A Failing Business that Created a Super Investor

In August 2022, Titan was a hot stock. The company's first quarter profit numbers had got a massive boost from rise in gold prices.

But I told you why I was NOT recommending Titan despite its 1,200% profit growth.

The stock has meandered around Rs 2,500 levels over past seven months.

Now I certainly do not seek credit over a short-term call. Nor do I track stocks over such short time frames.

But the question is whether a company so dependant on gold prices can create long term wealth?

In was in 2010 that an article in Forbes called the stock of Titan 'a golden cage'. It speculated if the new management at Titan will be able to prove the merits of the growth plan laid by it.

Mind you, the Tata group company always had iconic leaders. Xerxes Desai, the iconic leader who founded Titan in 1986, was a towering personality. He wielded tremendous influence inside and outside the company. So when Bhaskar Bhat succeeded him as the MD in 2002, there were concerns whether he will fill in the shoes of his mentor.

When Bhat took over the company in 2002, Titan was in very bad shape. Titan had made a huge investment on a new factory to manufacture watches in 1980s. But when outsourcing became the norm, Titan wasn't quick enough to make the transition. All this while, the company had also been borrowing money to fund its international expansion.

Most importantly the board of Titan wanted to shut down Tanishq, then a loss-making brand of international jewellery exports.

Tanishq's launch in India was also jittery. The concept of branded jewellery was then ahead of its time. Indians preferred their traditional family jewellers. Habits were hard to break. Even a McKinsey study recommended the board of Titan to wind up Tanishq.

Nevertheless, Tanishq was perceived as a premium due to its gold purity guarantee.

So, Bhaskar Bhat's endeavour to help Tanishq survive and thrive worked wonders over the past decade.

By 2010, Tanishq was the largest organised jewellery retail player in India. But even with 115 stores in 75 towns, it had barely 4% market share. Further, the organised jewellery retailing segment was only one tenth of the jewellery business in India then.

Later, Titan installed what is called 'Karatmeter' in its Tanishq stores. This was at a time when there was growing anxiety about the purity of gold being offered by family jewellers.

The instrument used X-rays to measure the purity of gold in three minutes. This exposed the unfair practices of family jewellers. It also gave Tanishq a big edge versus other branded gold jewellery companies.

By 2020, more than a third of Titan's sourcing of gold was from gold exchange. The management hopes to take it to 50% by 2025.

So, what is it that allowed Titan to become the jewellery behemoth that it is today?

The chart below shows the answer - a sharp uptick in gold prices.

Gold Prices in Rupees/Ounce Over Last 30 Years

As interest rates crashed post the economic crisis in 2009, gold prices took off into new orbits.

To put things in perspective, the rise in gold prices (in rupee terms) was 122% between 1994 and 2009.

The same was 300% between 2010 and 2023.

Being ahead of competition in terms of premium jewellery retailing allowed Titan to make the most of the sharp rise in gold prices. The Tata group's credibility gave it significant edge in gold sourcing and supply chain as well.

But is the edge here to stay?

Can Titan continue to rely to gold prices and Tanishq to help the company fight stiff competition in jewellery retailing today? Mind you even some small jewellery retailers are giving the company stiff competition.

Over past few decades, the stock of Titan created super investors like the late Rakesh Jhunjhunwala. The stock has been a 9 bagger in the past decade.

Can buying the stock today create the super investors of tomorrow?

Stay tuned for part 2 of the Titan story.

Meanwhile, you could check out the fundamentals of Titan and its peer organised jewellery retailers here.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)