Rakesh Jhunjhunwala trims stake in Titan

Brings down his holding from 8.05% in the December quarter to 6.77% in March quarter

Ahead of the recent decline in gold prices, billionaire investor Rakesh Jhunjhunwala had reduced a portion of his stake in Titan Industries in January-March from the previous quarter.

In the March quarter, Jhunjhunwala, who holds the second highest stake in Titan after the Tatas, brought down his stake to 6.77 per cent from 8.05 per cent in the December quarter.

He and wife, Rekha Rakesh Jhunjhunwala, together held 9.21 per cent stake in the company as at end-March quarter, down from 10.31 per cent in the December quarter.

The market is rife with speculation that the investor might have reduced his stake further still this month. “It does not come as a surprise that Rakeshji cut his holdings in Titan, going by the fact that US markets have firmed up since January. A lot of money has flowed out from gold to US stocks in recent months,” said Manish Innani, director, Prayas Securities.

Titan shares, which were among the best performers in 2012, declined 10.6 per cent in the January-March period. Today, the stock rose 2.5 per cent to close at Rs 244.65.

Analysts remain divided over the future of the Titan Industries stock. While some say the stock is over-priced at this point, others, such as Innani, believe Titan is still a hold because it is not just a gold play but also a retail play.

Citigroup has maintained its sell rating on Titan and cut its target price to Rs 235 from Rs 275 earlier, citing modest revenue environment and cut in earnings estimates as the main reasons.

“We are concerned about moderating gold price realisations, which have been a key driver of Titan’s growth in the past five years,” said Citi analysts Aditya Mathur and Jamshed Dadabhoy, in a recent client note.

“While it is difficult to quantify the numeric relationship between gold prices and jewellery volumes, we think that if gold corrects further, the “money chasing performance” phenomenon could reverse – something organised jewellers haven’t yet seen,” they added.

According to some analysts, this stock may be a good buy at lower levels owing to the possibility of an increase in sales due to waning gold prices.

This might happen with a lag effect, they said, as buyers tend to wait for prices to fall further or for prices to bottom out. The effects would likely start showing next quarter.

“The jewellery companies function on the basis of a replacement theory, where they sell and buy the same amount of gold every day. The decline in value will be in the case of the inventory they hold but even that will get offset,” said Bharat Shah, head — institutional business, Ventura Securities.

Titan, one of the best performing stocks in CY12, rose 62.35 per cent during the period. The Nifty gained 27.35 per cent in CY12.