India's Gold Demand May Be Affected by PM's Proposal to Delay Purchases

Titan CFO Sees Austerity Measures Boosting EBITDA Margins Amid Short-Term Demand Slowdown

Prime Minister Narendra Modi's call to citizens to adopt austerity measures, including delaying gold purchases, could have a short-term impact on demand for Titan, the Tata group company's chief financial officer Ashok Sonthalia told Moneycontrol on May 12. The company's stock price crashed up to 10 percent on May 11 following the Prime Minister's appeal.

Sonthalia believes that a short-term demand slowdown for three-six months can occur but notes that this period is relatively small compared to the life of a company. He also expressed concerns that the government's actions could lead to the creation of a parallel market, which would be unhealthy for the industry.

Government's Austerity Measures to Benefit Titan's EBITDA Margins

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The move to delay gold purchases, which could lead to a fall in the sale of gold coins, is expected to improve Titan's EBITDA margins. Gold coins make up a low double-digit percentage of the company's portfolio, up from a low single digit a few years ago. In the March quarter, gold coins witnessed a strong growth and nearly tripled in value from the year-ago period.

The company has taken several steps to counter the impact of rising gold prices, including the introduction of lighter cartage jewellery, a gold saving scheme, and gemstone jewellery lines under the Tanishq brand.

Strong Performance in March Quarter

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Titan reported a 35 percent year-on-year rise in consolidated net profit to around Rs 1,179 crore, while its total income surged 46 percent to around Rs 20,300 crore in the March quarter. The growth was led by momentum in its jewellery business and resilient demand in the watches segment. The jewellery portfolio grew 50 percent year-on-year to around Rs 18,195 crore during the quarter, excluding bullion and digi-gold sales.

Taneira to Focus on Strengthening Sub-Rs 10,000 Range

Speaking about the company's ethnic wear brand Taneira, Sonthalia said this fiscal would be crucial with a slew of initiatives planned, including strengthening the sub-Rs 10,000 range, display of merchandise, and taking a deep look at store economics. He believes that FY27 will be the year for some experimentations and rolling them out, despite the challenge of making people aware of the offering and bringing them into the store.

At 12.34 pm, the Titan stock was trading at Rs 4,115 on the National Stock Exchange, down around 2 percent from the previous close. The stock is down almost 7 percent in two days. India imports nearly all of its gold requirements and more than 85 percent of its crude oil needs, making the country vulnerable to spikes in oil and bullion imports.