Titan Ind, Seiko set to expand strategic partnership

As part of the agreement, going forward, Titan will supply stainless steel cases to Seiko to meet their global demand

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Titan Industries, India's largest publicly-held lifestyle company with a presence in watches, gold jewellery among others, is set to expand its strategic partnership with Japanese conglomerate Seiko Epson Corporation.

Titan Industries, which sold a total of 15.35 million watches last fiscal, had last year signed a strategic pact with Seiko Epson Corporation, in an effort to manufacture high-end stainless steel cases for watches. Titan, in this journey, will tap into the knowhow of Seiko through a technical services agreement, even as the company is in the process of setting up a manufacturing plant at Coimbatore, to produce high-end stainless steel cases at an investment of Rs 100 crore. As part of this agreement, going forward, Titan will supply stainless steel cases to Seiko to meet their global demand.

"Titan has been relying on imports to a large extent for these cases and as and when the plant goes live, they will not only be able to trim the import bill, but will also be an exporter, thus shoring up margins of this business," a senior industry analyst told Business Standard.

This move by Titan Industries to expand its pact with Seiko comes at a time when the margins of the watches business is under stress, despite volumes ticking at a decent pace.

"Titan's volumes have been coming from the lower end of the spectrum and we believe Titan may go in for continuous launches in the high end category which will be key to increasing the average realisation. In the past five years, although Titan has been able to achieve decent volumes backed by new launches and aggressive marketing, the overall margins have been declining. This is mainly due to the rising input cost, a change in the product mix (inclined towards low realisation products) and tough competition from overseas brands," said Nitin Mathur, an analyst with Espirito Santo Securities.

The Indian watch market is estimated around 55 million units and valued around Rs 4,700 crore. Over 50 per cent of this market is unorganised, primarily in the low-end and dominated by small players assembling watches illegally, smuggled watches and fakes. The organised watch market is dominated by Titan, with its collection of brands having a market share exceeding 65 per cent.

"Last year was a challenging one for the watches segment which grew 9.6 per cent to Rs 1,675.87 crore. The consumer ô retail sentiment remained subdued during most the year which is reflected in the moderate growth recorded by most of our brands," Bhaskar Bhat, MD, Titan Industries, told shareholders.

Going forward, with the growing dependency on import of watches owing to selection and launch of products from the Supplier Collection, Titan is moving towards generation of design by overseas designers, with close interactions with the Titan Design Studio. "Manufacturing will be in-house which will reduce our imports and as part of this measure, two design houses have been identified to work with Titan," Bhat detailed.