Titan’s Chief Financial Officer (CFO) Designate Ashok Sonthalia on Monday said the company is not considering listing of CaratLane anytime soon. In a conversation with CNBC-TV18, the CFO said, "There is no immediate plan and I don't think we are even considering listing of CaratLane. We will rather run a portfolio of brands for our jewellery business and doesn't make sense to us to have two listed entities in the same space."

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Sonthalia said that CaratLane is expected to grow faster than the rest of the portfolio. "If you look at EBITDA margin trajectory for last five year up to FY23, almost minus 9 percent to plus 9 percent it has happened CaratLane is largely diamond jewellery business. So the opportunity to keep inching up margin and gradually not only equal Titan jewellery portfolio margin but be slightly better than that exists and I think we'll see them working towards that."

CaratLane market share to touch 10% by FY27

Sonthalia believes that this business still has huge opportunity and huge growth ahead of it. "Like we talked about that our jewellery business with respect to jewellery industry in India is current 7 percent market share and will go towards 10 percent by FY27," he said.

Similarly, within tightened jewellery portfolio, CaratLane sits at about 6-7 percent and they should go towards 10 percent by FY27, he said.

Tata group company Titan acquired another 27.18 percent stake in its subsidiary CaratLane Trading from the jewellery brand’s founder and his family for Rs 4,621 crore in cash.

In an exchange filing, the Tata group company said that it is acquiring 9,190,327 equity shares in CaratLane from Mithun Sacheti and his family, following which its stake in the company will increase to 98.28 percent.

The latest transaction is expected to close by October 31, subject to regulatory approvals, Titan said.

'Will take part debt to fund deal'

The Titan CFO said that the deal with CaratLane will be funded by part debt and part cash. Titan currently has more than Rs 3,000 crore of cash on books.

"As far as this deal is concerned, our balance sheet is pretty healthy, we have a good cast position. But we are going to do part debt funding for this deal and we are working towards that. And by the time deal comes to closer in next two months kind of horizon, we should be ready with her financing plan. But part debt funding is contemplated," he noted.

The Tata group company had first bought a 62 percent stake in CaratLane in 2016 at a valuation of about Rs 563 crore. Between 2016 and 2019, Titan bought shares of the omnichannel retailer in tranches, spending a total of Rs 440-450 crore, mainly through secondary purchase of shares from Tiger Global, the only venture investor in CaratLane.

The transaction marks the second-largest exit for an ecommerce founder in India after Flipkart founders Sachin and Binny Bansal sold their stakes in the firm to Walmart.

Financials

In FY23, CaratLane crossed the Rs 2,000-crore topline mark, posting a turnover of Rs 2,177 crore, a 72 percent growth from Rs 1,267 crore it reported in FY22. In FY21, CaratLane had recorded revenue of Rs 723 crore.

CaratLane has been reporting a positive profit before tax number for the last three years, growing at 55 percent compound annual growth rate (CAGR) over a five-year period.

In the June quarter of this fiscal, the company witnessed a 32.4 percent year-on-year surge in revenues to Rs 640 crore, with earnings before interest and taxes (EBIT) standing at Rs 35 crore – an EBIT margin of 5.5 percent. CaratLane has added 11 stores in the June quarter, taking the store count to 233 spread across 93 cities in India.

First Published:Aug 21, 2023 10:25 AM IST