Titan falls 4% on Goldman Sachs downgrade on weak demand outlook

Goldman cited Titan’s slower store additions, lower returns and higher valuations as the key reasons for the rating downgrade. The global research house believes that the demand outlook for Titan is losing its shine as the country goes through a slowdown.

Goldman expects Titan's earnings to be significantly impacted as the GDP growth slows. Discretionary categories are likely to see the higher impact due to slowdown, it said while adding that only 35 percent of jewellery sales of the company relating to the wedding segment is resilient.

In its quarterly update, the watch and jewellery maker said that its January-March quarter revenue growth has been "impacted severely" following disruptions on account of COVID-19. The company said its revenue from its jewellery division declined by 5 percent due to "lost sales" in March. It had a revenue growth of 16.5 percent in January and February.

The company said sales of jewels division was picking up till the disruption on account of COVID-19. The company had closed all stores from March 22, following a nation-wide lockdown announced by the government.

The company further said the wedding jewellery sales were good till COVID-19 disruption.

Meanwhile, ace investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala sold 1.03 crore shares of Titan Company in the March quarter, thus reducing their stake to 5.53 percent in March 2020 from 6.69 percent in December 2019.

According to the latest exchange filing of the company, Jhunjhunwalas now hold 4.9 crore shares as against 5.93 crore shares in December.

The foreign portfolio investors (FPIs) have also reduced their stake in the company to 17.74 percent in the quarter ended March as compared to 18.31 percent held in the December quarter.

Titan’s business is hurting from high gold prices, weak consumer sentiment and the lockdown to contain COVID-19. Analysts expect a recovery only in the second half of this year.