Titan Company Limited (500114) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Titan Company Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. C.K. Venkataraman, MD of Titan Company Limited. Thank you, and over to you, sir.

It has been a fantastic quarter for the company across all businesses. As usual the Diwali and the post Diwali season turned out to be very, very good. The enabling conditions were perfect. We have reached a very high level of vaccination status in the country. And therefore, the customer anxiety was very low, the pent-up feelings for shopping and enjoying were there. The waves of greater formalizing were also in our favor in some of the categories where we operate. And of course, on top of that was the combination of innovation, agility, collaboration, teamwork, huge levels of customer relationships across our EBO network and of course, our distributors and retailer friends and all our vendor partners, who rose to the challenge and delivered an exception [Audio Gap] proud, all the figures, all the information is there in the presentation, so I will not speak any more. My colleague, Saumen Bhaumik, CEO of the Eye Care division is preoccupied on a certain development, and he'll be 15 minutes late to this meeting. So all those of you who have specific questions on eye care, please, if you can sequence yourself accordingly after 4:15 so that he can speak to you clearly from the conference room where he will join us. Now over to all of you for the questions.

[Operator Instructions] The first question is from the line of Abneesh from Edelweiss.

Congrats. My first question is on CaratLane. So extremely strong sales growth and like-for-like growth also. So 2, 3 questions here. One is your first store in airport, is it largely for branding purpose? Given airport rentals are very high. And currently in COVID era, the footfalls are very unpredictable and very volatile. Second is jewellery on rent pilot project, if you could share some details how has been the initial response? And overall, such strong growth in CaratLane, is there some level of cannibalization which Tanishq is seeing in some segments or it's completely different consumption segment?

Hi, Abneesh, Ajoy here. While [indiscernible] is not joining this call, I'll try and answer some of your questions. On the first one, the airport store is the first for CaratLane, and I think we have to yet figure out how the top line, et cetera, pan out. But by and large, every store that CaratLane opens has a path to profitability. So -- while yes, it will play a branding and marketing role as well for CaratLane. But we think there's enough -- at that price point, there's enough opportunity for impulse buying to take place. And this will enable us to test how strong is the actual revenue opportunity. And Bangalore is a good city to have tried it. On the jewellery on rent, I'm afraid we don't have enough information right now to share with you. However, we'll try and see if we can get back to you with some amount of learning. It's early days. It's still at a very, very early days in terms of a pilot. So don't have anything to share. Growth in CaratLane cannibalizing into Tanishq, we are not seeing that. We have seen handsome growth in literally all the brands, whether it is CaratLane, Tanishq, Mia, Zoya, and even put together between all these brands, all our brands put together, we are still around the 6% market share in a huge jewellery industry. Third, and of course, the customer segments are different, and even need states are different in many of these cases. So I don't see any cannibalization at all.

Sure. My second and last question is on Tanishq. Your growth in the last 2 years of COVID has been extremely good in jewellery and well ahead of expectations and possibly well ahead of every player also. So here, you have mentioned market share gains, and you have mentioned regionalization strategy of winning in focus markets. So could you give more specific granular details, which market, what has worked? Is it better pricing, more focused on wedding, the design aspect, anything else you want to highlight? And now when wave 3 is also now over essentially, do you see that the big fat weddings will be back, so that structural tailwind, which was there, that will become difficult. So people will spend more on the big fat wedding rather than on the jewellery because restrictions will not be there, if there is no fourth wave?

Okay. I'll start off with the first part of your question, which is to say what has worked for us. Actually, in quarter 3, there has been a clear volume buyer-led growth and a grammage led growth. Ticket size growth has been marginal because gold prices have stayed kind of muted relative to last year, which is very good news because so many more people in the market. We have seen very good -- so 32% has been the buyer growth. And on new buyers, we have seen a 39% growth, which is to say we have gained a lot more on new buyers, and we are continuing to see the benefits of formalization. In terms of regionalization, which is also helping us in market share gain, markets like Tamil Nadu, we have talked about, continue to power ahead in terms of market share growth, and we are continuing to invest in that market. We are also investing in Bharat markets, what we call as Bharat markets are those which are typically UP, Bihar, Orissa, parts of MP, Chhattisgarh, et cetera, where the upside is huge and there on the plain gold as well as on wedding, the opportunity continues to be very, very high for us. Actually, on wedding, if I were to say this quarter, we've seen very good growth, it's led the growth. Overall, retail growth has been around 34%. Wedding segment has grown at around 40% for this quarter. The opportunity for the big fat wedding to -- and how it is going to affect us because of other things, very early to say, our total contribution of wedding continues to be around the 20%, 21% mark. And most jewelers have about 50% to 60% coming from wedding. So the headroom for wedding-related market share gain is huge. What is working for us, we have a regional product which has been the thrust of it, network expansion and regional and specific campaigns that we have run across different markets. And we are continuing to do so. In fact, we're picking up a couple of more markets as we go forward. So I think that is what we're looking. Pricing has not really been too much of area of concern for us. Yes, there is some plus minus that keeps happening, but we've seen very good growth in the higher making charge products also. So all the pluses and minuses are netted off positively.

Just one small follow-up?

Yes. Sure.

Yes. So wedding as a percentage of your sales, are you happy with that number given market is much higher? And is there a conscious strategy to drive that much higher? In Studded, you used to have a number many years back, but then you said that every part of the business can grow and there is -- there are too many dynamics at play. So what would be your comment on wedding as a percentage of share, medium, long term?

So difficult to say share again. I would say that wedding can grow faster, just like Studded can grow faster. But since we are also focusing on the everyday specials or core category, which we talked about 2 years back, that has also come back very strongly. And in fact, it's a great -- it helps build the funnel because suddenly, people will not come and buy wedding jewelry or high-value Studded. They start off by buying every day and then migrate on to becoming regular customers. But yes, we are seeing good traction in wedding, and we have a separate dedicated marketing and, let's say, merchandising plan and retail plan for Rivaah, which is our sub-brand for wedding. And you will see much more aggressive play in that, as we go forward. I can't comment on contribution because everything is growing at a certain rate, but we will continue to invest in both Rivaah as well as Studded disproportionately.

Sorry to interrupt, may I request Mr. Abneesh to please rejoin the queue. We have participants waiting for the turn. The next question is from the line of Nitin Jain from Fairview Investment Advisory.

I have just one question. So a couple of quarters back, you spoke about Tanishq targeting the U.S. market. And this quarter too, the commentary is that CaratLane is -- has gone live with its U.S. website. So what kind of potential do we see from the U.S. market? And like what is the vision here for the next, say, 3 to 5 years?

I wouldn't want to share any specific ambition in terms of numbers here. But it's a very, very grand division in the sense that we want to become the jeweler of choice -- jewellery brand of choice for the NRI, PIO and the GCC and North America in the next 3 years, and we're doing everything that we should be doing to get there in scale and at a very, very fast pace, and we will share with you what we would like to share some time down the road.

The next question is from the line of Rakesh Jhunjhunwala from Rare Enterprises.

So congratulations for already fine results. I just wanted to wonder, what is the expansion plan we have over a 1- to 2-year horizon, both for the Jewellery business and the eye wear business and all the -- we were late in the wearables business. [Technical Difficulty] something in order to fill the gap and get better technology for whatever reasons.

So Rakesh, Ajoy here, I'll take the jewellery piece. This year itself, we have opened 27 stores and by the time we end the financial year, it may be another 10, 12 stores. We are looking at it maybe 35, 37 stores is the sense we had for this year. Next year, again, we have in mind -- we have a pipeline of 50, but we may land up opening 35 to 40. That depends on local conditions. But we are constantly pushing the envelope there, and we see the opportunity over the next 2, 3 years to really -- we are at 384-odd Tanishq stores. And we have also now begun to add a lot more in Mia besides the CaratLane expansion. So put together as a portfolio, we are already beyond 500, and we think that 500 could hit 600 to 700 over the next couple of years. Opportunity is large for all the brands put together.

This is Saumen from Eye Care division. On the network front, this year, in the last 9 months, we have added 125 stores. This happens to be one of the largest expansion that we have ever done in the division. And our outlook is in the coming 12 months, by FY '23, I think our network count, which is about 707 today, should be around 1,000.

By 31st March?

'23. Trying to open 1 store every 1.2, 3 days or something like that.

Hi, Rakesh, Suparna from Watches. I know you've been asking a question on network and expansion that I do want to mention, in quarter 3 itself, we opened 35 new stores across the 3 chains. And there is also in addition 29 stores renovation. So there is a very big plan to expand and modernize the World of Titan what is now we call Titan World store chain. In addition, Helios is expanding very rapidly. And the combination of Helios and World of Titan stores in many locations is working really well as an expansion route. With regard to your question on wearables, yes, in quarter 3, we had the launch of Titan Smart in the end of December, which has seen a lot of success, and in January, we've launched Fastrack Reflex watch called Fastrack Reflex Vox, which is also Alexa enabled. And we have another launch in -- tomorrow and another couple of launches in the next 2 to 3 weeks. So we have a very healthy pipeline of smart watches from both Titan and Fastrack. And whatever we launched is doing really well. So we hope to gather a lot of momentum on this in this quarter itself, which will then move on to next year -- next financial year. As you know, we had actually done an actually hire of a Hyderabad-based start-up called HUG Innovations, and that whole team is really our tech team right now. In addition, we are working with various factors and alliances, and we are very confident about taking on this expanding floating sector with a lot of good products up ahead.

I had one question for Ajoy. Ajoy, Venkat just now said [indiscernible] looking at aggressive interest expansion. And we want to with your customers about Indian [Technical Difficulty]. So which are the areas Singapore, Australia, Middle East and America, England. So these are the places where the Indians are in quite a quantity.

Yes, so Rakesh, we opened our first international store after a long time in Dubai, a little more than a year back. And it has done exceedingly well. After that, we've opened 2 more stores. And in the next 2, 3 months, we are opening a few more. And our first North America store is related to open in May, June of '22, 3, 4 months down the road in New Jersey. And our focus is going to be the Gulf Cooperation Council countries, including Qatar and Bahrain and countries like that and the U.S.A. and Canada. So this is our -- it's a 3-year focus. And we are obviously looking at concentrations of NRI, PIOs in the East Coast, maybe in the center like in Texas, on the West Coast, in the Bay Area and maybe Toronto, Vancouver. So the Australia, England and all are a little down the road, thereafter.

Singapore and Hong Kong also big Indian populations.

Yes, yes. Sure, sure. I mean they're all there in our -- just scheduling and there is a certain scale advantage, like if you're in the U.S. to put up 5 stores there is a certain scale advantage that comes as opposed to a dissipated international kind of approach. But sure, as we gain traction, I mean every year, we will ramp up our ambition as well, and we'll certainly take your point.

Without any commitment that it will happen, do you think it will be reasonable to [Technical Difficulty] that we'll open 25 stores in the next 3 years? Without commitment because...

I'm not -- my silence is not because I'm worried about the commitment. I'm just trying to recollect the plan. We are looking at -- yes, in the 20 store ballpark, yes.

When there's the sales -- see first of all, the gold prices. [Audio Gap] 10,000 people in India. So while NRI to buy there is more cheaper than buying in India. And because -- do you think a typical store in Dubai or in America on an average will say double of an Indian store?

Yes, could actually. Like I've also met -- I met many customers in the U.S. 2 months back. And both from their economic situation there in the USD 100,000 per capita on the one hand and they are state that we were sharing with them products and prices and all that. And the sense I got was what you're saying, which is a much bigger ticket size. And through that much bigger ticket size is much higher first 12-month sale in every store that we opened, which has actually been the case even in Dubai.

So therefore, if you opened 25 stores in 3 years [indiscernible] 50 stores or more compared to India?

Yes, from sales point of view, yes.

Fair enough, best of luck, and congrats to your team once again for stupendous results.

The next question is from the line of Jay Doshi from Kotak Securities.

Congratulations on good results. A very quick bookkeeping question. Diamond prices have gone up quite a bit in the past couple of months or so. And you've called out that as one of the reasons for higher profitability, is that number worth calling out in terms of what could have been the impact on profitability because of inventory gains on some of the diamond studded jewelry that you must have realized?

So I think that is, of course, one of the reasons which we called out, and it is well known that gold -- diamond prices are going up. To some extent, we also took price increase and had advantage of stock, which was at [indiscernible]. But there were certain other elements also which had helped this quarter. So overall, I would put about 100 basis points all those elements, which came together, which may not be -- I would not call it onetime, but they are not normal items. So that 100 basis points you can think it of I think on account of 2, 3 elements, not just diamond.

Is it possible to share what are the other 1 or 2 elements other than this?

Okay. One element, at least I will call out that we have our provisioning policy based on aging of the stock, and with the growth, some of those stocks got sold out. So some of those provisions got reversed. So that credit is also sitting in this quarter.

Understood. And in case of diamond, you will continue to see that benefit for at least 1 more quarter or beyond that, reasonable to assume?

Yes, it's reasonable to assume that because some of it -- it's a constantly moving thing. We took another price increase in Jan, but there's still opening stock. But now again, prices are going up. So yes, in this quarter, I think you can continue to see some benefit. And I would add to Ashok's point, there was one more element where I think we've gained this year and this quarter, some payout being lower on account of lower contribution of sales from GHS, which we'll catch up by the next couple of quarters. But these are all the other elements, which are also playing out.

Finally, with diamond prices, prices moving up after a very long period, are you seeing any kind of increased interest levels in the studded jewelry?

So quarter 3 has been very good for studded jewelry. The contribution -- I mean, the growth have been marginally ahead of the overall sale. Even in the month of Jan and I think we don't know how Feb has hit. I think studded continues to see interest, despite the inflation in diamond prices. But I think the cumulative effect of all this inflation will start hitting consumers in a bigger way only by Feb, March, I feel, or even April when all the market takes all the price increases, we will have to see that. But right now, yes, the market for diamonds and inflation in diamonds is red order.

Also, one of the things that I've certainly seen over many years, this is a store of value product. It's not finally a INR 50,000 becomes a INR 60,000 product, it's worth INR 60,000. So therefore, it is not like other categories where it has become more expensive. Sure, you have to pay more money, but the money is sitting in the product. So to that extent, it doesn't work exactly like the price elasticity on volume kind of point that you're raising, necessarily does not work like that. And as long as any brand has got an assortment, which is sort of wide and deep enough to cater to all price points, which typically companies -- all our teams keep working. When prices go up, then assortment teams kick in and then create more products, so that there are no gaps and there is volume to price on a -- physical volume to price equation, which is maintained around.

Sir, my question was the other way around. Are you seeing any pickup in the interest, given that normally, if I understand correctly, diamond prices were stagnant for quite a few years, whereas gold was appreciating. So from a investment or a store of value perspective, this movement in diamond prices, does it actually attract more customers to go for studded versus gold.

No, no, because gold is an investment product. Diamond is not -- even though it has paid back a lot to a lot of people but people don't think of it as an investment.

Sorry to interrupt, may I request to Mr. Doshi, please rejoin the queue. We have participants waiting for their turn. [Operator Instructions] The next question is from the line of Shirish Pardeshi from Centrum Capital.

Venkat, hearty congratulations for beating [indiscernible]. Very strong set of performance. I have 2 questions, sir. First is on -- obviously, on Tanishq. You have reported a very strong growth. If you will be able to give me some break up in terms of volume and value.

Yes. The volume growth -- in fact, the entire growth in retail is driven by volume actually, 34% is the Tanishq retail growth in value, 34% is driven by buyer growth and 2% on ticket size.

Okay. Okay. And any quick sense because what we have been seeing this pent-up demand and deferred wedding. Is that trend has continued in the month of January?

I don't really have the January data about wedding demand, et cetera, but the pent-up demand is there. If you ask me, there are a lot of weddings and a lot of people continue -- the inquiries are there. We are anticipating this quarter, there are -- there is opportunity for wedding and also if you ask me in quarter 1 going forward. So over the next 5 months, we are bullish on weddings, and we will push the envelope stronger on that piece.

I got that. That's very helpful. Why I'm asking is that you have beaten even the gross margin and jewelry being a larger component of your business. What kind of gross -- I'm not saying the number, but if that trend is visible and is it sufficient that we can look at more than 20-odd percent gross margin in that business?

I think our focus is substantially on sales growth and starting to become more and more dominating in every city where we are, including the programs that Ajoy has spoken about, which is multistate thrust. So all that is pushing for scale. And therefore, the overall expansion and the profitability of the business coming much more through scale than actually through gross margin expansion. If it comes through that in a particular quarter because of some circumstances like that, it comes through. But gross margin is, in any case, not an end in itself. It's not a business KPI. It's sort of -- within the range, we need to keep it. Otherwise, the health of the business gets affected. But otherwise, it's not an ultimate KPI. The ultimate KPI is profit margin and ROCE. And therefore the scale is what is -- in fact if you see substantial parts of the expansion have been delivered by scale in Q3 and some part of it by the gross margin expansion. So to that extent, this is dynamic. If we grow much more in gold jewelry in Q4 than in diamond jewelry, then the gross margin will fall. But does it mean anything? Nothing because our profits may actually increase.

That's very helpful, Venkat. My second and last question on the Watches segment. Again, Watches have seen after a very long time, a good strong growth momentum. So any color how the unit growth has happened or it is -- how the mix has changed in terms of premium and popular?

So in Watches, our volume is -- there's a gap of almost 10% between volume and value, which is as an average price growth of almost 10%. And it's on the back of the higher priced brand, which is both the flagship brand Titan, as well as international brands, which are more expensive, both have led the growth in Q3. Other brands have also done well. Sonata, which is our economy price plan is -- has seen the least growth, possibly because of the overall conditions, the favoring premiumization as opposed to the economy price point. Having said that, we are seeing good growth across all channels, whether it's multi-brand outlet, our own EBOs as well as large format stores and marketplace e-comm. And for us, different channels actually cater to different audiences and different price points. So the multi-brand retail and e-commerce are more oriented towards the economy price points and those brands do better. Our EBOs, as well as the large-format stores are sort of placed where Titan and international brands do better. So as of now, we -- there is still -- the -- a large part of the growth is still coming from the average price point. There is volume growth, but not as much as [indiscernible].

I got that, Suparna. My question was a little different. In these circumstances, as we know, the wedding season and gifting season is really strong because of the festive season. But once the economy opens and things normalize, do you think that the premium end is growing faster or will come back -- the growth rate will fall down to the economy brands?

I think the growth -- you're absolutely right. As the situation in the country becomes more normalized, the lower-priced products and the more economy brands will also kick back into life. So yes, maybe a year from now, there will not be such a big increase in the value side. The premiumization will continue because that's where the overall consumer trend is but lower price points -- middle and low price points will also -- that demand will come back. You're right, there's a lot of gifting, there is a lot of weddings. A lot of other occasions that also get gifted, which are not being celebrated all these moments of birthdays, anniversaries, so many -- graduations, so many important occasions that watches are the gift of choice, those will come back, and we will be able to see that growth coming back.

Sorry to interrupt. May I request Mr. Pardeshi to please rejoin the queue, sir. The next question is from the line of Tejash Shah from Spark Capital.

Congrats on good set of numbers. My first question pertains to jewelry segment. So a couple of quarters back, you had specifically called out that we are gaining market share in Southern India markets and with a lot of effort and planning being put on that part of the business for a while now. So any update on that front?

Yes. So market share -- hi, Ajoy here. Market share gains continue to be good actually across the regions. I can say specifically for Quarter 3, the gain in market share perhaps is sharper in South and West. In the East, also there is, but not as sharply as I'm seeing in the South and the West. In the north, again, local jeweler have been subdued. So we have continued to see market share. So across the country, the larger chains and organized players have gained from local barring maybe a few select states here and there, like the Bengal or Maharashtra, that there are local chains which are strong. In the South, Tamil Nadu, Bangalore, Hyderabad, everywhere, we are seeing -- witnessing good market share growth.

Sure. And if you can double click on South India further. So we had made some attempt 4, 5 years back in terms of Gold Plus and now we are -- after long, we are again seeing some traction there in Southern India market. So any strategic insights that you can share, what are we doing differently? And how are we going about tracking that Market again, Tamil Nadu in particular.

So in Tamil Nadu, we -- our network expansion, as well as conversion of Gold Plus to Tanishq I think was one very important piece. So we are at 42 [Technical Difficulty] stores right now. And the second piece that we have done is we have done a lot of regional product introduction, including in the daily wear categories where we needed to establish ourselves as a jeweler, which is taken seriously. So naturally, our studded ratios are a little lower compared to the rest of the country, but we think it's relevant because it's adding to the top of the system. Thirdly, we've done a very intense local culturally relevant marketing activity by going deeper into consumer insights and understanding the progressive women of Tamil Nadu specifically. And with Nayanthara as our brand ambassador, we put together a very, very strong program. On the retail operations front, there's a lot of focus on Grammage growth and exchange and many, many other operating levers. So all these 3 things put together, including merchandise infusion, absolute investment in inventory going up. So all these put together are working powerfully together and seeing us gain very, very handsomely in -- we are very happy, and we are continuing it as a strategic program.

Great. And second question pertains to eye wear profitability, which has been fabulous turnaround story in the last 2 years now. So just wanted to know when we focus so much on profitability, the other side, perhaps the downside, not sort of in this case, could be net promoter score. So how are we sitting on that front in terms of customer experience when we are focusing so much on profitability?

This is Saumen here. As far as the last 2 year goes, we have seen some unprecedented disruption. So we could not visualize anything more than a quarter. So we addressed quarter-by-quarter. And that's how we got many of the [indiscernible] right? As a result, in most difficult time, we kind of [indiscernible] our costs, et cetera, in a way that we saw the profitability and related turnaround. As far as customer focus is concerned, this has been one of the unwavering focus of the division, whether we made money earlier or not. This only got better than -- during the first lockdown and our people reached out -- more than 3,000 people reached out, 0.5 million customers, just to connect with them to find out their wellbeing, the kind of the positive response that we've got and -- the truth that we also discovered, how many people are waiting to come to our showroom for getting their problem solved and so on and so forth. And subsequently, if you look at our NPS score, it steadily improved days whether it's 2 days or 15 days or 90 days. And the last parameter is the information that is available in the public domain, which is a Google score. 420,000, 430,000 people, our customers have rated us 4.9 out of 5. So these are all enough indicators to us that the foundation that we have built over the last 12 years on the customer front has only become stronger in the most difficult and most disruptive phase of our existence.

The next question is from the line of Chirag Shah from CLSA.

In fact, my question was continuing on the Eyewear business margins. Of course, as the previous participant also highlighted, we have seen very strong margin growth in the last couple of years in the Eyewear business. Can you just talk about a little bit about the unit economics of the Eyewear business? What is the revenue run rate that mature stores do versus the network average sustainability of the margins here. And whether last part of the margin increase is because of the operating leverage as bulk of the investments are now defined?

Pre COVID, our average store turnover used to be roughly about INR 8 crore. Obviously, this -- we have never seen in 12 months [indiscernible] that is not a comparable figure. So that figure wouldn't have changed much if we normalize for 12 months. But last 12 months, especially the last 8 -- 7, 8 months, we also expanded. We've also gone far deeper and wider and the per store yield would be lower than, let's say, in bigger cities and bigger [indiscernible] and bigger catchments, that's one fact. As far as the margin is concerned, at a gross contribution level, we do not foresee too much of a variation going forward as we see it now. And [indiscernible] dropped because assuming that we are kind of out of the [indiscernible] that we have been experiencing, and we'll probably see on full 12 months, our focus would be towards investment [indiscernible] growth. So growth would come as the first priority and that would have a consequent impact in the profit margin.

Just continuing a bit further on the Eyewear business, you spoke about the network rollout that you plan on the eyewear side. But given that the opportunity is so large, what stops us to go for slightly more -- or rather a faster rollout, network rollout than what you are envisaging.

I think you know that we have been in the business for the last 12, 13 years. We have reached the level of about network size of 600 a year before. And now we are saying by end of FY '22 will be 1,000. So that by no standard, I think, is less ambitious where we stand today. Plus we have another channel, which is the multi-brand channel. We have spent a good amount of time and we have taken a lot of it in order to correct this channel. That is our distribution channel through which we reach out to some 7,000, 8,000 multi-brand outlets. Currently, we distribute -- earlier used to distribute only sunglasses, now we also distribute frame. This channel post this revamp that we have done is showing a lot of promise. And we believe that while our 1,000 stores serve enough and more customers, I think there are some 10,000, 20,000, 30,000 existing mom-and-pop stores who have been serving their customers so very well. There is some sitting competence, which is already there. We don't have to go there with [indiscernible]. This collaboration -- they see value, we see the value. I think that is the other route that we'll take in order to really go deep and wide across the country, apart from our own exclusive...

Just to make sure that the ambition and network expansion point that Saumen made just now is totally appreciated. It has taken us 15 years to reach 700 stores. The 16th year will take us to 1,000 stores.

If I may just ask one last question on the jewellery side. We spoke about the international expansion. I just wanted to understand that as we venture into the international market, what kind of store formats are we looking at? Are these L1 formats or L2, L3?

It will mostly be L2, L3.

The next question is from the line of Percy Panthaki from IIFL.

I was just doing some back of the envelope calculations based on the statements you have made and some news articles. So basically, you said that the growth is driven mainly by the growth in the number of customers. The gold price Y-o-Y has remained flat. So therefore, the volume per customer also would be roughly flat only, I mean just putting two and two together. On the other hand, we've also seen new articles where you've said that you're working on reducing the grammage per piece. So if the volume per customer is more or less flat, but the grammage per piece is down, is it that the customer on an average is buying more number of pieces than earlier?

Okay. Let me start with your first assumption about volume and grammage being flat. Volume -- actually in quarter 3, the grammage has grown faster than the rate of growth of customers. So 32% is the buyer growth and about 45%, 46% is the grammage growth overall. So actually, grammage per buyer has gone up this quarter. See, I am not making the statement [Audio Gap]

Why do we expect to operate around higher end of that. And I would say, 13% plus/minus quarter-on-quarter things can be different on a 3, 4 quarter basis, that's the number which we are kind of keeping in mind. Please also understand that a lot of competition is also kind of becoming aggressive in terms of their expansion, in terms of brand promotions, et cetera. We need to keep in mind that also and keep pace with that.

Also, the scale level at which this quarter is, and that scale leverage will not play out in the same manner in other quarters where the scale level drops

Before we take the next question, [Operator Instructions]. The next question is from the line of Nitin Jain from Fairview Investment Advisory.

So I would just like to delve a little on the criteria that goes into choosing the store locations. So just to give an example, in Pune, there are at least 2 to 3 jewelry clusters, where your peers, Malabar and Senco are present, but Tanishq is not in those clusters. But the high streets where Tanishq is located, most of your peers are not present. So what is the criteria that goes into choosing the high street locations?

So I'm not able to figure out which are those clusters. Mostly, we go into marketplace stores, high street stores, and then we have -- within High Street, there will be those which are like main high streets, which may or may not be a jewelry cluster, but it's an important high street. And then there are neighborhood stores. So let's put it this way, that in Hadapsar, there will be a store that will be a neighborhood [indiscernible]. But then there'll be a main high street, let's say, like generally Maharaj Road, et cetera, where we'll be having. And a marketplace store could be something like Laxmi Road in Pune. I am taking the Pune examples to bring it alive. And then, of course, there are malls. Malls are also there, some select malls. So our criteria is where there's a market for jewelry, we will certainly be there. And we are there pretty much in most markets. In fact, I would think across the country. In a given town, if we are present, we are there certainly in the marketplace. Plus, we are there in all major high streets, which are shopping for all kinds of retail outlets, all brands are there. And now in the last several years, neighborhood stores have also cropped up quite a bit because each neighborhood -- for example, in Bangalore, an Electronic City or HSR Layout, our more recent neighborhood stores, and they are also showing a very good traction. So wherever there's a catchment opportunity and we are able to see an outlook for at least a INR 40 crores, INR 50 crores store in the near future, we go ahead and put up a store. And of course, we are going into newer towns and newer markets as well.

And actually, we are the most penetrated jewelry brand in the country. So these specific examples may be real, but they don't necessarily signify.

Okay. And just a follow-up on that. So recently, like the observation is that next to a Tanishq store, there will be a CaratLane store as well. So are we trying to -- people who do not prefer to buy from Tanishq, they might choose to go to CaratLane? Are we trying to utilize that catchment area fully? What is the thinking here?

Each brand will pursue its growth strategy in a way independently. And in this case, CaratLane is also -- in fact, you'll also find a Mia store sometime or a Zoya store in the near vicinity. So every brand assesses the opportunity, basis its customer segment. And anyway, every other competitor brand to our portfolio also looks at Tanishq and see if Tanishq is there, then clearly, they try to come there. So willy-nilly, when Tanishq establishes itself strongly in a neighborhood that becomes a jewelry cluster in the next few years, yes? So I think there is a little bit of a self-fulfilling process here. And we don't see any impact on Tanishq store just because the CaratLane store comes next door. In fact, there's an...

It's synergistic.

It's synergistic exactly...

And also many partners are common now. Franchisee partners are common to Tanishq and CaratLane in this particular example. And it is synergistic even more so in [indiscernible].

The next question is from the line of Avi Mehta from Macquarie.

Just 2 questions. First, if I heard you correctly, the normalized range, you would argue that it should be more at the upper end of the 13% band right? I just want to clarify that part.

Yes. Yes, that is what we said.

Okay. And this is from -- not from the near term, but from an FY '23, I mean, at least from that perspective, from a sustainable perspective, that's the correct way to it, okay. The second bit I wanted to know about while you've talked about continued strength in wedding sales, would it be fair to kind of extend this to the entire jewelry and watch segment? So despite this third wave that has kind of played out in the country or if you could kind of help us understand the impact from the same.

Jewellery segment or jewelry watch segment?

Jewellery segment.

Actually, we are seeing strength across all price bands, across various categories, between Studded, between wedding, between everyday specials or core categories. Every category we are seeing [Audio Gap] but that could also be because we are significantly gaining share in new customers. So what we are seeing is what I'm telling you. And I think if I look at quarter 3 per se, every jeweler was very happy with the growth that they saw. And I think that couldn't have come only due to wedding, it is also festive. And during festival, everyday wear is also bought significantly. So right now, what we have seen and what we hope to continue to see is a strengthening across. Wedding is like an icing on the cake. Sure, it will grow a little faster or maybe we will push the envelope stronger on that. But as I said, that is still only about 20%, 21% of our overall contribution. In the rest of the segments, also we are seeing good growth.

Okay. And this is -- my comment was essentially with respect to the Jan, Feb, March. So I just wanted to clarify that. So you are essentially saying that strength is across price points, at least till now. And the demand is not...

Yes, yes, it's not primarily wedding led, that's what we are trying to...

Yes, yes. It's not, okay.

[indiscernible] wedding but it's not like overweight.

And sir, is it possible to give a similar comment for watches as well? Is that strength similar demand strength? Because I understand jewelery you're seeing buyer-led price point and product-led strength continues, even in watches realization that growth rate continues, is that a fair comment, is how I should see?

Yes. In watches also, we are seeing good growth in the premium part. So there is an overall average price point increase, so that is leading to that. And wedding is actually our -- also a very big driver of sale for watches. And this particular -- the winter wedding season, particularly for premium watches. So we are point for some good uptake in the months and the quarters ahead.

The next question is from the line of Jay Gandhi from HDFC Securities.

Sir, just a couple of bookkeeping questions first. If you could just help me with the mix of gold sourcing this quarter and the wedding contribution to sale?

Gold sourcing for the quarter. I'll pull out and tell you. I don't have the figure readily available here. Let me pull it out and check.

[indiscernible] change the way what we have been sourcing through GOL and through GP, TP and spot buying. I don't think there has been any major systems. [Technical Difficulty] might be but -- yes.

And the wedding contribution, I'm not sure if I missed this but.

Yes. Sorry, on the wedding contribution is around 20% is what I wanted -- what I've been sharing.

Right. And sir, I have one question what would be our share from South if you compare this quarter and perhaps the same quarter 2 years back? It's obviously likely to have gone up meaningfully, right? And we still managed to maintain broadly the same gross margins. So just wanted to understand how does this play out? Because if you look at most of the other players, who are wedding heavy, your counterparts, most of them end up having a gross margin of around maybe ranging from 10% to 15%. Now how -- you have to gain market share in that area? How do you manage to maintain the same gross margin?

So you're right. South region is relatively lower margin compared to the other regions for us. But yes, through a mix of product engineering, through a mix of -- we have an internal separate program on enhancing and optimizing gross contribution. Also, we've seen a little bit of benefit of higher making charges, products -- based on product mix that we have been able to sell, both in South and other regions. So a combination of product mix, product engineering through focus -- and also these lightweight, I think the lightweight has also helped in 2 fronts, one is price point also in terms of giving us a slightly better gross margin. We've been able to kind of, in a way, compensate the increased contribution of South and therefore some amount of margin dilution. We are also constantly reviewing our rationalizing and reviewing our gold rate markups and AMCs, making charges across different parts of the country. So yes, there is some amount of [Audio Gap]

Hello?

Management, we cannot hear you.

Can you hear me now?

Yes, sir. Please go ahead.

Yes. Just the last point. The share of diamond jewelry in the south is not lower than the share of diamond jewelry in some other parts of the country. So while the gold jewelry business is of one profile, but for example, Chennai is a very, very big diamond jewelery market. And our share in diamond jewelry in Chennai is likely to be more than our share in diamond jewelery in West Bengal, Orissa or Bihar, and therefore, if Chennai increases in share compared to West Bengal, for instance, on the gold side, we may lose, but on the diamond side, we'll win [indiscernible].

Right. Right. No, fair enough, sir. I get that. The drivers that you mentioned...

Adding to your point...

Sorry, go on, sir.

Carry on.

Yes. The drivers that you mentioned are likely to be very similar across players, I get that, the degrees may vary. You may have done probably a better job. The only thing -- the reason I ask you this question is, is it that you're being able to find lesser retail catchments even in South or is it the same market that we're gaining share?

So I think between what we said, what I shared and what Venkat shared, I think that's the summary of what how we've been able to manage margins. Yes, there is a studded focus also we bring in all markets and even in the South. Therefore, we are better up on studded than many other players. And we are seeing some benefits of all these margin management exercise.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. C. K. Venkataraman for closing comments.

Thank you very much for all the support and for all the challenging questions, as always. See you soon.

Thank you. On behalf of Titan Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.