Titan Bullish About Next Two Quarters Of FY25, Says CFO Ashok Sonthalia

Even as Titan Co. reported a muted quarterly earnings performance, CFO Ashok Sonthalia said they were confident of the company's performance in the upcoming quarters of fiscal 2025.

While the company has experienced some margin pressure, it remains optimistic about growth in the second half of the financial year, Sonthalia told NDTV Profit.

The company had previously benefited from a surge in demand for gold jewellery, particularly after the government’s cut in customs duty.

However, Sonthalia pointed out that the preference had shifted primarily toward gold, with items like gold coins and jewellery becoming more popular. "We all know about Indians' love for gold, but in this quarter it was far more pronounced. After the customs duty cut, we saw a lot of customers and consumers coming back...there were wedding customers too," Sonthalia said, attributing the strong demand to both cultural affinity and higher gold prices.

Despite this growth in the gold segment, Titan’s jewellery margins have come under pressure due to changes in product mix. The proportion of studded jewellery sales has dropped to 3%, affecting the company’s profitability. In response to the high gold prices, many jewellery companies, including Titan, have started offering discount schemes and exchange offers to attract customers, further squeezing margins, Sonthalia explained.

As a result, Titan revised its Ebit margin guidance for the jewellery segment to a more realistic range of 11-11.5% for FY25. Sonthalia clarified that the margin decline was primarily due to product mix issues, rather than aggressive discounting by competitors. “While competition is definitely a factor, the main challenge for us has been the shift in consumer preference towards gold jewellery over (higher-margin) diamond pieces,” he said.

When asked about the short-term outlook, Sonthalia acknowledged the uncertainty, but remained confident in the company’s ability to weather the pressures. “We are far more confident and visible for the next two quarters,” he stated. “Our scale and market presence provide us with the leverage to pull several levers to maintain stable margins.”

Titan, a major player in the jewellery market, also sees potential in the growing demand for natural diamonds, driven by their rarity and investment appeal. Sonthalia emphasised that Titan’s strategy was more focused on long-term growth rather than responding solely to short-term market conditions.

Despite the challenges in Q2, Titan is bullish about a strong performance in Q3, with the expectation that the festive season would continue to drive consumer spending.