Titan Company Limited (40A.F) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Titan Company Limited conference call to talk about the launch of beYon brand. [Operator Instructions] Please note that [ this call will be ] recorded. I will now hand the conference over to Mr. Ajoy Chawla, Managing Director of Titan Company Limited. Thank you, and over to you, sir.

Thank you. Hi, good morning, everybody. I hope I'm audible and there is no noise in the background. Good morning, and welcome to this conference call. Happy 2026 to all of you, and it's a pleasure to talk to you. Thank you for coming in so early and being part of this. As you are all aware, we introduced beYon our -- from House of Titan as our lab-grown diamond play around the 29th of December through the first store in Bombay. Unfortunately, that also happens to be the silent period in which we are operating, and it continues to be so until our quarter 3 results are declared. And therefore, we could not do a media meet as part of standard operating process. And of course, given that many of you have been nudging us over the last 2 years or at least asking us fervently, there would be natural curiosity and hence this call. Whenever we've spoken about the lab-grown space, I have mentioned that there is a media narrative which is perhaps much larger than the reality on the ground. And that continues to be my point of view. We have also noted that it is an opportunity, and it can serve a different need in a different segment, except that we were very unclear, firstly, where would the prices of lab grown diamonds settle down to. There has been tremendous erosion in the wholesale price and as well as the retail price of lab-grown diamonds over the last few years as there has been excess capacity and a lot of supply. And we know that this is a category which, because it is man-made and it's a product of technology, prices can only go down. And many players having entered it close to 500 stores or currently and about hundred-odd players or more and counting. We always felt that this could get commoditized. And therefore, amidst the commoditized space, how will we create differentiation? What will be our IP? And therefore, what should be our consumer value proposition if we were to play in this? Assuming it makes sense from a unit economics and from a business sustainability point of view, we know that the market is still evolving, and unit economics are not yet stabilized. And really, we don't know because a lot of VC NPE funding has also gone into this. The other important aspect is that India is an underpenetrated category for studded, roughly between 12% to 15% of the overall jewelry market. And gold is completely penetrated 100% virtually. So there was always this belief that perhaps lab-grown diamonds, because of its accessible price points, could be an opportunity to bring in many more customers into this category and therefore, expand the pie. However, given the commoditization tendency that was -- that we were seeing, we were very, very unsure what would happen. And all the more in the -- in a rising gold rate regime, customers at the lower price points were also a little hesitant to kind of jump in both in gold as well as diamond. So the opportunity for increasing penetration, we knew was always there. But the kind of play we wanted to do was not very clear. The customer -- we've done a lot of work. The last 2 years, we've been studying the category. And in the last 1 year, we have spent a lot of time in really doing a deeper customer work one-on-one groups, pilot activities, testing product ideas, testing pricing and policies and many thoughts that we had in our mind. And what we have recognized is that the customer, thanks to the media narrative, is now fairly aware of this category, but also is a little confused. And especially since many of the players who have jumped in have kind of looked at the low-hanging fruit of trying to pitch it as an alternate to natural diamonds. And also offering all kinds of policies of exchange, et cetera, even though this category is perhaps not suited. So the customer continues to be a little confused and hesitant. The more evolved customers probably have more clarity. Those were already big diamond buyers, but not everybody is in that space. So the consumer work we've done has helped us to kind of recognize that given the nascent and early stages of this category in the country. And given India's orientation, very different from the rest of the world as well as the penetration being very different from the rest of the world, there is an opportunity to evolve a narrative, and there is an opportunity to, in a way, expand the market, if we were to educate the customer in the right manner and make an accessible play, which is making sense both for the customer as well as us. And therefore, we've evolved our own consumer value proposition, and we have come out with our brand beYon from the house of Titan in this very exciting space. It is still very, very small. I continue to hold the view that it is not more than 2% to 4% of the entire studded market, though it has opportunity to grow. How big it will be, we will not know right now. It's very early stages. And we know that we can do this even while evolving and continuing to invest strongly in our existing precious diamond brand space, which is Tanishq, Mia, CaratLane, Zoya. These are brands which are doing particularly well. We have been growing very well, and we are continuing to invest heavily in this space in collaboration with industry partnerships as well as our own work. The house of Titan, as you are all aware, is a house of lifestyle, design-driven brands that have shaped the narrative across many lifestyle categories, especially in the adornment and serious accessorization space, be it watches, be it sunglasses, be it perfumes, handbags in the recent past, dresswear and certainly now beYon. So I think the opportunity is there across many parts of the Indian -- vast Indian consumer landscape. And that is what has prompted us to kind of make an initial foray and entry through beYon house of Titan. So for more information on how we plan to do this play, let me introduce to you Mr. Arun Narayan. You all have heard about him, but this is probably his first interaction with all of you. He has taken over from me as CEO of the Jewelry Division. Please join me in welcoming Arun Narayan. And Arun, over to you to take forward the best of what we have to share before we open it up for Q&A. Thank you.

Thank you, Ajoy. Good morning, everyone. Glad to meet you all and glad to also note the interest in beYon Like Ajoy mentioned, this is a culmination of work over the last couple of years, patient and very steady understanding of what's happening both in terms of developments in the market, starting with the U.S. as well as dynamics on the consumer side between lab-grown and naturals, starting with the U.S. and then in India over the last year or so. And I think, a, we have understood the consumer dynamics; and b, through a steady process of understanding consumers ourselves as well as through a tranche that we did a few months back, got a deeper sense of how the dynamics could play in India. And importantly, how it could play into our game plan of driving adoption for diamonds in India, like Ajoy said, where penetration is low and there is a huge headroom for growth. And the way that we have crafted beYon really is focused on that strategy, that game plan to drive adoption of diamonds in India. So our first learning really has been that India is an end market where both could coexist. There could be some crossover of customers, but there is opportunity for both to play independent of each other in driving adoption for diamond as a whole. And beyond the category development work, and there's a lot of work that we've done in recent times across all our natural diamond brands, Tanishq, Mia and CaratLane, there is an opportunity for us to play to a different need state to a different consumer segment and play with very, very different codes, codes of being fashion forward with everyday styling, accessibility and really playing to indulgence as opposed to the codes which natural diamonds play to, which is that of being precious, special moments, emotions and being storehouse of value. And the way that we have crafted the customer value proposition as well as the marketing mix really plays to those codes. And therefore, the pricing, the product mix as well as the policies of no exchange on the stone, et cetera, are all keeping in mind these codes that we expect to drive adoption. And in a way, ensuring that every success for beYon because our objective is to be a leader in both both segments and be in the full position of both. So it is a very measured play. We opened the first store. The second store will open in NCR. And we hope to open a bunch of stores largely around Bombay and Delhi. So that's it from my side for now. Yes, we'll take a pause.

Yes. Thanks, Arun.

I wanted to add a couple of lines to what Arun said. As I want to reemphasize it actually, that in beYon, we are also playing to win, as you said, take full position. And while initially we might understand better how the assumptions on the unit economics and all the assumptions on the top line, et cetera, are playing out over the next maybe 5 to 10 stores, which may have come up in the next few months, but we will not restrict ourselves eventually to just the top metros. We will also go well beyond once we've understood how it works. Yes, you can take it here.

Thanks, Ajoy. Just to add one more piece. We've spoken about the DBS partnership. But in addition, there's a lot that we've done in recent times to build confidence on natural diamonds, and you all would have read about the launch of our diamond expertise centers that we've invested a lot in R&D in developing a slew of machines that bring alive the origin as well as authenticity of natural diamonds, and happy to share that we are close to 30 diamond expertise centers in our stores. And hopefully, very soon, every store of Tanishq will have a diamond expertise center. And this, itself, can become pretty much the diamond carat meter moment for Tanishq that you all saw 2.5 decades back when we brought this to change perhaps the dynamics in -- on the gold side.

Thanks, Ajoy. Thanks, Arun. Good morning, everyone. As we open the floor now for Q&A, we welcome your queries on beYon, as you are aware, we released our quarterly update yesterday and I just wanted to highlight that we would be able to talk and address queries specific to the quarter and the 9-month performance only in the earnings call after declaration of our financial results. And we thank you for this understanding. I would request the operator to kindly open the floor for questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We take the first question from the line of Mihir Shah from Nomura.

And congratulations on the launch of beYon and also for the stellar performance that you're reporting for the quarter. Sticking to beYon, sir, if you can just help us understand how should, one, our customers think about the differentiation or any cannibalization for beYon versus Mia and CaratLane? Will beYon also be there online? Currently, the website indicates us to go to a store, but will it also be online? And I have a few more follow-ups as well as this.

I'll take that, Ajoy. Yes. beYon will be a full-fledged brand play, e-commerce plus retail, and we should open our e-commerce on the website very soon. Having said that, for a customer, I think, firstly, each of these are very, very strong brands. They have their own proposition. They have their own emotions associated with them. And beYon really place in being fashion forward and being experimental and really plays to the intelligence aspect of diamonds. And we expect consumers to respond positively to our pricing. The policy, which comes from the same principle of no exchange on the stone. And the idea really is to bring consumers early in the category and bring them more often, and thereby, start the journey in diamonds, after which we expect them to cross over to Mia or CaratLane and then to Tanishq. So we see these as very distinct propositions playing to different need states. Although I must say that the in-market testing really has now begun with the first store, and I'm sure we will discover a lot as we roll the first bunch of stores.

I will add a point to Arun's response. We must all recognize that whether it's Tanishq, Mia, Zoya, CaratLane. These are all brands, and they are not selling diamond jewelry as a commodity or is just a category. And these brands have acquired special meaning in the hearts of our customers. They have acquired a certain scale and stature. And be it our products, be it the narrative, be it the design philosophy, be it the customer experience, there's so many things and trust that goes with any good brand. And therefore, that is always the best moat for any business through competition or through other cross category. And we believe we will continue to strengthen these brands in their own way. And while beYon charts its own territory and it will be a brand in its own right. And I think just look at it as a portfolio of brands catering to different segments in these states.

Understood. My follow-up is on the gross margin profile for this category. Market experts or industry reports have indicated that there is a significantly higher gross margin profile versus gain. Will that be a [indiscernible] statement to make? Plus, if you can just share how do you -- how should one think about the margin laddering for beYon, Mia, CaratLane purely on the gross margin level if you can share some indication on that front?

I will take that question, Arun and Ashok. So firstly, I think it is very early days to even be able to give a stable outlook on margins, either gross or EBIT margin. First and foremost, we must recognize that the way we want to play this game is to make the pricing very attractive to the customers, especially new customers, especially modern, young customers, especially customers who have been hesitant to step into the diamond territory because it may be a little intimidating to them. And as well as we want to improve the frequency of purchase, so that people feel it's beautiful, expressive product at a very, very affordable price point. So in many ways, we want to kind of bring that alive and therefore, to start looking at margins at this stage, maybe a little premature. I would say it is better to err on the safer side and make it attractive to the customer and bring in more customers and expand the pie rather than start looking at it as how do I optimize my profitability. Having said that, we will look at unit economics. We have some assumptions. We also recognize that this category is likely to continue to see erosion in prices, both wholesale and retail, and we've factored that into our business modeling at this point in time. Third comment I would like to make is that we must see this as a new business. And any new business takes a few years to kind of build a certain threshold scale, before which it can start delivering returns. And therefore, we will nurture and incubate it in such a manner. So certainly, margins, at this point in time, very, very -- may be very, very premature to talk about. I don't think the contribution of this category is likely to be so material to the total jewelry business or the total company's business to really move the needle. So I would not worry too much about that front as well, if I were in your place.

No, that is understandable. We were just understanding the laddering of the margin profile. And actually, my third question was something on what you really touched upon was on the LGD prices. So if you can also talk about your -- how are you taking care of the supply chain for LGD? Is it a consignment basis? And have the prices increased now? Because what would idly think that the production, which is made, et cetera, will keep happening and ideally prices should keep going down versus what somebody had bought a year ago. So how should one think about these 2 aspects? And this is the last question from my side. Wishing you all the best

Okay. I'll step in there, Ajoy. So like Ajoy also mentioned earlier, this is -- you will see technology kind of get more and more advanced to perhaps bring down prices. So -- and it is an evolving space. So the last word on this hasn't been said. We've priced our very, very aggressively because the idea is to encourage people to come about and adopt diamond and to adopt it and buy diamond jewelry more frequently. So you will see that beYon is priced very, very sweetly. And honestly, we will evolve our pricing and based on our learning because the objective, like we said, is to drive diamond adoption, and to make beYon the leader in this space. So we are learning with every step we take, and this is another step in that journey.

I will add one more data point to what Arun said. Currently, the way we have priced our LGD diamonds, it's around the INR 23,000 to INR 25,000 a carat. Market is, I think, operating at around INR 30,000 a carat. Though there are players who are also going up to INR 40,000, INR 50,000 a carat. And the wholesale prices seem to be between -- much, much lower. In fact, it has -- and therefore, there is scope even for new retail players to come in and price more aggressively. So this is likely to become a competitive market, and we would rather start by keeping the customer in mind. And the approach we are taking that there is no exchange value for the LGD diamond, though there will be exchange value for the gold, which houses it, whether it's 14 or 18 carat. And therefore, we've kept in mind the overall package we're doing the pricing. Of course, we'll refine it as we go along, and we are not hesitant to review it if we get fresh learnings as well as if we see more players coming in. We've built that into our assumptions.

Understood. Largely, on the supply chain, is it on consignment? Or you're going to buy and hold lease? Any insights on that, if you can share? Or yes, that's all for me, please.

Those are operating commercial and we would not like to get into that at this stage. As I said, it's not material enough for us to worry about that. We'd rather look at how the consumer value proposition plays out. Those things can always get tweaked one way or the other.

[Operator Instructions] We take the next question from the line of Aditya Soman from CLSA.

Yes. So couple of questions. So one, in terms of sourcing, will you also be manufacturing this? Or this will be entirely externally sourced in terms of the diamonds, given that you already have some expertise at your facility in the U.S. And secondly, will this be limited to sort of limited? Or will this be largely gold-based jewelry? Or will you also do imitation jewelry under this or silver or other products?

We don't expect to be backwardly integrated at the moment, and we are working with very reputed partners here who -- whose standards, quality standards, match us. And that's the direction we expect to be in this phase. Having said that, the jewelry that we have is in 14 and 18 carat gold, and we have a small collection in silver as well. And that, again, is a process of learning as we roll out stores. So we are open to material, but primarily gold and silver to begin with, and we'll see how that goes.

And the exchange on the gold and silver will be similar to what you offer on your other brands, right?

So currently, exchange is on gold, and that's the larger part of the portfolio that we've put out. Silver is a very, very small line really to test how that works.

We take the next question from the line of Videesha Sheth from AMBIT Capital.

Sorry, this has been discussed earlier, but are there any initiatives being undertaken to educate consumers on this category or any campaigns or large campaigns that are in works considering that there would be initial consumer hindrance at least for those who not yet into the category? That was the first question.

Yes. That will follow. That will follow. We've just opened the store, and you will see many things kind of roll out, like was asked earlier, e-commerce, consumer education. So many things will follow as beYon gets more full blown.

Got it. And while I understand that in the initial few stores, it would be more learning-driven rather than tracking the operating and financial metrics. But on the qualitative side, what is it that you will be keeping a close eye on? Would it be that what kind of price points are consumers purchasing more? If you could just throw some light on that?

Yes. Like we said, the whole objective is to increase adoption of diamonds. So a whole lot of things that we are keeping our eyes on. Of course, the whole marketing mix and consumer value proposition, but also learnings on what consumers are gravitating towards and what we need to kind of refine in our overall mix. So a bunch of things, a lot which is sitting in the interaction between consumers, product, price, policies,

We will also add, for example, a track on how often people are coming, what is the profile of people who are coming in? Are they already diamond buyers or new? Are they Tanishq or other existing brand buyers? How much are we able to attract a younger set of audiences? Those are all the assumptions which Arun spoke about. And also since ours is a very design-led play and fashion forward, we will also want to see whether the people who are coming in are getting that kind of sense from the product as well as the interactions and the store experience. So many of these pieces of the CVP, or the consumer value prop, we will be checking out. Of course, we will have a good track on the numbers like average ticket size and so on and so forth. What is selling, what is not selling, what are customers asking which we don't have and they're excited about, et cetera.