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We maintain REDUCE on TTAN, as the Damas acquisition is not cheap and potential value creation is insignificant (vs TTAN’s scale). The recurring business (Damas Signature) is only ~40% of the overall Damas topline (CY24), as the Graff business (20%) is likely to be shelved before the acquisition and balance 40% is a ‘low-profitability’ Gold business that calls for a major overhaul. TTAN expects raising Rs12bn debt for the consummation of this transaction (67% stake; 6% cost of debt), and expects the acquisition to be EPS accretive only FY29 onward. Ex Graff and valuing the Gold business at its estimated inventory value (2.5x stock turns), we believe the Signature business is being acquired at ~20x trailing EBITDA, which is a fair multiple. In our base case, which implies 15% CAGR for Damas Signature over CY24-27 (vs 12-13% CAGR historically) and near-doubling of its estimated EBITDA margin by CY27, our incremental value addition stands at less than 1% to TTAN’s m-cap (0.3%/1.8% in our bear-/bull-case). Also, we believe the acquisition may occupy incommensurate bandwidth, as the business is in need of improving its retail KPIs in UAE (sourcing/merchandising), its network expansion in a lesspenetrated KSA market, and a major overhaul of its Gold business.

Damas scale-up to likely require incommensurate bandwidth

To extend its growth longevity and become a global lifestyle brand, TTAN shared its plans about acquiring 67% equity stake in Damas—a premium jewellery brand in Dubai/KSA. Damas’s journey has been bumpy, with the first round of major store closures in CY12- 14, and thereafter some in CY20-22; now, its gold business has seen some store closures post-acquisition. TTAN indicated that the Damas Signature business (~40% mix; major focus) is seeing better growth trends (12-13% CAGR) and has a better margin profile, helped by higher studded mix (50%) and higher making charges in the plain gold business vs India. Interestingly, Damas Signature also has an in-house LGD brand— GAIA, which retails in the same store, along with natural diamonds. Going ahead, TTAN sees growth to be driven by potential throughput increase in a relatively mature Dubai market (60% organized) and network expansion in an under-penetrated KSA market (30-40% organized). TTAN plans to replicate its India playbook for improving retail KPIs in terms of merchandising, replenishment, and conversions (hyper-local pricing architecture), and improving sourcing/manufacturing by leveraging its existing relationships with diamond suppliers and manufacturing facilities in Hosur/Pantnagar (India). For balance 60% of the existing business (non-signature business), the Graff business (20%) is likely to be shelved before the acquisition, with the remaining 40% a low-profitability Gold business that is in need of an overhaul. Damas operates ~40 stores under the Gold business (of the total ~146 stores) which have a weak profitability profile, albeit better throughputs, as the segment contributes ~50% of revenue (vs ~30% store mix). Titan has plans to convert some ‘gold business’ stores into Tanishq stores, and close down the rest. TTAN projected confidence, though, as it stated it would explore more International acquisitions only after seeing a turnaround in Damas.

Q1 trends show risk to estimates; margins, the key monitorable

TTAN saw growth moderation in Q1 with 17% growth in the jewelry business vs recent trends of ~25% growth. Also, LTL growth for TTAN in the early double digits is weaker than the 18- 19% for peers. In our view, Street’s expectation of a high-teen jewelry growth for FY26 at stable margin is at risk, as the 17% growth in Q1 comes on a weak base (9% growth); remaining FY26 has a strong base of ~25% growth, enabled by a 900bps duty-cut last year. Further, the revenue mix is seemingly weak currently, with higher growth in the low-margin coin sales and lower growth in the high-margin studded/plain gold segments. TTAN’s 1YF valuations at ~65x are demanding and leave limited room for disappointment. Given the risk to estimates, the increasing competition, mushrooming LGD players, and deteriorating RoIC profile, we maintain REDUCE on TTAN with TP of Rs3,350 (50x Jun-27E EPS).

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