We will deliver between 12% to 13% EBIT for jewellery business in FY-24: Ashok Sonthalia, Titan

"We have been quite satisfied with the quarter one performance and it was as per our plan. Quarter one generally is slightly weaker from the margin profile because Akshaya Tritiya which is more gold-led quarter and studded activation actually happens in quarter two," says Ashok Sonthalia, CFO, Titan.

Just wanted to begin by discussing your jewellery margins because they are at the lowest levels that we have seen in the last nine quarters. Do you still maintain your guidance for the jewellery EBIT to be around 12-13%?
We have been quite satisfied with the quarter one performance and it was as per our plan. Quarter one generally is slightly weaker from the margin profile because Akshaya Tritiya which is more gold-led quarter and studded activation actually happens in quarter two. So, quarter two margin profile and quarter three festive and quarter four again diamond activation. So, overall, we are still very-very hopeful that we will maintain our guidance and continue to deliver between 12% to 13% EBIT for the full year.

Demand in May was subdued, June saw recovery. What is the demand outlook currently given that there are some festivities which are going to be pushed back this year and do you see 20% plus growth sustaining for rest of the year?
Like for last 10-12 months, I would say, we have been seeing the volatility in prices and oscillation in consumer sentiments, sometimes they are there and sometimes there are dull moments, fortnights when nothing is happening which was the characteristic of quarter one as well which we just concluded and we delivered about 19-20% growth there.

We talked about that July has been also pretty much okay and as per quarter one trend for us. Adhikmas has not seemed to be impacting at least July month for us and we are doing pretty well.

Studded activations have started towards end of July and we are seeing very-very good response from the customers. It is very difficult to predict everything, but we believe August again, the whole diamond activation will be liked by the consumers and they will kind of purchase. Festive season like already on a very strong base last year. So, as long as we get 19-20% number, we will be more than happy to deliver.

So, for the full year still we are targeting close to high-teen growth numbers and there is nothing contrary at this point of time to suggest us that it cannot be achieved.

So, just want to understand more on the studded portion that has remained flat at 26%. Is there a trend there and is there lower demand for studded jewellery? Any concerns on that front?
Diamond ratio in portfolio mix is pretty much stable. It was slightly lower than pre-pandemic and now has kind of recovered to that level and this quarter will be critical for us to see how does the whole ratio works.

But as we have been talking about earlier also that we do not have a target that we want this much diamond, this much gold, this much coin. Every category, every catchment is important and there are teams who kind of take actions to push.

These ratios are generally outcome and we are more interested in more and more customers coming to Tanishq and market share gain is happening rather than specifically thinking about that how the studded ratio will go up in our portfolio.

But there are several initiatives, several new campaigns which have happened in the month of June around diamond jewellery and now the activation has started.

So, we are pretty positive about quarter two. On quarter two completion, the studded ratio should be much better than what we have seen in the past.

I also wanted to talk about the comment that you made on the concall that the earnings growth will lag the revenue growth. So, in terms of profitability, how should one view FY24?
No, so we maintain, this business is a bit seasonal business. So, quarterly profitability profile is always different from quarter one to quarter two to quarter three and quarter four, kind of weddings which happen say in quarter one and the catchments and the region of the country which participate in that.

So, everything put together there is a generally profile where quarter two, three and four are expected to be higher profitability quarter compared to quarter one and that is what we have been talking about that while we do understand that market was expecting better profitability margin in quarter one than what we have delivered, but we are kind of okay and we are as per plan for 12% to 13% delivery.

Also, one thing I must remind you that last financial year, we have been talking about that we had some one-off gains in the jewellery business and that accounted for more than a percentage point throughout the year. So, to that extent, some calibration for FY24 should be kept in mind by the people who look at our stock.