INVESTOR MEET - USA 2005

Bhaskar Bhat
Managing Director
Titan Industries
We are based in India : A continent in disguise….

• Population 1075 mn (M:F = 50:50)

• Age group- 20-44 years 400 mn

the youngest population in the world

• Religions 6 Main

• Languages 23
 Our Heritage – TATA Group

• Titan is a part of the TATA group having a turnover of > USD 14 bn, equivalent to
over 2.5% of India’s GDP and having the biggest market capitalization
• The Tata group is India’s 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)
– India’s largest software company (TCS)
– India’s First car maker (Tata Motors)
– India’s 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
 Our Purpose:

We
generate wealth for all our stakeholders by
creating India’s most desirable brands
in watches, jewellery and personal accessories
 At Titan Industries
We achieve this through
a customer centric approach to excellence in:

Design and styling

Manufacturing and sourcing
Marketing
Distribution
Retailing and
Customer service
 At Titan Industries,
Integrity
Innovation
High performance orientation
Respect for the individual
Long term relationship building
and
Investing in the environment & the community

is a way of life
 Our businesses

WATCHES

Operating in
JEWELRY 30 countries
With a larger
footprint in
ACCESSORIES Middle East
Asia Pacific
Africa
PRECISION ENGINEERING
 ABOUT US
• Titan is the world’s sixth largest, integrated watch manufacturer brand &
India’s 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 ( India’s ‘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-art

facility
 Titan’s Leadership Position

 Industry

 Market

 Brand

 Technical

 Corporate Citizen
 TITAN INDUSTRIES LIMITED

National Stock Exchange

LISTED
BOARD MANAGED COMPANY WITH Bombay Stock Exchange

Regional Stock Exchange

Structured Governance with
Levels of Authority
and Business Processes,
defined delegation of Powers
cascading down from Board
to operating management
personnel
BOARD OF DIRECTORS
(Professional Board with multi- Clause 49 of Listing Agreement with
disciplinary expertise) Stock Exchanges
(No. of meetings held during the year is
Corporate Governance
6 against statutory requirement of 4)
Equivalent to Governance
prescribed in Sarbanes Oxley Act

REMUNERATION COMMITTEE ETHICS & COMPLIANCE COMMITTEE

AUDIT COMMITTEE
(Remuneration of the Managing Director (Compliance Committee to oversee
(Pre-dominance of independent Directors)
recommended by the adherance to Ethical conduct and
(No. of meeting held during the year is 6
Committee based on performance criteria) prevention of Insider Trading)
against statutory requirement of 4)

TERMS OF REFERENCE
(A comprehensive Charter recommended
by BOD)
Tata Code of Conduct
signed by all employees which
promotes Ethical conduct and
1. Recommends on the Scope of Audit professional integrity
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
 Titan and the Community

Titan has a deeply embedded policy on Social Responsibility, making a

significant contribution towards improving the life of the community

 Investing in children's education - the Titan School and scholarships for the
deserving.

 Abling the physically disabled - much beyond the national compliance norms.

 A sustainable programme for the empowerment of underprivileged women.

 Building the Titan Township surrounding our manufacturing operations for our
workforce and the community.

 Partnering with several agencies in helping the less fortunate - viz. Clarke School
for the Deaf, Indian Cancer Society, Communication programmes in HIV
awareness.

 Environment and quality standards fully compliant with ISO 9000, ISO 14000 and
TS 16949.

 Signatory to the Global Compact and preparing Sustainability Report as per GRI
guidelines.
 Titan – progress over the years
1 200 1 00
Phase III (98-04)
PED 90
1 000 Phase II (92-98) Downsizing 80
Tanishq
Phase I (87-92) 70
800 break even

Launch phase 60
600 50
40
400
30
Launch of Titan
20
200
10
0 0
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

Sales Income (Rs. Cr or es) Capital emp PBT (Rs. Cr or es)

 TITAN INDUSTRIES LIMITED
A TURNAROUND YEAR IN 2003-04…
 an increase in Sales Income by over 20%
 consolidated income crossed Rs 1000 crores
 growth of 18% in the Watch Division
 growth of 23% in the Jewellery Division
 growth of 57% in Exports
 repayment of loans of Rs 60 crores from internal accruals thus
bringing down borrowings from Rs 467 crores to Rs 407 crores
 interest costs reduced below Rs 40 crores for the first time since
1996
 three-year wage settlement signed with the employees’ Union
 100% increase in profits before taxes and exceptional items
 80% increase in net profit after tax
 Three times increase in EPS from Rs 0.60 to Rs 1.76
 Results for the 2 years 2002-03 & 2003-04
1200 959 Rs.in Crores
1000 798
800 671 607
2002-03
600
400 2003-04
200
0
Operating Capital
Income Employed

In Rupees
14 Earnings per share
15
11
10 2 1.76
10
PBT 1.5
6
PAT 1 0.6 Earnings per share
5
0.5
0 0
2003 2004 2003 2004
THE TURNAROUND CONTINUES IN 2004-05…
THE NINE MONTHS ENDED 31 DECEMBER 2004 HAVE SEEN

 an increase in Sales Income by about 20%

 growth of 12% in the Watch Division
 growth of 29% in the Jewellery Division
 growth of over 75% in Exports
 repayment of loans of Rs 21 crores from internal accruals thus
bringing down borrowings from Rs 407 crores to Rs 386 crores
 interest costs reduced by Rs 7 crores
 Three times increase in profits before taxes and exceptional
items to Rs 20.05 crores from Rs 6.65 crores
 Six times increase in net profit after tax to Rs 10.27 crores from
Rs 1.69 crores.
 RESULTS FOR THE NINE MONTHS ENDED
DECEMBER 31
2002 2003 2004

Operating income (Rs Crores) 539 671 803

EBITDA (Rs Crores) 57 57 60

PBT (Rs Crores) (6) 3 9

PAT (Rs Crores) (4) 2 10

Capital employed (Rs Crores) 644 605 589

Earnings per Share (Rupees) (1.49) (0.28) 1.86

 Our leadership position in both businesses & improved
Operating performance have been noticed by the Capital
market as well.
Performance of Titan Share Price in comparison with the BSE Sensex, indexed
at 100 on Jan 2002

BSE INDEX Vs TITAN

650

BSE INDEX
TITAN

200

100

Jan-02 Sep-02 Jun-03 Apr-04 Dec-04

PERIOD TITAN
BSE INDEX
 Market Capitalisation (Rs Crs.)

1200
1018
1000
800
600 500

400
218
200
0
2002-03 2003-04 2004-05

Market Cap
OUR ASPIRATIONS FOR THE FUTURE:
UNLOCKING OUR POTENTIAL

We believe Titan can become:

Much larger in size
With wider International presence
And
Much more profitable
In the next five years
The Watch Business
 The watch market & industry in India
• India is an under penetrated market for watches – 27 % of
Indians 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
 SEVERAL FORCES ARE TRANSFORMING THE INDIAN WATCH INDUSTRY

2. More global and local players

Brands •Exploring new
brand for luxury
‘Titan’ and – Significant increase in competition in
all segments segment
‘Sonata’ • Luxury end : Swiss brands •Licensing: Tommy
• Mid to upper end : Global fashion/ Hilfiger watches
Japanese brands
• Low end : Local/regional IMFQs,
1. Shift in structure Chinese imports 3. Emergence of distinct
of demand consumer segments

– Volume
– Sharply defined
growth driven
Dramatic consumer segments
by the low end
transformation around distinct
– Value growth of the Indian buying factors
driven by watch market – More awareness of
luxury
brands and global
segment
trends among
affluent urban
consumers
Dominant retail • 4. Emergence of new channels
presence: ‘World – New retail outlets emerging (Dept.
of Titan’ Sub-branding
stores/malls)
Showrooms, –
strategy: Raga,
Existing outlets (MBOs) getting
TimeZones smarter looking Fastrack, Nebula
– Unorganised retail at low-end
 The watch market in India (by value 2006-07)
Premium (> Rs. 5k)
Valued at 370 Crores
Mass (< Rs. 400)
Swiss brands: Tissot, Omega, Rolex
Valued at Rs. 300 Crores Fashion brands: Fossil, Calvin Klein,
Grey market, Chinese, etc. Giordano, Esprit
11% 13%

33%
43%
Mid-upper (Rs. 1k - 5k)
Low-end (Rs. 400-1000) Valued at 938 Crores
Titan, Citizen, Timex,
Valued at 1200 Crores
Swatch, Espirit
Sonata, HMT, Maxima
 QUICK REVIEW OF THE TIME PRODUCTS DIVISION
• Key indicators • Element
– Market leader
Business • 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), Images
Fashion Award
• Established two brands – Titan & Sonata
– Enviable network
• Widespread, visible and profitable retail and customer service
chains (~7250 retail outlets in 1800 towns, 165 exclusive
showrooms, 600 service centres)
• Distributed in 30 countries
– Large customer base- more than 60 million consumers
– Efficient support system - Integrated manufacturing
facilities, strong vendor base (~800 strong vendor base)
• Topline has been growing at 18% over last 2 years
Financial
• ROCE has been about 32% over last 2 years
The Jewelry business
 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
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

•Key players: Fragmented market, mainly retailer driven.

Players •Most retailers are unorganised and stand alone, absence
of hallmarking
•Tanishq - the first branded jewelry player
•Increased investment by industry bodies (DTC, PGI, WGC)
is spurring rapid growth of the branded jewellery market in
India
TANISHQ TODAY – A BRIEF OVERVIEW
The Business

• Strongest and most aspirational brand in the jewellery category

Brand • Rated No. 1 brand in independent research (ORG-MARG, 2003)
• Enjoys a market share of 70% in branded jewellery
• Selected as one of India’s 100 “Superbrands” (2003, 2004)

• India’s only national jewelry retailer

Network • 73 stores in 54 towns – prime high street locations
• Most of these stores are run by franchisees

Customer • 1.2 million customers shopped at Tanishq last year

Base • Customer retention rates exceed 80% (TNS-MODE, 2002)
TANISHQ TODAY – A BRIEF OVERVIEW
The Business

• Rapid growth of 40% p.a. over the past four years

Revenues • Rs. 450 crores+ during the current financial year
• 45% of the Company’s revenues

Impressive turnaround
• PBT (2002/03) - Rs. 6 crores
Profits • PBT (2003/04) - Rs. 14 crores

ROCE exceeds Cost of Funds

• ROCE (2002/03) - 13%
ROCE • ROCE (2003/04) - 22%
 Growth in Revenues

Annual Revenue, in Rs. crores

450 425
400
345
350
300 268
Rs. crores

250
203
200
153
150
100 74

50
0
'98-99 '99-00 '00-01 '01-02 '02-03 '03-04

Rapid growth – CAGR of 40% per annum

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
International Business
 International business

• One of India’s first companies to take the branded

export route:since 1990

• Present in 30 countries

• Strong presence in the Middle East and the Asia-

Pacific

• Selling half a million watches annually with increasing

presence in jewellery
 New businesses

• Precision Engineering:Leveraging design and

manufacturing know how as India becomes an
important hub for hi end manufacturing

• Accessories:Leveraging brand strength

• Licensing:Leveraging retail capability and

capacity
Precision Engineering Business
 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 precision
engineering products addressable by Titan is Rs.135,000 cr.
Current position: 3 segments 3 streams

Market Size
Rs 135,000 Cr. Automotive Market Size
Rs 575 Cr.
•Precision
components
Automation
•Dash board Aerospace Solutions
instruments

•Sub systems

Domestic & Medical Domestic

International Market
Market. Only
TSMG
Study
 Customer Base

Tyco Tata Motors Others

3% 2% 5%

MG Rover
3%
Jet Avion Ford
3% 26%

Turbo Energy
6%
2005-06
Toyota Tsusho
6%
MG Rover
8%

Eaton – USA
compts
Stanadyne 17%
9% Tyco
Electronics
10%

Automotive 51% Aerospace 18%

Hydraulics 17% Medical 6%
Others 8%
 THE WAY FORWARD

Two Pronged Strategy

• CONTINUED THRUST ON OUR CORE BUSINESSES – Leveraging our

leadership position in both industries:
– Watches
– Jewelry
– International markets

• DEVELOPING NEW BUSINESSES & SEGMENTS THAT LEVERAGE OUR

STRENGTHS:
– Precision Engineering
– Mass Market Jewelry
– Eyewear
 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.
Thank you