“There could not be a better home for Caratlane than Titan,” says founder Mithun Sacheti, as he sits back after selling his last 27 percent stake in his brainchild to jewellery and lifestyle giant Titan for Rs 4,621 crores. The deal values CaratLane at Rs 17,000 crores.
The company, founded in 2008 by Sacheti alongside Srinivasa Gopalan, was rooted in his family’s connection to Mumbai’s renowned jewellery establishment, the Jaipur Gems. It took 8 years to catch the eye of the Tata Group, which first became a shareholder in 2016.
Through Titan, the Tata Group acquired a 62 percent stake in CaratLane from New York-based private equity firm Tiger Global, in a deal that valued the company at Rs 536 crore. Between 2016 and 2019, Titan picked up more shares, taking its total holding to a little over 72 percent. This was mainly through a secondary purchase from Tiger Global, which at the time was CaratLane’s only venture investor.
Titan’s continued investments in CaratLane, however, was apparently not without its sceptics; notable among them investor Rakesh Jhunjhunwala. “He had this strong view that loss-making businesses like us don't deserve the value that we were getting,” Sacheti tells CNBC-TV18, recalling his first meeting with the late investor.
This was soon after CaratLane, in 2018, raised Rs 100 crore from Titan, a valuation Sacheti was not happy with. He then went to Jhunjhunwala for guidance, who was, at the time, in the company of Ramesh Damani, Raamdeo Agrawal and Utpal Sheth, among others.
“All of them spoke about compounding and what is the right way to compound, and while they were speaking about these things and not directly to me, I took that to heart. I realised that my biggest gap was that I obsess too much about my P&L and I've had a very low obsession with my cash flow,” Sacheti says.
Soon after that dinner, Sacheti decided to buy out his co-founder Gopalan and then doubled down on his business. It’s a move he says helped Caratlane grow exponentially, because the doubling down came with a new strategy – one where he reworked the company’s cash flow situation and reduced his dependence on venture capital money to keep the wheels turning.
“The buzzword of cash flow caught on to me at that point. The P&L is just a report card and everything is just on the basis of cash. We opened 20 stores a year because that's all the cash we had. And last time we opened 80 because we had that much more cash coming,” he says.
Caratlane, which started off as a purely online business, currently has over 200 stores across India. It earned over Rs 650 crores in the last quarter. And the magic word is ‘cashflow’. “Cash became king for us and cash led to profitability, but all of this started with those conversations (with Jhunjhunwala),” Sacheti remninisces.
The journey has been about more than just cashflow and profitability. It’s been a journey of trial-and-error to find the right business model, of near misses that include almost having to shut shop, of scrambling to keep up with changing consumer trends.
“When we started, we didn’t have a clue as to how to go about it, about how to build . We had this idea that looking at the time people were spending on the internet, and the internet is going to be the place where a lot more stuff happens,” he says. But there was a problem. People visited the site, but were not buying. And so CaratLane began experimenting.
“People wanted to touch and feel jewellery to try it out. We tried the try-at-home model and we saw great success, but we realised it’s not a scalable model.... So we decided stores were the right way. But the only way stores work is when everything else — from finding the jewellery, designing it, making the customer choose — happens in his house or on his cellphone. So when that model played out in 2014 is when we knew that this is the future of this space,” Sacheti adds.
Titan’s arrival as an investor helped streamline the business model. “When we were building out, we felt that Titan was the best partner. We had Tiger Global as an investor but their view was a lot more tech,” Sacheti says.
However, even their stores were not a hit right off the bat. “Our store in Bangalore in 2014 opened up, and it was a remarkable success,” Sacheti says, but quickly adds, “The first two were failures, the third was a big success.”
The omnichannel approach was the gamechanger for CaratLane. And that came from Titan as well. “Frankly, we didn’t know the word omni either, and we called it all kinds of things like clicks-to-bricks and clicks-to-mortar and I don’t know what not,” he smiles.
Fifteen years since he began, Sacheti has sold out to Titan in a massive Rs 4,600 crore deal that is easily India’s biggest deal involving a D2C e-commerce player. CaratLane has become the newest jewel in Titan’s crown, and Sacheti’s move is one of the most remarkable exits in the Indian e-commerce space.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
Phase five Lok Sabha polls: Rae Bareli, Amethi among 14 UP seats going to polls on Monday
May 19, 2024 1:03 PM