Buy Titan Company Ltd for the Target Rs.4,250 by Motilal Oswal Financial Services Ltd
Expanding ME footprint with Damas Jewelry acquisition
* Titan has announced the acquisition of a 67% stake in Damas Jewelry (excl. luxury brand Graff), a renowned Middle Eastern jeweler, at an EV of INR24.4b (AED1.04b), implying 6.9x EV/EBITDA and 0.7x EV/sales for CY24. Over CY22-24, Damas delivered revenue/EBITDA CAGR of 13%/14%. With 146 stores across the GCC, Damas has a strong brand equity in the region and a premium market positioning defined by its high studded jewelry share and design offerings that resonate well with Arab consumers. The acquisition marks Titan’s shift from catering predominantly to the Indian diaspora to a more diverse, international clientele. The acquisition will be funded through a combination of debt, internal accruals, and cash reserves. A majority of the funding will come from debt raised by Titan’s overseas subsidiary at an expected interest rate of ~6%, with an initial borrowing of AED500-550m (~INR12b). The deal also includes an option for Titan to acquire full ownership after Dec’29, providing long-term strategic flexibility.
* We believe that given Damas’ established retail footprint in the GCC, the transaction offers Titan long-term growth potential in the region. The company plans to enhance product innovation and elevate customer experience while retaining Damas' core brand values. Titan aspires that the Damas acquisition will be incremental to its USD500m international revenue target, underscoring its ambition to scale up its global jewelry operations through both organic and inorganic growth. Management expects this acquisition to be EPS-dilutive in CY26, neutral in CY27, and EPS-accretive from CY28 onward. Given Titan’s large size, we believe the deal would have a relatively marginal impact on its earnings, rather it will boost Titan’s global footprint. We reiterate BUY with a TP of INR4,250.
About Damas Jewelry:
* Established in 1907 and currently owned by Mannai Corporation, Damas operates 146 stores across all six GCC countries—UAE, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. It maintains a strong presence in the premium jewelry segment. Damas is positioned to target the upper-middle class or affluent aspirational segment. The brand has built deep trust and affinity among local Arab consumers with its heritage-inspired collections. It has a high studded jewelry mix compared to Titan’s India jewelry business. The share of studded jewelry in Damas’ sales is ~50%, as Arab consumers prefer diamond-heavy, premium designs.
* The business witnessed flat growth during 2019-2024 due to network downsizing and weakness in the South Asian-focused business. However, the Signature segment, catering to Arab consumers, has delivered at a healthy 12- 14% CAGR in the last few years. Over CY22-24, Damas delivered revenue/EBITDA CAGR of 13%/14% and sales of AED1.45b (INR34b) in CY24. Given its high studded share, gross margin is in the range of 20-24%, better than most listed Indian jewelers. EBITDA margins are in the 10-11% range, while pre-IFRS EBITDA margin is ~2-3%, resulting in PBT margin of ~1% (see exhibit 2 for detailed financials).
Synergy benefits for Titan:
* The jewelry retail market in the UAE is largely organized (~60%), while in Saudi Arabia, it is still fragmented (~60% unorganized). Titan sees significant headroom for organized retail penetration in SAUDI ARABIA, with opportunities for market share gains.
* Damas’ premium positioning and strong, long-standing brand equity with local Arab consumers, coupled with a higher studded share than Tanishq, can be leveraged by Titan.
* Titan aims to enhance Damas’ operational efficiency by implementing the best practices in sourcing, inventory planning, pricing, etc. Cost savings are expected through consolidated sourcing, leveraging Titan’s own factories, and improved vendor negotiations. Additionally, Titan plans to optimize finance costs by improving the capital structure and inventory management.
* The company expects to benefit from design and product innovations through deeper immersion into Arab consumer preferences, including exposure to Italian, Turkish, and other international jewelry styles.
* It will operate in a dual-brand model in the GCC, as Tanishq will cater to the South Asian clientele, while Damas will continue to serve Arab consumers.
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