While Carat Lane’s acquisition is definitely a step in the right direction, revenues of the company is too small to change Titan Industries’ struggling jewellery business immediately. Moreover, large events like weak demand environment and recently introduced PAN card requirement for jewellery purchases will have a greater bearing on Titan’s jewellery business.
But there are positives. The company has given a strong growth guidance of 15-20 per cent for jewellery business in FY17 backed by good response to the new version of Gold Harvest scheme and successful launches of Niloufer and Uttara. The company is going to launch in July in the price point of Rs 2-5 lakh, which will help in growth.
Titan’s jewellery business has been suffering in the past many quarters and fraught with volatility for either of the reasons like high gold prices, removal of GHS, government new regulations on purchase transactions and recently the strike. In such scenario, Carat Lane’s acquisition will diversify Titan’s sole dependence on offline business as well as Tanishq brand.
Carat Lane is a leader in online jewellery sales in India with strengths across the value chain (design, manufacturing and marketing). It has also 13 offline stores and will expand these. According to media reports, Caratlane has a revenue of Rs 250 crore with good gross margin but is loss making due to heavy spending on advertising.
But Titan will get a ready online platform to tap young customers and also add low price points to its product portfolio. In turn, Carat Lane will include some of Titan’s brands like Mia in its offline stores. Lastly, Caratlane’s inhouse managed technology will also help,
Analysts are positive on Titan’s move to acquire Carat Lane, which is done though internal accruals. “Titan, the largest brick and mortar jeweller, post acquisition of Carat Lane also becomes the largest online jeweller,” said Edelweiss in a note.
According to media reports, Titan is set to acquire a majority stake (more than 51 per cent) from Carat Lane’s long time investor, Tiger Global, in an all cash deal. There will be no dilution by the promoters.