLane as omni play, where there's online presence and off-line presence and it's a pure (inaudible) play largely. So wouldn't it be more viable to enter markets such as the U.S. using the same online, maybe with other e-commerce players or something? Would that market not -- given that now distribution is easier, why would not we exploit that sort of channel now given that it's easier to sell and if you have the brand, and you can easily sort of...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [51]

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Yes. You are very right, Amit. It's just that the concrete plans on that front are not yet in place for me to share. But you're very right that the opportunity for some parts of Tanishq, certain EMEA and of course, CaratLane in the U.S., and we are already a preferred partner with Amazon as a company to the Watch business in the U.S. And therefore, people are at work to pick the relevant parts of the Titan Company Jewellery business into the U.S. as well. But it's in the early exploratory phase. And therefore, there is nothing concrete that I could share. But you're very right.

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Operator [52]

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We have the next question from the line of Nillai Shah from Morgan Stanley.

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [53]

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On gold hedge unwinding part of your book hedges, some of it continuing to Q2, so it goes to the second half also?

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Unidentified Company Representative, [54]

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There would be some impact in October, but that is pretty normal. But I think this is beating out because this is basically a gold that we bought up to june, right, which is getting impacted. Typically, the hedges are for 4 months, so I think it impacts falling off from November onwards. It's also impacting in October, but not so much, yes.

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [55]

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Okay. So 11% to 13% factors, that also in it?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [56]

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No, that depends (inaudible) factors like that. The 11% -- I mean, just to go back to the figures, that should be right, given that INR 3,800 as an example. So if it was INR 3800 average selling price in quarter 2 FY '20 and there is INR 3,500 selling price average Q2 FY'19, that difference is that actual growth of the retail is recording at 7%. But then because of the gold that was bought in May of 2019, we hedged them and then matured in September of 2019, we have to reverse that around [INR 142 crores]. Thereby, 37 was depressed by (inaudible) of (inaudible) continuous points. So that complication is currently not visible -- materialize only when the -- on the date that it matures. So it's very [debatable whether it will impact the] right now there is a retail growth, which is without the hedging funds.

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [57]

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Got it. Okay. And the second question is on the margins for the Jewellery business for the quarter, 10.9% underlying margins of about 10.4%, 10.5%. It's down pretty significantly on a Y-o-Y basis, adjusted for the one-offs that you had last year. So the question really is that you had INR 17 crores of inventory gains, which you were likely to book this quarter from the prior quarters. You had the customs duty increase in certain bits on account of that also coming through. And I understand that this was offset by increased promotions. So what were the kind of promotions at that? I mean was it as significant to have erased both the INR 17 crores plus the customs duty hike, which you had plus the fact that the studded jewelry portion was much higher this quarter?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [58]

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Actually, even given the gold rate differences in the market were quite significant, the rate between Tanishq and some of the other competitors. And therefore, we have to intervene and correct out the prices of gold as well. And we had the exchange scheme, which, like I said earlier, was still paying for itself when we began it. Under which was the growth rates that we have targeted but as a percentage of sales rose when we ended it because of intent as well as planned. And then we also have the bundling offers during the quarter, which (inaudible) claim at a higher cost. And therefore, the overall margin was affected by that despite what you said we were [setting our funds to that].

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [59]

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Could you just go and help us understand what was the gain on account of the customs duty hike that happened? And some part of it will come from the 3Q also, right, on account of that?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [60]

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Correct, there. In fact, a good part of it would come, but we have also used it sometime to actually reduce price correction in the [nonlife cycle]. So it is not a material item in Q3.

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [61]

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So Q3 will be bigger?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [62]

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Sorry. It's very difficult to predict because we end up actually using it to get sales and all that. So on -- by the end of the quarter, even our -- an understanding before we decide even to share.

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Nillai Shah, Morgan Stanley, Research Division - Equity Analyst [63]

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Okay. Got it. And last question is, does then INR 19.5 crores of unallocated expense, which is then in the segmental, Subbu, what is that on account of?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [64]

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No, that would be on corporate expenses but by and large, yes. We also don't go (inaudible) we don't go under the division, okay? There are certain parts in the quarter segment, which are retained there, on top of which, there are some which are not allocated at all to divisions like that. That's why you get it.

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Operator [65]

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So we have next question from the line of Rakesh Jhunjhunwala from Rare Enterprises.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [66]

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(inaudible) deliver 11% to 14%, so...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [67]

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10%, Rakesh.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [68]

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And in previous second quarter, you have to pass it on to your consumer to get the sales. So how are the prices during the festival season?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [69]

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How was that during the festival season?

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [70]

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Yes.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [71]

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Yes. No, sort of we took some calculated bets on it, and we were under -- having a much better control on that in the 33 days of the season.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [72]

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There were margins ahead. You don't have to make it so hard...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [73]

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Yes. We don't have to -- we do not have to offer so much of a discount for the 33% -- I mean, 33 days, 10% growth, like we did in H2.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [74]

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You did not [have called here]. You do not -- like there's a [decline] pricing power?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [75]

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Definitely, sir.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [76]

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Pardon?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [77]

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Sorry. Like we did in Q2, I'm sorry. I said H1. H2. What we had to do in Q2 we ended up awarding in the 33 days of October, the season.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [78]

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Right. Other thing is that your Watch business have done very well in Diwali.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [79]

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Yes. You're right, Rakesh.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [80]

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All right. Your [factory employees] have gone up in the Watch business and in the Jewellery business. Will that -- some part of it can be employed in (inaudible) after Diwali?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [81]

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Sir, the reason capital employed was higher in both the Jewellery and the Watch business, so then revenues come down yet the...

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Unidentified Company Representative, [82]

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See, like I said right there, we had an early start to the season this year, and therefore, 30th September, capital employed got budgeted also like that. And unfortunately, because of the gold prices, we had a significant impact on the value of that inventory and it's below even further. But even as we speak, it has come down and continued to go down and get under control in the next 2, 3 weeks.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [83]

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And why is the other income lower in this quarter by about INR 30 crores as compared to the first quarter?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [84]

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Other income is lower because we (inaudible) bottom.

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Unidentified Company Representative, [85]

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Yes. The last quarter, also, we had a tax rate on income tax [return]. And then that's basically why. But essentially, it's that the cash below average has gone down much lower.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [86]

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So that could improve in this quarter when the recovery employed is reduced?

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Unidentified Company Representative, [87]

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Yes. Now for this year, I mean, from October, and we are going at it again. And yes, we just start seeing higher [tax] prices.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [88]

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And so in some of your quarters, this corporate expenses, unallocated is positive?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [89]

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No, that would be because of income (inaudible) right? The income tax refunds that go on to the book which have been unplanned.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [90]

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So, when you take the income tax interest, I mean where do you...

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [91]

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Yes because there was a refund we got and done that, and that is....

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [92]

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So Subbu, where do you account for your interest income? Do you account for it in the jewelry business or...?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [93]

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Interest income comes in the other income, and it's predominantly in the derivatives.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [94]

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So you take the tax of further divisions and allocate the...

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [95]

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Yes, exactly. It is based on the cash generated by each of the division. So it's almost entirely going to the division. Value-added goes to corporate actually.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [96]

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And in the consolidated, you have a INR 23 crore -- you have a INR 31 crore profit in TEAL and a INR 10 crore loss in CaratLane, and this INR 21 crore loss is in what business? You see your presentation...

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [97]

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Yes.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [98]

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You have INR 31 crore profit in TEAL in the first half.

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [99]

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Yes, yes.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [100]

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And INR 10 crore loss you have in CaratLane and INR 21 crore in other business. What other businesses they are in?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [101]

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That is the Favre-Leuba.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [102]

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Favre-Leuba. Another thing I wanted to ask you, what is the deferred asset you're carrying in the balance sheet now? If you go in the 25.14%, do you see have a deferred tax asset?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [103]

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Well, this deferred tax is essentially the one by -- the adjustment we made also in this month was regarding Ind AS 116. We have to capitalize the assets -- all the leases. So when -- we had to pass an entry for deferred tax asset at the beginning of the year. Now that was based on the old income tax rate. Old tax -- changes which are now with Ind AS adopted now is at 25% tax rate. We had to had a -- we changed that -- we accounted for that in this quarter. So essentially, that deferred tax asset has come down to some extent because of the reduce in the tax rate.

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Rakesh Radheyshyam Jhunjhunwala, Rare Enterprises - Executive Officer and Partner [104]

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So ultimately, your tax rate now will be 25%, period?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [105]

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That's right. That is right. Yes, yes.

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Operator [106]

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We have next question from the line of Tejash Shah from Spark Capital.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [107]

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Sir, first question pertains to the whole demand environment. Sir, when we started this year, we were very excited about the wedding calendar being very robust. Now that demand is supposed to be nondiscretionary and sticky in nature. So how -- is it not participating? Or is it yet to come in second half of the year?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [108]

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See, we have -- as you would know, we have between 5 and 6 engines of growth, which we have identified over the last 24 to 30 months for our 2.5x goal. And each one fires in a particular way and takes it to a consolidated growth target of the 20% plus. That's how we planned. And wedding is a very important -- in fact a critical one out of them. And wedding itself has done [inheritors], in fact, outstripped the 20% growth substantially. But some of the others haven't fired as well as a result of which our H1 growth is what it is. So wedding itself has done well, but some of the others haven't done as well. The nondiscretionary parts, as you're saying, is for wedding, while some you may need to raise the ante in that category even more to compensate for some of these (inaudible).

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Ajoy Chawla, Titan Company Limited - CEO- Jewellery [109]

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This is Ajoy here. I would like to supplement what Venkat said about the wedding piece. As you rightly said, we have actually should seen a 30% -- close to 30% growth in wedding-related category and in the second half of the year actually had good wedding. So starting 1st November, we've actually launched the wedding campaign itself. And we're -- it's banking on this that we are hoping that we can try and get to 11% to 13% growth that Venkat spoke about. So there are good mix next few months. And if all goes well, hopefully we should be able to get to our numbers.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [110]

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Sure. And what will be weddings' total contribution for first half?

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Ajoy Chawla, Titan Company Limited - CEO- Jewellery [111]

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The wedding contribution has been close to 22%, very much on target of what we wanted.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [112]

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Sure. And sir, just one clarification. So this hedging policy that has reverted this time, the reversal, prior to 2012, '13, we did not have this, right? And are we planning to revisit our strategy on discount because this...

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [113]

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No, I think -- sorry, we've been hedging for the time being -- I think 2004, '05 onwards, we've been hedging. So the issue here has been that we have not seen fluctuations of this kind, which we have seen, and that is short period. And therefore, it will have impacted us had this happened some year back itself.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [114]

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So in 2000...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [115]

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So there is no revising -- reviewing this policy like the question that you asked. It will continue because this is a new hedge. As long as we continue to hedge and if oil prices fluctuate like this, rise like this, we will continue to have this issue.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division - VP of Research [116]

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Sure. And sir, lastly, the guidance for second half of 11% to 13%. Are we building a revival of demand sentiment? Or is it based on sentiments as it stands today? And does it also impact -- are you seeing this sentiment impacting our outlook on FY -- beyond '20 also? Or does it hurt on visibility of '21 materially?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [117]

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If you go back to the last 3 months, August, we grew 15%, September we grew around 11% without taking the season of 3 days, which came into that monthly per count. The season, we have done 10%. So if I look at these 3 pockets of time in the last 4 months, the 11% to 13% that we're targeting for H2 is not out of line with that because when we -- like Ajoy said, the wedding dates are certainly getting better. And we are obviously using many things and are continuing to work on. So therefore, the 11% to 13% is actually based on current and immediate past trends, and we are reasonably confident of achieving that.

On your next question of what does it do to the FY '21 and thereafter? The jewelry market is a very, very large opportunity for the company. The share of Tanishq is in small single digits. So intrinsically, the opportunity for growth is very much there. And we would like to keep our size like we visualized 2.5 years back to that big goal in 2023. And therefore, we would like to run for that 20-plus percent growth in FY '21 as well. But for proper form stake, I would suggest that this question is properly answered by the company in our next call because all our teams are at work currently building the FY '21 plan and strategy. And they're very much seized with this dream as well that we cannot let these extreme circumstances contain our thinking and look at the very large opportunity that industry offers, the huge assets and the capability that the company possesses, and therefore, we should work on it to actually make it happen. But we'll confirm it in the February call.

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Operator [118]

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(Operator Instructions) We have next question from the line of Alok Shah from Edelweiss.

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Alok Shah, Edelweiss Securities Ltd., Research Division - Research Analyst [119]

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I just wanted to confirm on the store count. So we -- first to work on guidance, that was about 60 stores. Is that understanding correct for the full year?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [120]

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Yes. We are -- our current estimate for new Tanishq for FY '20 is about 60.

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Alok Shah, Edelweiss Securities Ltd., Research Division - Research Analyst [121]

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Okay. So that would mean close to about 20% store addition. If one were to look at half of that or close to about 9% to 10-odd percent revenue growth coming from that plus about 20% growth in the gold price, so we are looking at a significant lower grammage sale in the second half. Now you're saying -- yes, and your basis that guidance of 11% to 13%. Now just to extend Tejas' question, if considering that this sort of gold prices remains at the same level and while your store expansion can give you revenue, but then -- would you then in the circumstances be quite optimistic about the 20%-plus growth in the FY '21?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [122]

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It's a very complex mathematical model that I'd love to get into to sort of (inaudible). The 20% is a number of stores, first of all. Okay. The per square foot of the current network will far exceed the per square foot of that 20%. And therefore, we cannot take the 20% into the time periods that are available, and therefore, so much growth in sales and that kind of stuff and then the gold rate impact and all that. So the 40 stores that we are -- 60 stores that we are confident of opening this year will certainly give us a good building block for the FY '23 -- FY '21 20% plus plan, yes. And the gold rate, frankly, I have no idea about how the gold rate will behave in FY '21. So at the moment, we have no framework to build for the growth of FY '20, even like I said the teams are at working.

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Alok Shah, Edelweiss Securities Ltd., Research Division - Research Analyst [123]

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Right. And you would have got some benefits in the margin from the custom duty increase. And as you mentioned previously, a large part of it will fall in Q3. But do you think most of that or all of that would get offset against the scheme? Or would you see that translating into better margins in Q3?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [124]

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It's very difficult to say at the moment because it did not really translate into margin in Q2. We had to really induce customers to come and buy some. We are investing in a lot of offers for the customer. And we will be able to speak on this with any clarity on when the quarter ends.

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Operator [125]

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We have next question from the line of Vishal Gutka from PhillipCapital.

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Vishal Gutka, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [126]

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Sir, I had 1 question on gold exchange. Basically for a jewelry company, there are 2 lever for margin. One is the spread on the gold rates. Second is basically the making charges that you make. What are your hearings on the ground or the channel technics of this that more and more people are bringing either bars or coins or they're buying from physical market where the gold rates are lower than the Tanishq gold rate, and they're exchanging the same when they have to buy jewelry from Tanishq. Sir, have you see this kind of an increasing share of bars and coin versus what we call old jewelry?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [127]

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Not really, not really. I mean you're obviously pretty [crude] on to what's happening on the ground, I must say (inaudible). But it's not been a while. There are instances like this and people who are really smart doing it. I'm not recollecting it as a trend. It is a genuine conversion of old jewelry into fresh new Tanishq jewelry that is happening, by and large, I would say.

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Vishal Gutka, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [128]

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Okay, okay. And sir, what have led to relatively better growth in Studded, because Studded -- the share was around 38% this quarter. It was 35% in the base quarter. So what are all related to that? Why that has happened? Is it because of the promotion campaign that we have carried out or what is the reason behind it?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [129]

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The what?

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Vishal Gutka, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [130]

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Share of Studded. Yes.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [131]

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One other thing that we're observing we're seeing a relatively higher slowing down in the lower inches products. And this indicates middle-class coming under pressure because typically the middle-class customers are those who buy products in the lower price points. And in a way, the Studded jewelry is a little more aligned to upper middle and upper class who are perhaps less affected by this real pressure on cash flows, feeling of not having enough money and therefore (inaudible) and stuff like that. So I guess, that has an impact on the relatively better desire to buy diamond jewelry versus gold jewelry. And the gold price itself is a bigger deterrent on pure gold jewelry buyer with less deterrent than a diamond jewelry buyer.

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Vishal Gutka, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [132]

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Okay. Sir, my last question on Golden Harvest scheme. Sir, what have been the contribution during this quarter from Golden Harvest scheme?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [133]

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Just 1 second. Can I just come back to you on this?

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Vishal Gutka, PhillipCapital (India) Pvt. Ltd., Research Division - Research Analyst [134]

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Yes, sure.

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Operator [135]

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(Operator Instructions) We have next question from the line of Amit Purohit from CIMB. (Operator Instructions) We have next question from the line of Amit Sinha from Macquarie.

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Amit Sinha, Macquarie Research - Analyst [136]

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My question was on the difference of the gold rate that you spoke about. And I just wanted to understand that this difference came in primarily because of the fact that others were a little proactive in passing on the custom duty hike benefits compared to you guys. And was it very, very specific to festive season? And are you seeing a similar kind of difference even now?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [137]

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Actually this -- the kind of difference that I have seen in the last 4, 5 years now, it is not necessarily influenced by an act like the customs duty change that happened recently. Given in the past I have seen INR 150, INR 175 differences, INR 200 differences, and there was no act like the customs duty increase that happened. It's, I think, a lot to do with maybe the supply of smuggled gold at a certain point in the year, and that excessive difference in the supply rates is in the white and black channels and all that. And I suppose it got aggravated a little in Q2 of this year because of the customs duty and accumulated stock of various individual jewelers and all that. And therefore, we have to intervene and do what we have to do. But it is looking like it is a bit in the past now, at least for the last few weeks I have not heard -- Ajoy is in market. And certainly, we have not heard this in the Diwali season. It's been a reasonably stable period on that front.

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Amit Sinha, Macquarie Research - Analyst [138]

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All right, sir. So basically, the higher discounts or the lower gold rate, which was offered by the competition, was it also impacted by the desperation in the market and now it is kind of coming off, right? I mean...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [139]

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Yes. It could be many reasons because the industry -- like I was saying that we have done much better than the regional players, the national players to the extent that we can measure. And obviously, everyone is under pressure to that extent. And we have seen instances, particularly in some of the B and C category cities across the country where some of the local jewelers sell gold at some INR 50, INR 60 below cost. And we wonder how it's possible. I'm talking about at various times during the year. And when you're not doing well, the pressure to grow sale is that much higher. And I'm sure that was also a contributory factor apart from the opportunities that they had on account of customs duty.

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Amit Sinha, Macquarie Research - Analyst [140]

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Got it, sir. Just a follow-up on that. I mean would you attribute a bit of a kind of mix from your side during the quarter because of this particular factor, at least even for half of the quarter 2?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [141]

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On the certain miss, what exactly do you need?

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Amit Sinha, Macquarie Research - Analyst [142]

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No, no, not miss exactly. So basically, when -- basically from this -- from the numbers which we talked about after first quarter, there have been some kind of underperformance from Tanishq. Was it also because of this gold difference -- gold rate difference during the quarter, which were -- which...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [143]

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Not on the sales side because the gold rate is a daily managed item. And therefore, every day, we are in touch with the market, and we keep the competitiveness of Tanishq in a way intact on that point. So we didn't lose sale, but that impact on margins. So we -- whatever targets we have for August and September I think outlined that growth target when we spoke the first week of August. But whatever internal target that we have for August and September, we more or less -- maybe we had some INR 50 crores, INR 75 crores short, if I remember right. They started from right, but they came at a cost.

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Operator [144]

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(Operator Instructions) We have next question from the line of Nikita Maheshwari from JM Financial.

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [145]

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This is Richard here. I've got 2 questions. One is -- and sorry to harp on this again. This is regarding the guidance change from 20% to 11% to 13%. I guess the premise for the 20% growth expectation that was there earlier was basis your own execution and so on and so forth and ability to get sales rather than macro dependence, right? As I guess, from a macro perspective, you would have expected to have been mad anyway. So I just want to know what is the difference now in your execution plan between what you expected to happen earlier and what is happening right now that has actually led to this change from 20% to 11% to 13%? Or is it that this 11% to 13% is just an average of what you saw in August, September and the 3 days to Diwali? Because if I look at your store growth, even that seems to have been at least much higher than what you were actually envisaged.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [146]

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Yes. So Richard, if I go back to when we had set out this kind of a CAGR for 5 years, the general sentiment around us was very, very positive. And that certainly helped that the industry was not tanky. It may have been sluggish. It may have been slight low single-digit growth. I'm talking about now FY '18, early FY '19 and all that. So when the industry is in a small single-digit growth or flat, everything that you do -- and there's a certain migration that started happening as a result of a lot of structural changes that happened because of demand because of the Nirav Modi and all that trust factor kicking in, in favor of Tanishq. We were able to deliver a 20-plus growth rate with a certain set of initiatives, with a certain level of excellence in our execution.

But in the first half of this year, as opposed to what we judged on the basis of a lot of research that we did in the February -- January-February of 2019, well, the sentiment was indicated to be pretty positive from the customers that we researched on. But what is appearing now 6, 7 months later was -- is that the sentiment is actually worse than what we at that time measured. And because of that, the overall industry -- it was like 17% decline in imports. Every single jeweler that we are aware of is talking about a big decline. Vendors are talking about big drops in supplies. And regional, national jewelers -- if I take the regional jewelers, for example, we are talking about between minus 12% and minus 22% decline in the first period as opposed to a plus 10% that we have done.

So obviously, the strategies as well as the standards of excellence in our execution are happening in a circumstance, which is less in our favor than it was 1 year back. And therefore, we need to sort of go back to the drawing board in some sense, expand the number of weapons that we need to polish more or create afresh. And that would take a little more time than a few months. And therefore, the guidance for H2 is, in a way, not taking that big step out into account. And that's why I said that it is our intent to keep gunning for that 20-plus percent for FY '21 and later that I will confirm in February. But for the moment, since it can only be a tweaking of the arsenal that we already have, we are going by the more recent growth performance of the last 3, 4 months.

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [147]

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Okay. Got it. And Subbu, 2 housekeeping questions, if I may. One is, I noticed a profit of minority interest of INR 8 crore versus a loss that used to be there earlier, if you can help explain this. And second, before the operator cuts me off is, do you have any Ind AS adjusted comparable numbers for other expenses, depreciation, interest and EBITDA to share?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [148]

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I think maybe (inaudible). It led to impact overall for (inaudible) Ind AS, okay? I think for growth for the top material but clearly yes, the EBITDA numbers would look better because the rate is lower substantially. Whereas if I continue to increase this in depreciation and finance costs over the last year, (inaudible) and it would almost offset the reduction in these entries which will be part of the other expenses.

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [149]

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Sir, the minority interest part?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [150]

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On the minority interest, I think because it's a loss, it is a gain as well. We booked the entire loss -- we did the consolidation with a simple loss of correcting, and therefore, you reverse some portion of the loss, which is pertaining to the minority shareholders.

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [151]

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No, the minority interest charge led to a lower net profit. So I guess it's the businesses with minority, which is CaratLane. I think did they have a profit during the quarter?

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [152]

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No, profit -- we did not have a profit in the quarter. We had a loss.

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [153]

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Minority interest is a reduction from your -- from your total impact.

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S. Subramaniam, Titan Company Limited - CFO & Head of IT Function [154]

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Let me get back to you on this, Richard, okay?

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Richard Liu, JM Financial Institutional Securities Limited, Research Division - Research Analyst [155]

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Sure.

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Operator [156]

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We have next question from the line of Chanchal Khandelwal from Birla Mutual Funds.

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Chanchal Khandelwal, Aditya Birla Sun Life AMC Limited - Fund Manager [157]

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Coming back to the guidance and the store opening, you have done 21 store opening in the first half. And you're guiding for 60 stores. And also, if I look at number of cities, most of the stores have been opened in the newer cities. I'm just trying to understand the top 8 metros or a bigger chunk of the jewelry demand would be in the bigger cities. Is it actually you're only focusing on the franchise business model that we are going to Tier 2, Tier 3 cities? Or am I missing something here?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [158]

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Actually, the distribution expansion takes into account the current level of distribution in every city that we are in, the opportunity for expansion in the cities that we're already in and the opportunity for expansion in those cities that we are not in. So we are now a 20 -- nearly a 25-year-old brand, and we have reached reasonably high levels of presence and in some cases even saturation in some of the big cities. And therefore, our distribution expansion in the FY '23 time frame is substantially middle India focused. And that's why you're seeing that. And the franchise or company is not leaving this trust. What is leaving this trust is actually the distribution opportunity. And depending on the town, depending on the catchment, we decide whether it should be a company store, a management agent store or a franchisee store. So that's the privatization.

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Chanchal Khandelwal, Aditya Birla Sun Life AMC Limited - Fund Manager [159]

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That question on the company store, franchise store is okay, but coming back to this point, the throughput in top 8 or top 10 city would be much, much higher. And all the new stores -- throughput -- the sales per store, won't it be much, much higher in a top 10 city? All the 20 stores have been opened in the newer cities. So I'm just trying to understand why...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [160]

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Not all of them, but many of them, yes, but that's because, for example, I would just illustrate. If I tell you Delhi-NCR we'll work something like 21 of them -- 24 stores in Delhi-NCR. So while each one of them is substantially bigger in terms of throughput than, let's say, Jorhat or a Karnal, but a Karnal store -- in a town where -- in Karnal if there is no store, the incremental revenue is that -- isn't good. Whereas in Delhi, I would end up cannibalizing -- and there is no room in Delhi anymore like that. So that was the general point I was making. But the room for expansion now for Tanishq is substantially more in towns where we're not present rather than in towns where we are present.

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Ajoy Chawla, Titan Company Limited - CEO- Jewellery [161]

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But just to clarify. This is Ajoy here. We have opened a few stores in the existing metros, Bombay, Bangalore and even a few more are also there in the pipeline, but a bulk of them, as Venkat said, is really...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [162]

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Out of 60, I presume maybe 40 may be in new towns and -- at best...

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Ajoy Chawla, Titan Company Limited - CEO- Jewellery [163]

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20 at the best.

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [164]

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At least, and at best 20 may be in the towns where we exist.

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Chanchal Khandelwal, Aditya Birla Sun Life AMC Limited - Fund Manager [165]

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Sure. Just to sum it, so next 3, 4 years, we have ample opportunities to ramp up this 50, 60 stores every year. I mean you must have done that work back to '23 when you're making the target. Just sticking to that targets, so that opportunity still exists, right?

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [166]

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Very, very large, yes, yes. And in a way, it's independent of the consumer sentiment pressure that we are facing in existing geographies. With this greenfield, we can hit the ground running. And in fact, all the stores are performing as planned, plus the other good aspect. The new stores are important.

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Operator [167]

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We have the last question from the line of Manoj Bajpai from Barclays.

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Manoj Bajpai;Barclays Wealth and Investment Management;Head - Equities, [168]

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My question was on the -- some of the channel sales push we have been able to get through the HDFC Bank core brand, the cards, which had a cashback up to INR 10,000. And the second one about the new launch about (inaudible). So how these things have panned out in this quarter? They had led to some incremental sales in this year? Do you think that this will continue in the next quarter as well? Will you kind of push for additional sales?

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Ajoy Chawla, Titan Company Limited - CEO- Jewellery [169]

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Yes. This is Ajoy here. Yes, these are good tactical opportunity that we keep exploring from time to time. And HDFC Bank credit card -- because they have a large base actually works out well. We saw good response to these offers during the quarter attend by and also during the festive season. So we will continuously exploit and explore these opportunities as they come along. They are useful.

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Operator [170]

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Ladies and gentlemen, that was the last question. I now hand the conference over to the management ...

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C. K. Venkataraman, Titan Company Limited - MD & Additional Director [171]

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Sorry, sorry, I just had one comment before we close -- 2 comments. One is thank you very much for the participation and the continuous encouragement of all of you in the Titan company management and everything that we are pursuing to do. And I would like to close this call by calling to attention one of our colleagues, Ronnie Talati, is retiring from the company end of this year, 31st of December, 2019. And I would like to place on record the exceptional contribution that he has made to the company. He's been with the company for 33 years and has played the pivotal role in building India's most iconic and sexy youth brand, which is Fastrack and for the last 4 years now been at the helm of running the jewelry -- and the Eyewear business and establishing benchmark standards in everything that, that business is doing. And I take this opportunity to lays on the appreciation from Titan Company to Ronnie for everything that he has done, wish him all the very best and thank you, Ronnie.

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Operator [172]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Titan Company Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.