Titan Company Ltd, the $1.7 billion jewellery-to-eyewear retailer of the Tata Group, is acquiring majority stake in Chennai-based online jewellery e-tailer CaratLane, signalling the growing importance of online commerce for traditional brick-and-mortar companies in India.
Titan Company’s board, on Friday, approved the acquisition of majority stake in CaratLane, which counts one of the world’s largest hedge funds Tiger Global Management as an investor. As per an earlier Forbes India article that appeared in March 2015, CaratLane had raised funds amounting to $50 million.
The exact stake that Titan Company would take in CaratLane and the valuation of the deal are “currently under discussion and details will be shared on signing of definitive documents,” read a statement issued by Titan Company. The transaction is expected to be completed by the middle of June 2016, it added.
Co-founded by Mithun Sacheti in 2008, CaratLane has both an online and offline presence with a network of over 4,000 global vendors. It operates 13 retail stores across the country, while its online store reaches out to 150 cities.
On the other hand Titan’s jewellery business, which includes the brands Tanishq, Gold Plus, Zoya, and Mia, is retailed from over 200 stores across the country. The Tanishq brand is also retailed online through the official company website.
”For Titan, the acquisition brings significant capabilities in the e-commerce space along with a brand, a customer segment and a business model that are very exciting,” said Bhaskar Bhat, managing director, Titan Company Ltd.
This acquisition gives Titan control over a leading online jewellery brand, which caters to a different customer segment and has significant internal capabilities in design, manufacturing, and technology. Titan believes that the synergies with CaratLane is “very high”.
Interestingly, Ratan Tata, chairman emeritus of Tata Sons, through his personal investment firm RNT Associates had in 2014 invested in Bengaluru-based Bluestone, a rival to CaratLane.
Meanwhile, Titan also announced its 2015-16 financial results. The company posted a 5.2 percent decline in income at Rs 11,264.53 crore over the previous fiscal. While profit before tax declined by 17.5 percent to Rs 870.66 crore, net profit declined by 4.2 percent to Rs 705.85 crore. A company statement read, "The financial year as well as the last quarter of 2015-16 was an extremely challenging one for the company. The challenges faced were both on account of weak market conditions for all businesses and new regulatory restrictions for the jewellery business."
Titan’s jewellery business accounts for 78 percent of its FY16 revenue, the watch business 17 percent, eyewear 3 percent, and others 2 percent. Income from the jewellery segment for the period under review saw a decline of 7.6 percent at Rs 8717.40 crore over the previous year. The company attributed the decline to the "absence of revenues from the Golden Harvest scheme” and disruptions caused by "industry wide strikes" in the last quarter of the just conclude financial year.
While its eyewear business registered a revenue growth of 11.8 percent, the watch business clocked a growth of 1.7 percent. The company declared an interim dividend of Rs 2.20 per share.
At the end of market trade on Friday, the company’s shares were up 1.31 percent at Rs 364.10 apiece over the previous day’s close, even as the benchmark Sensex was marginally down by 0.13 percent.