us roadshow - 2005
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INVESTOR MEET - USA 2005
Bhaskar Bhat
Managing Director
Titan Industries
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We are based in India : A continent in disguise.
Population1075 mn (M:F = 50:50)
Age group- 20-44 years 400 mnthe youngest population in the world
Religions 6 Main
Languages 23
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Our Heritage TATA Group
Titan is a part of the TATA group having a turnover of > USD 14 bn, equivalent toover 2.5% of Indias GDP and having the biggest market capitalization
The Tata group is Indias largest employer in the private sector 222,000+employees across 85 companies
The TATA group has achieved many Firsts for India:
First private sector Steel mill First private sector Power utility
First Luxury Hotel (Taj), First Airline (now Air India)
Indias largest software company (TCS)
Indias First car maker (Tata Motors)
Indias largest watch & jewellery mfgr (Titan)
Owned by Tata:25% and Tamil Nadu Indl. Dev. Corp( TIDCO):27.88% Professionally managed by the TATA group & an independent Board
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At Titan Industries
We achieve this through
a customer centric approach to excellence in:
Design and styling
Manufacturing and sourcing
Marketing
DistributionRetailing and
Customer service
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At Titan Industries,
Integrity
Innovation
High performance orientation
Respect for the individualLong term relationship building
and
Investing in the environment & the community
is a way of life
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Our businesses
WATCHES
JEWELRY
ACCESSORIES
PRECISION ENGINEERING
Operating in
30 countries
With a largerfootprint in
Middle East
Asia Pacific
Africa
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ABOUT US
Titan is the worlds sixth largest, integrated watch manufacturer brand &Indias largest
Leader in the Watch & Jewellery businesses in India
First & largest branded player in the Jewelry (Tanishq)
>50% share of the organised watch market Over 60 million watches sold across 30 countries
4 Factories - Main Watch & Jewellery plants in Hosur
near Bangalore ( Indias Silicon valley), Watch Assembly
plants at Dehradun and in Himachal Pradesh, with an ECB plant in Goa
Investment of over US$130 million. A 450,000 sq.ft. state-of-the-artfacility
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Titans Leadership Position
Industry
Market
Brand
Technical
Corporate Citizen
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TITAN INDUSTRIES LIMITED
LISTED
WITH
National Stock Exchange
Regional Stock Exchange
Bombay Stock Exchange
Clause 49 of Listing Agreement with
Stock Exchanges
Corporate Governance
Equivalent to Governance
prescribed in Sarbanes Oxley Act
BOARD MANAGED COMPANY
BOARD OF DIRECTORS
(Professional Board with multi-
disciplinary expertise)
(No. of meetings held during the year is
6 against statutory requirement of 4)
AUDIT COMMITTEE
(Pre-dominance of independent Directors)
(No. of meeting held during the year is 6
against statutory requirement of 4)
TERMS OF REFERENCE
(A comprehensive Charter recommended
by BOD)
1. Recommends on the Scope of Audit
2. Independent reporting by the Internal Auditors to the
Audit Committee
3. Oversees financial controls and due-diligence on reporting,
disclosures, etc., to Stakeholders
INTERNAL AUDIT DONE BY RENOWED FIRMS ie.,DELOITTEE HASKINS & SELLS and ERNST & YOUNG
Tata Code of Conduct
signed by all employees which
promotes Ethical conduct and
professional integrity
REMUNERATION COMMITTEE
(Remuneration of the Managing Director
recommended by the
Committee based on performance criteria)
Structured Governance with
Levels of Authority
and Business Processes,
defined delegation of Powers
cascading down from Board
to operating management
personnel
ETHICS & COMPLIANCE COMMITTEE
(Compliance Committee to oversee
adherance to Ethical conduct and
prevention of Insider Trading)
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Titan and the Community
Titan has a deeply embedded policy on Social Responsibility, making a
significant contribution towards improving the life of the community
y Investing in children's education - the Titan School and scholarships for thedeserving.
y Abling the physically disabled - much beyond the national compliance norms.
y A sustainable programme for the empowerment of underprivileged women.
y Building the Titan Township surrounding our manufacturing operations for ourworkforce and the community.
y Partnering with several agencies in helping the less fortunate - viz. Clarke Schoolfor the Deaf, Indian Cancer Society, Communication programmes in HIV
awareness.
y Environment and quality standards fully compliant with ISO 9000, ISO 14000 andTS 16949.
y Signatory to the Global Compact and preparing Sustainability Report as per GRIguidelines.
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Titan progress over the years
0
200
400
600
800
1 000
1 200
87- 88 88- 89 89- 90 90- 91 91 - 92 92- 93 93- 94 94- 95 95- 96 96- 97 97- 98 98- 99 99- 00 00- 01 01 - 02 02- 03 03- 04
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20
30
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1 00
Sal e s I nc ome ( Rs . C r or es ) C api t al emp P B T ( Rs . C r or es )
Phase I (87-92)
Launch phase
Phase II (92-98)
Phase III (98-04)
Downsizing
PED
Launch of Titan
Tanishq
break even
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Phase II Exploring new frontiers
0100
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700
92-93 93-94 94-95 95-96 96-97 97-98 98-99
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Cap a e p a e n o e R Cror es) PBT (Rs. Cror es)
Timex JV
European
Foray
Exit Timex
Asia-Pac
Launch
Launch inMid East market
Launch of
Tanishq
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TITAN INDUSTRIES LIMITEDA TURNAROUND YEAR IN 2003-04
y an increase in Sales Income by over 20%
y consolidated income crossed Rs 1000 crores
y growth of 18% in the Watch Division
y growth of 23% in the Jewellery Division
y growth of 57% in Exportsy repayment of loans of Rs 60 crores from internal accruals thus
bringing down borrowings from Rs 467 crores to Rs 407 crores
y interest costs reduced below Rs 40 crores for the first time since1996
y three-year wage settlement signed with the employees Uniony 100% increase in profits before taxes and exceptional items
y 80% increase in net profit after tax
y Three times increase in EPS from Rs 0.60 to Rs 1.76
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10
14
6
11
0
5
10
15
2003 2004
PBT
PAT
Earnings per share
0.6
1.76
0
0.5
1
1.5
2
2003 2004
Earnings per share
Results for the 2 years 2002-03 & 2003-04
In Rupees
798671
959
607
0
200
400
600
800
1000
1200
Operating
Income
Capital
Employed
2002-03
2003-04
Rs.in Crores
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THE TURNAROUND CONTINUES IN 2004-05
y an increase in Sales Income by about 20%
y growth of 12% in the Watch Division
y growth of 29% in the Jewellery Division
y growth of over 75% in Exportsy repayment of loans of Rs 21 crores from internal accruals thus
bringing down borrowings from Rs 407 crores to Rs 386 crores
y interest costs reduced by Rs 7 crores
y Three times increase in profits before taxes and exceptional
items to Rs 20.05 crores from Rs 6.65 croresy Six times increase in net profit after tax to Rs 10.27 crores from
Rs 1.69 crores.
THE NINE MONTHS ENDED 31 DECEMBER 2004 HAVE SEEN
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Our leadership position in both businesses & improvedOperating performance have been noticed by the
Capital market as well.
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Performance of Titan Share Price in comparison with the BSE Sensex, indexedat 100 on Jan 2002
BSE INDEX Vs TIT N
J J D c
PERIOD
TIT
N
BSE
INDE
X
I N
IND X
1
65
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Market Capitalisation (Rs Crs.)
Market Ca
218
500
1018
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OUR ASPIRATIONS FOR THE FUTURE:UNLOCKING OUR POTENTIAL
We believe Titan can become:Much larger in size
With wider International presence
And
Much more profitableIn the next five years
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The watch market & industry in India
India is an under penetrated market for watches 27 % ofIndians own a watch
Total estimated market as of 2005 Volume ~ 35 mn units &
Value: Rs 2328 Crs (USD 530 Mn)
Vast proportion of the Indian market is below Rs 500 ~ 68%(85% by volume)
Market has been split into: Low end, Mass market, Mid market,Premium
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SE ERAL FORCES ARE TRANSFORMING THE INDIAN WATCH INDUSTRY
Dramatictransformationof the Indianwatch market
1. Shift in structureof demand
olume growthdriven by thelow end
alue growthdriven byluxurysegment
Brands
Titan andSonata
3. Emergence of distinctconsumer segments
Sharply definedconsumer segmentsaround distinctbuying factors
More awareness ofbrands and globaltrends among
affluent urbanconsumers
Sub-branding
strategy: Raga,
Fastrack, Nebula
Exploring new
brand for luxury
segmentLicensing: Tommy
Hilfiger watches
Significant increase in competition inall segments
Luxury end : Swiss brands
Mid to upper end : Global fashion/Japanese brands
Low end : Local/regional IMFQs,Chinese imports
2. More global and local players
Dominant retail
presence: World
of Titan
Showrooms,
TimeZones
4. Emergence of new channels
New retail outlets emerging (Dept.stores/malls)
Existing outlets (MBOs) gettingsmarter looking
Unorganised retail at low-end
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The watch market in India (by value 2006-07)
Mass (< Rs.4
00)
Valued at Rs. 00 Crores
Grey market, Chinese, etc.
Premium (> Rs. 5k)
Valued at 70 Crores
Swiss brands: Tissot, Omega, Rolex
Fashion brands: Fossil, Calvin Klein,
Giordano, Esprit
Mid-upper (Rs. 1k - 5k)
Valued at 9 8 Crores
Titan, Citizen, Timex,
Swatch, Espirit
Low-end (Rs. 400-1000)
Valued at 200 Crores
Sonata, HMT, Maxima
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POOR WATCH PENETRATION IN INDIA IS LIKELY TO DRIVEFURTHER GROWTH IN VOLUMES
Penetration
Low penetration level (~27%own a watch)
Low multiple ownership ofwatches (3.5%)
Source: IRS data 2002
Indias watchconsumption is low
30
120Watch sales/1000 people p.a.
India International
19% in rural areas (47% inurban)
18% among women (36%
among men)
71% in SEC A and B (47% inSEC C and D)
Increasingpenetration willdrive growth of
low end andmass marketsegments
Higher multipleownership willdrive growthof Mid-uppersegment
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QUICK REVIEW OF THE TIME PRODUCTS DIVISION
Business
Financial
Key indicators Element
Market leader
Only profitable watch company in India 50% of volume, 65% of value of organised industry
Most admired consumer durable company (A&M magazine),Superbrand 2003, Brand Equity Award (PHDCCI), ImagesFashion Award
Established two brands Titan & Sonata
Enviable network Widespread, visible and profitable retail and customer service
chains (~7250 retail outlets in 1800 towns, 165 exclusiveshowrooms, 600 service centres)
Distributed in 30 countries
Large customer base- more than 60 million consumers
Efficient support system - Integrated manufacturingfacilities, strong vendor base (~800 strong vendor base)
Topline has been growing at 18% over last 2 years
ROCE has been about 32% over last 2 years
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Our market and brand leadership of >50% uses themuscle of a vast distribution network
ALL INDIA7000
Dealers1200
Towns
World Of Titan172Showrooms
102Towns
Time Zones119
Multi-brand-stores
90
Towns
Service Centers616
Centers314
Towns
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The Jewelry business
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Jewelry Market & industry highlights
Size of market: 65000 Rs crs (~ US$ 15 Bn)
Urban market is about 38% of this base
Branded jewelry is less than 2% of the overall market
Importance of Jewelry in Indian consumers
Gold is seen as auspicious, an investment, adornment.
Product mix: largely plain gold 22kt, with gem set jewelry
constituting 20% of the market
Players
Market
Key players: Fragmented market, mainly retailer driven.
Most retailers are unorganised and stand alone, absenceof hallmarking
Tanishq - the first branded jewelry player
Increased investment by industry bodies (DTC, PGI,WGC) is spurring rapid growth of the branded jewellerymarket in India
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TANISHQ TODAY A BRIEF OVERVIEWThe Business
Strongest and most aspirational brand in the jewellery category Rated No. 1 brand in independent research (ORG-MARG, 2003) Enjoys a market share of 70% in branded jewellery Selected as one of Indias 100 Superbrands (2003, 2004)
Network Indias only national jewelry retailer 73 stores in 54 towns prime high street locations
Most of these stores are run by franchisees
Customer
Base
1.2 million customers shopped at Tanishq last year Customer retention rates exceed 80% (TNS-MODE, 2002)
Brand
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Rapid growth of40% p.a. over the past four years Rs. 450 crores+ during the current financial year 45% of the Companys revenues
Profits
Impressive turnaround PBT (2002/03) - Rs. 6 crores PBT (2003/04) - Rs. 14 crores
ROCE
ROCE exceeds Cost of Funds ROCE (2002/03) - 13% ROCE (2003/04) - 22%
Revenues
TANISHQ TODAY A BRIEF OVERVIEWThe Business
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7
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00
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'98-99 '99-00 '00-01 '01-02 '02-0 '0 -0
Growth in Revenues
Annual Revenue, in Rs. crores
Rapid growth CAGR of40% per annum
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-4
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'98-99 '99-00 '00-01 '01-02 '02-03 '03-04
Growth in ROCE
Return on Capital Employed, in %
One of the highest ROCE businesses in the Tata group
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Brand Tanishq
Rapidly growing consumer base Over 1.2 million consumers last year Young, well educated, affluent, urban women Very successful customer acquisition efforts
Strong brand equity Brand recall levels exceed 70% nationwide Consumer retention levels exceed 80%
Most desirable brand of jewellery
Unique first mover advantage No serious national competitor yet on the horizon
Powerful brand building efforts during past 4 years Exciting, vibrant, innovative a happening brand Consistent investments in brand
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International Business
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One of Indias first companies to take the brandedexport route:since 1990
Present in 30 countries
Strong presence in the Middle East and the Asia-Pacific
Selling half a million watches annually with increasingpresence in jewellery
International business
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New businesses
Precision Engineering:Leveraging design andmanufacturing know how as India becomes animportant hub for hi end manufacturing
Accessories:Leveraging brand strength
Licensing:Leveraging retail capability and
capacity
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Precision Engineering Business
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Precision Engineering Business
Rationale
Leveraging Engineering capabilities
B2B business balances risk of B2C businesses
Profitable revenue streams established proof of concept established
The Opportunity
India growing as a manufacturing base for precision products across industries
Cost pressures and offset requirements guarantee a long term opportunity
High cost of switching for customers
Overall a large & growing market: The global market opportunity for precisionengineering products addressable by Titan is Rs.135,000 cr.
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Current position: 3 segments 3 streams
Automotive
Aerospace
Medical
Precisioncomponents
Dash boardinstruments
Sub systems
Market SizeRs 135,000 Cr.
AutomationSolutions
Market SizeRs 575 Cr.
Domestic &International
Market.
DomesticMarketOnly
TSMGStudy
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Customer Base
Eaton USA
compts
17%
Toyota Tsusho
6%
Turbo Energy
6%
Jet Avion
3%
MG Rover3%
MG Rover
8%
Stanadyne
9% TycoElectronics
10%
Tata Motors
2%
Ford
26%
Others
5%Tyco
3%
2005-06
Automotive 51% Aerospace 18%Hydraulics 17% Medical 6%Others 8%
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THE WAY FORWARD
WITH AMBITION AND ASPIRATIONS, WE CAN ACHIEVE
Titan Industries can have a turnover of almost Rs 3700 crores
(USD 1 BN ?) by 2009-10 ( up from Rs 960 crores in 2003-04)
Time Products will contribute over Rs 1300 crores to turnover
Jewellery will contribute Rs 2100 crores to turnover
Precision Engineering will contribute Rs 490 crores to turnover
With a projected profit after tax of about Rs 300 crores, the
Company can deliver an RONW of ~ 36 % in 2009-10.
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Thank you
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