Next FOF dates

Tuesday, 17th March 2020

Thursday, 23rd April 2020
Vs
Disclaimer
● Not an apple to apple comparison

● Not a stock recommendation

● Will be looking at only the Jewellery business of Titan

 Tiffany Tanishq
No of years since
first store 182 24
Tiffany Tanishq
No of stores 321 321
Tiffany Tanishq
No of countries 20+ 1
 Tiffany Tanishq
Revenues(Bn $) 4.4 2.3

Tiffany Tanishq
EBIT (Mn $) 790 272

Tiffany Tanishq
Average sq ft 4200 4000
 Tiffany Tanishq
Gross profit
margins (%) 59-62% 25-26%*
Tiffany Tanishq
Operating profit
margins (%) 18-19% 10-12%
Tiffany Titan
Market Cap (Bn $) 16.26 16.57
*Estimate
Global Jewellery Market
Market size of Diamond Jewellery
Chinese own more pieces of jewellery
Source: Diamond Insights Report 2019
Source: Diamond Insights Report 2019
Source: Diamond Insights Report 2019
Indian Jewellery Market
Structural changes
Demonetisation

GST implementation

PAN Card regulation

Hallmarking

Death of money lending due to growth in gold loan NBFC’s and fintechs
Slow death for mom and pop jewellers
Shrinking margins

Increased compliance costs

GST implementation

Increased awareness of hallmarking

Main earnings were from money lending

Hallmarking
BIS hallmark for gold jewellery consists of several components:

• The BIS logo

• A Three digit number (out of a set of six pre-defined values) indicating the purity
of the gold in part-per-thousand-format viz; 916, 750, 585. Thus a BIS 916
hallmark would certify to a purity of 916 per 1000, that is 91.6%, translating to a 22
carat purity of gold

• Logo of the assaying centre

• A code denoting the date of hallmarking

• Logo/code of the jeweller

Hallmarking
Wedding jewellery
8-10 mn weddings in India

Average ticket size of Rs 2

lakhs

Age old concept of

“Streedhan”

Titan is a weak player in

wedding jewellery
Studded jewellery
Jewellery
 Procurement of Gold

Gold Exchange/Repurchase:
40%

Tanishq Gold - 0% commission

Gold on Lease: 40% Spot Purchase: 20%
Non Tanishq Gold -
❖ 22k & above - 2% comm.
Naturally hedged Gold is hedged
❖ Below 22k - 8% comm.

Tanishq Gold - 3% comm

Non Tanishq Gold - N.A.
Revenue split
Gold deposit scheme
Customers pay 11 monthly installments (for eg Rs 1,000 per installment) and the 12th
installment is generally contributed by the jewellery company. At the end of 11th month,
customers are allowed to buy jewellery worth Rs 12,000 from the stock kept at the
store.

Restrictions under Companies Act w.r.t these types of schemes:

• Effective return on deposits cannot be more than 12%

• Term of the deposit cannot exceed 12 months

• Under the amended Deposit Regulations Act, the jewellery company can take
deposits upto 35% of its networth, and no more than 10% of its networth can be taken
from members of the company.
CAGR:
Revenue: 15.96%
Profit: 18.74%
Gold: 5.39%
Uberisation of Jewellery
Rent for 3 days at 3% of the value of the jewelry

Deposit for the full value of the jewelry which is daunting

Players like rentjewels.com, Eves24.com

Tiffany
Founded in 1837 by Charle Lewis Tiffany

1st store in Manhattan

$ 855 mn in cash

Total D/E 0.32x

14000 employees

Company operates e-commerce enabled websites across 13 countries

Company is hoping to open the website in China in next year

Products
● Licensing agreements for Tiffany & Co branded eyewear
and fragrance products. Contributes less than 1% to the
revenues
● Jewelry accounts for 92% of the revenues
● Other products include watches, fragrance products,
eyewear, home & accessories
Advertising spend 8-9% of sales

Average sq ft stores - 4200 (NY store is 45k sq ft, emerging

markets they have 1800 sq ft stores)

60% of the jewelry is manufactured in-house. Rest is

procured from third parties

Entered into a JV with Reliance Brands to open stores in

India. 1st store to open in Delhi in January 2020
Geographical split
No of stores worldwide
Majority of sales is online
Bull case / pros
● Steady growth

● Shift from unbranded to branded

● Leading brands globally

● Balanced merchandise and price coverage

● Very well managed

Bear case / cons
● Cyclical sector (consumer discretionary)

● Correlated to global growth which is slowing down

● Millenials don’t get married

● Threat of lab made stones (CVD diamonds)

● Rising commodity prices

● Execution risks