Titan accelerates on CaratLane

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₹4,621 crore. The transaction pegs CaratLane’s valuation at about ₹17,000 crore. For Titan, increasing the stake in CaratLane is a step in the right direction.

As analysts from Nuvama Research point out, “This is a positive for Titan given the scale-up potential for CaratLane—the higher the share that Titan owns, the better for its shareholders." After acquisition, Titan would hold 98.28% stake in CaratLane on a fully diluted basis. The transaction is expected to be financed through a mix of cash balances, internal accruals and debt. As on 31 March, Titan’s consolidated cash and cash equivalents; and other bank balances stood at ₹1,343 crore.

Titan is expected to partly fund the stake purchase with borrowings. For now, CaratLane is not big enough to make a significant impact on Titan. For perspective, CaratLane’s revenue in FY23 was ₹2,155 crore versus nearly ₹31,900 crore of Titan’s standalone jewellery revenue excluding bullion sales.

But CaratLane’s faster growth prospects is one of the chief attractions for Titan. According to Kotak Institutional Equities, Titan’s experience scaling Tanishq augurs well for CaratLane. “Select areas of opportunity are: (1) potential consolidation of Mia and CaratLane given significant overlap (we note that Mia revenues are about one-fourth that of CaratLane in size), (2) introduction of CaratLane in Tanishq stores and (3) overseas expansion," said the Kotak report dated 21 August.

But all is not hunky dory. Some reckon the valuation is expensive. “Titan has acquired the remaining stake in CaratLane at a valuation of 4.2 times its estimated revenues for FY25.