Rating Rationale
July 06, 2017 | Mumbai
Titan Company Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.1350 Crore
Long Term Rating CRISIL AA+/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
Rs.500 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
The common independent director on the boards of CRISIL and Titan Company Ltd did not participate in the rating committee meeting and the rating process for these instruments
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank loan facilities and debt programme of Titan Company Ltd (Titan). The rating continues to reflect Titan's market leadership across its major business segments-organised jewellery and wristwatches-healthy operating efficiency, and strong financial risk profile. These strengths are partially offset by the company's exposure to regulatory risks in the jewellery division and exposure to competition from unorganised players, in the jewellery segment.

Analytical Approach

For arriving at its ratings, CRISIL has consolidated Titan and its subsidiaries. Further, CRISIL has amortised the goodwill and intangibles arising from the acquisition of 62% stake in Carat Lane Trading Pvt Ltd (CaratLane) over a period of 5 years from the date of acquisition (Rs. 30.49crore in fiscal 2017 and Rs.60.98crore from fiscal 2018).

Key Rating Drivers & Detailed Description
* Leadership position in major business segments: jewellery and watches:
Titan is the largest jewellery retailer in India and has around 65% market share in the domestic organised wristwatch segment. The company's market leadership in the jewellery and watches division is driven by its strong brands, association of trust with the Tata brand, and its pan-India distribution network. CRISIL believes that Titan will leverage its brands to expand and maintain its leadership position over the medium term.
* Healthy operating efficiency
Titan also has healthy operating efficiency reflected in its operating margins of 9.3% in fiscal 2017. The company's healthy operating efficiency stems from strong control over operations, outsourcing of jewellery-making to karigar parks, in-house design and expertise in precision engineering and watches, efficient working capital management, and prudent hedging policies. CRISIL believes that Titan's healthy operating efficiency will enable it to maintain its strong operating profitability over the medium term. Titan's focus on franchise model of stores also benefits it Return on Capital Employed (estimated at 29% for fiscal 2017), thereby benefitting its operating efficiency.
* Strong financial risk profile
Titan's financial risk profile is marked by healthy capital structure and ample liquidity as reflected in nil debt and Rs.1000 crore of liquid surplus as on March 31, 2017. Titan has increased its reliance on gold on loan scheme, after the scheme was re-introduced by the government. This has helped Titan reduce its inventory funding costs and also provide a hedge on the gold inventory.
Also, Titan's expansions are prudently managed through a mix of company-owned, company-managed, and franchisee stores. Since over 80% of the stores are franchise-based,  large-scale retail space additions does not result in heavy capital expenditure (capex). CRISIL believes that Titan's capex will remain between Rs.250-300 crore per annum over the medium term; this will be largely funded through internal accruals of Rs.600 crore to Rs.700 crore per annum. As a result, the capital structure is expected to remain healthy over the medium term. Given the internal funding of capex and ample liquidity, CRISIL believes that Titan will maintain its healthy financial risk profile over the medium term.
* Exposure to regulatory risks in the jewellery division
Titan remains exposed to regulatory risks in the jewellery division. This sector has seen heightened regulatory action over the past four years. For instance, during fiscal 2014, to curb the import of gold, the government introduced 80:20 rule, discontinued gold on lease scheme and modified the gold deposit scheme. Subsequently, in fiscal 2015, the gold on loan scheme was re-started and 80:20 rule was scrapped. Further, since January 2016, the government has mandated jewellers to collect PAN card for all purchases over Rs.2 lakh. The government has also introduced the sovereign gold bond scheme, to shift consumer preferences away from physical gold. These regulatory changes had moderated the company's operating performance in the past. However, the operating performance has recovered in fiscal 2017 due to increasing customer shift towards branded players like Titan post the announcement of demonetisation in November 2016. CRISIL believes that Titan will remain susceptible to changing regulatory norms.
* Exposure to competition from unorganised players in the jewellery division
Jewellery retailing in India is largely dominated by unorganised players, which have a stronghold in their regions. Although Titan is the largest jewellery retailer in India with a market share estimated at over 15% in the organised jewellery retailing segment, its overall share is less than 5%. As the company expands, it will face severe competition from local players. However, CRISIL believes that increasing consumer awareness about branded jewellery and purity of gold, and the trust associated with the Titan brand will enable the company to penetrate new markets over the medium term.
Outlook: Stable

CRISIL believes Titan will maintain its strong market position in the wristwatches and jewellery segments, and its strong financial risk profile with low gearing and strong debt protection metrics, over the medium term.
Upside scenario:
* Titan reports more-than-expected revenue growth across its business segments, while improving revenue and cash flow diversity
* Continued healthy financial risk profile, such that the ratio of total outside liabilities to total networth remains much below 1 time on a sustained basis
Downside scenario:
* Significant impact due to regulatory changes, or due to supply related issues impacting Titan leading to deterioration in business risk profile
* Weakening of capital structure, either due to aggressive debt funded expansion plans or regulatory changes leading to gearing exceeding beyond 1 time on a sustained basis

About the Company

Titan was incorporated in 1984 as a joint venture between the Tata group and Tamil Nadu Industrial Development Corporation Ltd (TIDCO). Titan is the market leader in both its core segments, watches, and branded jewellery. Titan's brand portfolio includes Titan, Sonata, Fastrack, Raga, Xylys and Nebula for watches; and Tanishq, Gold Plus, and Zoya for jewellery. Its other business activities (around 4% of the turnover) include precision engineering and prescription eye wear. The company has also launched a brand, Skinn in the perfume segment. The Tata group and TIDCO hold about 25% and 28%, respectively, of Titan's equity shares, with financial institutions, banks, corporate entities, and the public holding the rest. Titan's manufacturing and assembly plants are in Hosur (Tamil Nadu), and in Dehradun, Roorkee, and Pantnagar (all in Uttarakhand).
For fiscal 2017, Titan, on a consolidated basis, reported a net profit of Rs.697 crore (Rs.674 crore for fiscal 2016) on revenue of Rs.13,170 crore (Rs.11,383 crore).

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size (Rs. crore.) Rating assigned with outlook
NA Proposed Cash Credit* NA NA NA 900 CRISIL AA+/Stable
NA Proposed Letter of Credit** NA NA NA 450 CRISIL A1+
NA Commercial Paper NA NA 7-365 days 500 CRISIL A1+
*One way interchangeability to Import letter of credit, foreign letters of credit and Standby letters of credit to the extent of sanctioned limit
**Interchangeable with standby letter of credit and bank guarantees
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  500  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Non Convertible Debentures  LT    --    --  22-03-16  Withdrawal    No Rating Change    No Rating Change  CRISIL AA+/Stable 
Fund-based Bank Facilities  LT/ST  900  CRISIL AA+/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AA+/Stable 
Non Fund-based Bank Facilities  LT/ST  450  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Cash Credit Limit* 900 CRISIL AA+/Stable Proposed Cash Credit Limit* 900 CRISIL AA+/Stable
Proposed Letter of Credit** 450 CRISIL A1+ Proposed Letter of Credit** 450 CRISIL A1+
Total 1350 -- Total 1350 --
*One way interchangeability to Import letter of credit, foreign letters of credit and Standby letters of credit to the extent of sanctioned limit
**Interchangeable with standby letter of credit and bank guarantees
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Retailing Industry
Criteria for rating Short-Term Debt (including Commercial Paper)

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Tanuja Abhinandan
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000

Anuj Sethi
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 44 6656 3100

Amit Bhave
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3113

Abhishek Anand
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 44 6656 3140
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a global, agile and innovative analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers.

We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 95,000 MSMEs have been rated by us.


CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy. You can view the Company’s Customer Privacy at https://www.spglobal.com/privacy

Last updated: April 2016


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: http://www.crisil.com/ratings/highlightedpolicy.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL