Titan share price gains as analysts believe CaratLane stake purchase to be value accretive

livemint.com:

Titan Company signed a Share Purchase Agreement with the Founder of CaratLane and his family members to acquire all the shares held by them representing 27.18% stake in the company for ₹4,621 crore. CaratLane is an unlisted private company engaged in the manufacture and sale of jewellery and is a subsidiary of Titan. Titan had first acquired a 62% stake in CaratLane in 2016 for ₹357.24 crore, and had subsequently raised its stake in the omni-channel jewellery retailer.

Read here: Titan Co acquires another 27.18% stake in CaratLane for ₹4,621 crore Analysts believe Titan increasing stake in CaratLane will be value accretive in the medium term as the company is a high-growth business with opportunity to ensure healthy revenue and margin. However, the transaction will also be EPS dilutive in the short-term for Titan. The current transaction pegs CaratLane’s valuation at around ₹17,000 crore.

Analysts at Antique Stock Broking believe the acquisition optically appears to be expensive, but it is positive for Titan in the long run as CaratLane will play a critical part in Titan’s ambition to dominate the organized jewelry space in India, especially e-commerce. “We note that CaratLane is in a sweet spot with the share of online jewelry in India expected to double in the next five years from 5.9% in FY22 to 9.2% in FY27E. Overall, we understand that the acquisition is positive for Titan over the long run," Antique Stock Broking said.