Titan plans to take on partial debt to fund Caratlane's acquisition

Jewellery maker Titan is planning to take on partial debt to fund the acquisition of a 27.18 per cent stake in its subsidiary, Caratlane shares.

The company plans to fund more than 50 per cent of the acquisition by debt. On Saturday, Titan announced that it signed a share purchase agreement with the founder of CaratLane Trading (‘CaratLane’) and his family members to acquire all the shares held by them representing 27.18 per cent of the total paid-up equity share capital (on a fully diluted basis) of CaratLane for a total consideration of Rs 4,621 crore. 

“Titan will take some debt to fund this transaction. We have a healthy balance sheet with a good cash balance, but we still want to do a part funding through debt," Ashok Sonthalia, Titan’s chief financial officer, told Business Standard.

“You can assume slightly more than 50 per cent through debt, but this has not been finalised,” he said.

He added that the interest on the cost of the debt will come into Titan’s Profit & Loss (P&L) account.

The company also expects regulatory approvals in the next two months.

He added that it will take a call on the remaining 1.72 per cent stake held by employees only after the completion of this transaction.

Caratlane ended the previous financial year (FY23) with a 9 per cent earnings before interest, taxes, depreciation and amortisation (Ebitda) margin, Sonthalia explained, and added there was room for improvement as 75-80 per cent of its revenues would come from diamond jewellery.

“They have the capacity to keep inching up their Ebitda margins from 9 per cent and eventually could be better than that of Tanishq’s but that will take 5-7 years and it is difficult to put a timeline to that,” he added.