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00:00Welcome to Earnings Edge. We are tracking Titan right now that reported its quarter
00:09four earnings and showed 20% growth in revenue, while margins were down by roughly 100 basis
00:15points for the quarter. The company reported a PAT of roughly 771 crores, while showing
00:20a 5% growth compared to last year, but just a tad bit below the consensus estimates. We
00:26are now joined by Mr. Ashok Suntalia, CFO at Titan. Welcome to NET Profit. Thanks so
00:32much for joining in, sir. And I just wanted to start with how you assess the quarter four
00:38and the financial year 2024 for Titan. Has the quarter as well as the year gone as per
00:44expectations for you? So, the quarter four and full year has been
00:49a satisfying performance for us. And on the growth front, we did pretty well in spite
00:55of several challenges during the entire year, and particularly in quarter four, gold price
01:02volatility created for us, but overall satisfying quarter. Of course, the margin was a bit slower,
01:12but if you look at actually FY23, we always have been talking about we had some one-time
01:18gain. And for that, if you adjust about 30-40 basis points, lower than the normal margin
01:24trajectory, and we have talked about competitive pressure and gold price volatility caused
01:30this because we have been prioritizing growth and customer acquisition and market share.
01:37Understood, sir. And I think I just want to take the point forward that you said on gold
01:41volatility, how has that affected your inventory currently? And was that one of the key reasons
01:49for the margin pressure in the jewelry business as well?
01:52So, when the gold prices are volatile and particularly a sudden spike or increase happens,
01:59of course, consumer sentiment weakens a bit and people who can defer, who can wait for
02:07their purchase, they tend to do that. And once the prices settle down and people get used to new
02:13price levels, they come back. So, quarter four had that phenomenon happening, but eventually,
02:21it comes back. It also kind of put the confidence back in gold as a class of store of value,
02:30where generally prices have been going up on the long term, and that brings back the store
02:35of value investment angle to the gold jewelry purchases as well. But yes, in the quarter,
02:43to kind of attract customers, not many consumer offers and gold exchange program, etc., were
02:49promoted, and that has affected margin a bit. And what is your general outlook for these gold
02:55prices? Because currently, we haven't seen in the month of April as well, post quarter four as well,
03:01the prices haven't come down. And in fact, they've also flattened and are expected to somehow go up
03:08as well. I know you can't speak on numbers per se, but how do you see the trend for gold prices
03:15going forward right now? Very difficult to predict, you know, and gold price gets governed
03:23by so many global factors. And one of the factors which affect gold also is the geopolitical issues,
03:30which are very, very unpredictable. Also, we believe central governments are also increasing
03:37their purchases as far as gold reserves are concerned. So gold is going to be a very stable
03:43and strong asset class. Some corrections may happen because all of a sudden increase has gone up,
03:49but very, very difficult to predict. Understood, sir. And I just want to talk a little bit about
03:55margins. You said that, you know, in the conference call, the roughly 12 to 13%
04:00margins should be maintained by the company over the next 12 to 18 months. Now, despite being a
04:08very, I wouldn't call it a shaky start to the year, but on basis of the gold price, which is a key raw
04:13material being up, while there has also been a very increased competitive incentivity for the
04:18first time in the last few years. How do you speak on margins? And if there's anything you want to
04:23add on competition as well, sir? So, of course, you know, the competitive intensity has gone up.
04:30You know, the existing players are expanding pretty aggressively. Many new players are coming
04:36into the industry and sector. So retail capacity has gone up. I don't think demand has kept pace
04:42with that capacity addition. So competitive intensity is going to stay. And I think our
04:50margin for jewelry business operating profit margin will be more centered towards 12
04:56than 30. That's the thing. But as always in the past also, we have said that while growth is a
05:03priority, but it is not at the cost of margin. We do take tactical calls to respond to competition,
05:10but it appears to me center of gravity for margin in jewelry business would be around 12%.
05:16And how do you see the recovery? So in order to overall maintain the margins at an overall
05:22consolidated level, generally, because in the last quarter of the previous financial year,
05:28we saw the jewelry margins roughly at around 13%. This time, it's around 12. And you're saying that
05:33going forward, that would be at least for as we look today, the new level, where do you see the
05:39recovery? Do you see other segments recovering? And which would be those according to you?
05:43So we have also talked about that other businesses like watches, wearable, eye care,
05:51and the newer segments where we are scaling up, they have high gross margin profile compared to
05:59jewelry business. And as their proportion goes up over two, three years, they can benefit
06:06few basis point margin uplift for the company level. And outside standalone business also
06:12Carrot Lane and Teal are doing pretty well. And as they grow, their margin profile improves,
06:19overall company should get benefit, but it's not a major shift, because jewelry continues to be a
06:25dominant business as far as revenue and margin contribution is concerned. And there I'm not
06:31seeing in next 12 to 18 months too much margin shift towards upward, but other businesses will
06:38contribute on the positive side. I think for this quarter specifically,
06:43the watches margins were a bit affected, the watches as well as the wearable market coming
06:48in roughly 8.5% versus 11% previously. How do you see this market going forward? Because
06:56the segment has been a little tough to see growth per se for FY24. And this is not just for you,
07:03specifically for the industry as well, but you being the biggest player. How are you seeing this
07:08particular segment going forward for the financial year 25? Any on launches, anything
07:13on commentary that you can give us, sir? So on FY24, overall watch business grew very
07:20healthy, roughly 18% and wearable also grew in the same proportion, I would say. So premium
07:29watches, analog watches are doing well. Their margin profile is also doing well. There is some
07:35softness at the entry level, where Fastrack and Sonata analog watches operate, but on the Titan
07:42and the Helios and the premium watches within Titan, what we are doing, they are doing well
07:48and their margin profile is intact. Wearable industry have gone through, I would say,
07:55price downward spiral, which due to competitive pressure, due to inventory glut, which is
08:02continuing to have at this point of time, prices have gone down and margins have really come down
08:08very heavily. And that has affected overall watch business margin profile in quarter four for us.
08:14As far as we think that wearable business should be able to correct its inventory situation,
08:19other players in next two quarters and the third quarter, which is generally festive season for
08:26India, again, wearable should also start improving its margin profile. Overall,
08:34we believe for our watch division, we don't see any further margin drop. It should start inching
08:41up from there and again going towards 12% in FY25. That's our expectation at this point of time.
08:51Understood, sir. And just to spend a little bit more time on Carrot Lane,
08:54I think the numbers have been really strong and over the last 12 to 18 months, you have been
09:00updating your shareholders on its progress as well. Currently, roughly around 7% is the
09:05EBIT margin for the business as well as on the storefront as well. It's pretty strong,
09:10coming at roughly 270 stores. If I just have to take a longer term view over the next couple of
09:16years, how do you see this business panning out on the storefront, on the revenue contribution to
09:22the overall business as well as on margins? Because this is one of the key growth segments,
09:27which has been for the company. So just if you could update us on that, sir.
09:31So Carrot Lane is doing well. We believe next few years, they grew 34% in FY24 and that kind
09:42of growth trajectory should be there. While the scale is now going up, so it becomes increasingly
09:48difficult task to keep delivering that kind of growth number. But 30% plus kind of growth rate,
09:55definitely I expect next two, three years to happen. And with that margin profile should
10:01also from 7% to 8, 9% operating profit should also progress. This year particularly, again,
10:08they also got impacted with the competitive pressure and that is where, and they have set
10:14up some of the expansion plans and growth plan and created some of the fixed cost base accordingly.
10:20And actually that kind of growth didn't materialize. And then that is where margins were
10:27not as per the plan and expectation, but they have capacity and potential to keep improving
10:35their EBIT margin and continue to grow 30% plus growth rate in coming years.
10:40Now we're joined by Devansh Jain, who's the Executive Director of the INOX group.
10:45And we're here to talk about INOX Wind as well as INOX Green Energy. Good afternoon, Devansh.
10:51Hi, good afternoon, Amrita. How are you?
10:53I'm good. How are you?
10:54Thank you.
10:55Yes. So I first want to talk about INOX Wind now, a good quarter as well as a financial year.
11:00I just maybe give us some color on how the quarters or the year itself went by for the company.
11:05Look, it's been a key turnaround year for us. It's been a milestone year for us.
11:11After five years of very painful transition in the sector, after all the efforts, we're one of the
11:18one out of probably the selection survivors in the sector. And I think
11:22it's been a very fulfilling journey this past 12 months to get the company back on track.
11:28We've had a substantial jump in revenue quarter on quarter over the course of the
11:33full financial year. Revenues have gone up almost 3x. There's a swing of, you know, from
11:40being EBITDA loss of about 250 crores, we've now gone to an EBITDA profit of about 350 crores.
11:46There's been a significant cash back over the course of this financial year. And I think if
11:50I just talk of Q4, it's been very, very strong. I think we've had very strong margins given the
11:57shift over to our three-megawatt product. We've had an EBITDA of almost 140 crores in this quarter
12:04as opposed to an EBITDA loss of 25 crores in the same period of the last financial year. So it's a
12:10substantial swing. I'd publicly stated that we expect every quarter to be better over the course
12:16of the last financial year. And I think we've walked the talk. Q1 was EBITDA positive, Q2 was
12:22cash back positive, Q3 we turned around with a 2 crore profit, and Q4 has been a larger profit
12:28in terms of almost 38 crores over very large EBITDA, almost 140 odd crores of EBITDA. So it's
12:34been a very transformational journey over the past 12 months to get the company in position
12:42to leverage the massive growth which we are expected to deliver as we move forward.
12:47For sure, Devansh. Even on a quarter on quarter perspective, revenues have grown so
12:51from a loss-making company to a profit-making company. Now, congratulations. Now, I want to
12:55talk about the order book. More than doubled in the past year. Current order book stands at 2.7
13:01gigawatts. Now, what's the execution timeline of the current order book and the revenue potential
13:07from the order book for FY25-26? Look, I think in terms of 2.7 gigawatts, that amounts to revenues
13:14of almost about 18,000 crores. What we've publicly stated has been that our goal is to do about 800
13:20gigawatts in FY25 and do about 1,200 gigawatts in FY26. We've been constantly upgrading our
13:26guidances given the demand is unparalleled. I mean, every time we sit down to review the
13:32business plan every month, we kind of look at even more and more. Having said that,
13:39the longest lead time you get to execute an order is about 24 months for a PSU.
13:44Private sector, C&I, IPPs give you about 12 to 18 months. So, effectively, and C&I retail is about
13:50six months. So, effectively, if you put the numbers which we've put out in the public domain,
13:55for the next two financial years, that's about 2 gigawatts. So, we're already on a very, very
14:00large order book. And as we said today, there are multiple tenders in which we've already
14:06participated, which we've built. There are multiple C&I and IPP discussions ongoing,
14:11which we expect to close as we continuously keep moving forward. But within which, I think also
14:18from a revenue perspective, look at Thamru guidances, we make about six crores a megawatt,
14:23blended, because we have equipment supply, we have turnkey projects typically go at about
14:28eight crores a megawatt. But then you've also got limited supply projects. So, effectively,
14:33six crores a megawatt is a very realistic number to take for the business plan. And I don't think
14:39you need to be a genius to put that into a business plan, and our revenue and EBITDA guidance
14:43to get to what we're targeting for this financial year. And in terms of future growth of the order
14:48book, now, C&I and capital segment is around 75% of your current order book. Do you expect it to
14:55the new orders to be majorly C&I and capital segment or could there be more from the central
15:00or the state or retail segments itself? Honestly, it doesn't matter. We don't care. I mean, as long
15:05as you're very diversified, that's what matters. Frankly, I don't care whether it's a central PP,
15:10whether it's C&I, whether it's IPP, it makes no difference. And I don't think we are driven by
15:15the fact that X percentage has to be this, X percentage has to be that. I think what we're
15:20driven by is broadly, our goals have been 50% turnkey and 50% equipment supply. And if you
15:25look at it over the course of the past financial year, we've gone from building a firm order book
15:31from about 600 megawatts to now about 2.7 gigawatts. That's almost 2.1 gigawatts added
15:37over the past 12 months. And we've gone from being 100% turnkey to now being about 60, 65%
15:44turnkey and 35% equipment supply. So I think what we're going to see probably as we move forward is
15:50a little bit more equipment supply kicking in. But other than that, I mean, it's a very, very,
15:55very diversified order book across some of the biggest PSQs and the biggest C&I, IPP players
16:00in the country. Got it. And does the equipment supply have higher margins when compared to the
16:05turnkey projects? Look, I wouldn't want to get into that. I think we talk about blended margins
16:10as a company, we're running for 14 to 15% a bit margins. You will have some orders which are
16:15higher in turnkey, you will have some in equipment which are higher. Also what happens in equipment,
16:19some places you have value added services. So, you know, it kind of is not the right
16:24metrics to explain that. I think blended as a company, we're looking at about 14 to 15% a bit
16:28margins. Eve of operation, I think what's also important when you do equipment supplies, you're
16:34not doing the execution part. You're not building line substations, which eases execution, you know,
16:41it doesn't require us to execute on the ground. It's just X factory supplies. And I think to that
16:45extent, I mean, what we're really driven is our EBITDA margins, not really, you know, specific
16:54order wise EBITDA margins. Got it. Now coming to Inox Green, what is the growth target in terms
17:01of top line and bottom line that the company has set for the near term? Look, I think it's a
17:07lovely niche, very sweet business. It's a company which runs at about 50% EBITDA margins.
17:13Again, in that entity, we don't have any capex. So, you know, you have optical depreciation, which
17:18is happening and we have no interest in that company. We've become net cash as of 31st March
17:2324. Also, we have a lot of broad forward losses given the past five years of sector shutdown. So,
17:29effectively EBITDA and Inox Green is equal to cash profit for us. What we've also publicly stated is
17:35that by 26th, FY26, our goal is to be a six gigawatt company in terms of actual megawatt
17:41under implementation, plus the value added services, which broadly thumb rule gives us
17:46a revenue of about 40 to 500 crores. And at about 50% margins, that should be about, you know,
17:52240 to about 250 crores of cash back. That's what we're looking for. The medium term goal,
17:58really, for that company is to get to a 10 gigawatt plate. And I think that's going to be
18:04contributed by both organic and inorganic. Naturally, organic drops down from the parent
18:10Inox wind, wherein whatever we do, turnkine, wherever we are supplying turbines, generally,
18:14we have long term O&M agreements, which flow into Inox Green. And on the inorganic side,
18:19we're looking at multiple options, you know, to kind of merge into wind to kind of acquire.
18:24So I think that's something which will play out as we move forward.
18:27Devansh, last question, as we're short on time, you know, you mentioned inorganic
18:31potential around 10 gigawatts of capacity that is undertaken by stressed or inactive players.
18:37What is the plan? Could we see some acquisitions in the next two, three years on behalf of the
18:41company? No, certainly. I think that's the aim. I think in the last financial year, we acquired,
18:46I think, the second largest unorganized player, IFOX, which we've scaled up to about 400 megawatts
18:53managing from about 200 megawatts in terms of value added services. In fact, we just won a 50
18:59megawatt PSU tender also about two, three months. Very profitable and keeps adding.
19:06Having said that, I think there are multiple targets we're looking at. I think what's changed
19:11for us is scale. We're not looking at very, very small assets because it's not worth our time to
19:17really kind of put together some of these small things. But I think there are a couple of
19:24who've gone bankrupt. And I think hopefully some of them should click as we move forward.
19:31Got it. Thank you so much, Devansh, for joining us and giving us that insight on the business
19:35and what it expects in the next few years. Viewers, with that, it's a wrap on this edition
19:40of Earnings Edge. But do stay tuned as we have lots more lined up on the other side.