Titan's plan to acquire remaining stake in CaratLane reaches an impasse

The Tata Group and the founders of CaratLane are in disagreement over the valuation of the latter, which has resulted in an impasse, The Economic Times (ET) reports. Titan owns a majority stake in CaratLane.

With no solution in sight, the talks so far have not delivered any positive results, and the issue has now been escalated to the offices of Tata Sons chairman N Chandrasekaran. People aware of the matter were quoted in the ET report as saying that discussions are ongoing with a quick resolution as its objective.

A senior Tata Group executive said, "It's an ongoing negotiation — these things take time." Additionally, the same official added, "Titan is a listed company, so it has to follow certain guidelines. On the other hand, entrepreneurs want quick solutions as startups need to be nimble."

Tanishq and CaratLane have shared a strategic partnership since 2010 in which CaratLane acted as Tanishq's vendor. In 2016, Tanishq started acquiring CaratLane in parts, spending a total of Rs 440-450 crore.

As things stand, Tanishq has 72.3 per cent ownership in CaratLane. Industry experts consider CaratLane as Titan's most valuable subsidiary. The remaining 27.8 per cent ownership of the company is still held by CaratLane's founders, ET reported.

According to the original deal between Titan and CaratLane, Titan can acquire the remaining business of CaratLane. However, it has to be done at a value agreed upon by both parties.

To arrive at a valuation agreeable to both parties, both sides could appoint an independent agency to determine the valuation. Later, the average of the two valuations was to be shortlisted, but this could only be done if both parties agreed to the arrangement, the report added.

Earlier, Titan appointed Bank of America to determine the valuation of the residual 28 per cent stake. Bank of America valued the entire company at Rs 6,000-7,000 crore, meaning the founder's stake was worth Rs 1,680-1,960 crore. However, the founders found this valuation too low.

In case the discussions do not conclude, the only way to find out the fair valuation of CaratLane will be through listing it on the stock exchanges. The listing may take two more years to be completed, the ET report said, quoting people in the know.