Will Titan Company continue to be a darling of customers after MD Bhaskar Bhat retires this month?
It is no secret that Bhat has played a key role in making the company a titan on and off the bourses.
It is no secret that investors love Titan. And Bhat has played a key role in making the company a titan on and off the bourses. The Tata group company has been one of the storied stocks of the past decade and a half. Since Bhat took charge as MD on April 1, 2002, its shares have risen a remarkable 400 times, compared with an increase of nearly 11 times in the Sensex.
At the end of the hour-long call, Bhat — who speaks multiple languages, including Tulu, Kannada, Tamil and Gujarati — thanked everyone and said, “From an anpadh (illiterate) I became quite savvy at answering your questions.”
The 65-year-old, who has often ditched his car for the airport shuttle, is known for his modesty. In an interview with ET Magazine at the company’s airy headquarters in Bengaluru’s Electronic City a couple of weeks later, the IIT-Madras and IIM-Ahmedabad alumnus continued in the same vein. “I don’t ascribe anything to myself. A company’s achievement is ascribed to its MD, unfortunately.” But it is difficult not to give him some of the credit for Titan’s growth, especially considering how big Titan has become in the last two decades.
When he took over the reins of Titan, the company’s market value was a mere Rs 220 crore, a 10th of Tata Power’s and around a 15th of Tata Steel’s and Tata Motors’. Now Titan is valued at Rs 95,000 crore — more than all those companies combined. It is the second biggest listed Tata company, after Tata Consultancy Services. Moreover, between 2001-2002 and 2018-19, Titan’s revenues and profits grew at an annual rate of over 20% and 30%, respectively. “We feel good, certainly, when the stock does well. At the same time, we don’t feel bad if the market cap goes from Rs 1 lakh crore to Rs 95,000 crore,” says Bhat.
However, Bhat’s legacy goes beyond numbers. He turned a watchmaker with a jewellery business (Tanishq) into an enviable lifestyle company with brands in eyewear, accessories, perfumes and now sarees. The company even has a precision engineering subsidiary called Titan Engineering & Automation, a spin-off that caters to industries like aerospace, defence and electronics. The jewellery vertical contributed 83% to Titan’s standalone revenues of Rs 19,250 crore in 2018-19, with watches accounting for 13% and eyewear 3%, according to the company. Bhat was the first hire of the predecessor to Titan, The Watch Project of Tata Press led by Xerxes Desai, in May 1983, according to a recent book on Titan by Vinay Kamath, a journalist.
Bhat moved from Ahmedabad, where he was with Godrej & Boyce, to Mumbai, where he grew up, to take up the new job in sales. He saw the birth of Titan Watches a year later as a joint venture between the Tatas and the Tamil Nadu Industrial Development Corporation (Tidco), which was one of the few entities with a licence to manufacture watches back then. The company’s first plant was in Hosur in Tamil Nadu, around 40 minutes from Titan’s headquarters in Bengaluru. Titan was an acronym of Tata Industries and Tamil Nadu. Tidco owns around 28% and the Tatas 25% in Titan. The chairman of the board is nominated by Tidco. Interestingly, the governor of the Reserve Bank of India, Shaktikanta Das, an IAS officer from the Tamil Nadu cadre, was chairman of Titan between 2006 and 2008.
After it started selling quartz watches in 1987, Titan went on to eclipse the then market leader Hindustan Machine Tools, a state-owned company. Looking for new avenues of growth for the company, Desai led Titan into the jewellery business under the banner of Tanishq in the mid-1990s. But the foray would turn out to be more difficult than anticipated, as Titan found it difficult to prise Indians from their family jewellers. Things started improving slowly for Tanishq after it encouraged prospective customers to come to its stores to check for free the purity of the gold jewellery they own. This way, it was able to show the customers if their trusted jewellers were cheating them or not.
By the time the Titan mantle passed from Desai to Bhat in 2002, the jewellery unit was profitable. But there were still questions about the future of the business. In his book, Kamath quotes a senior executive saying the then Tata Sons chairman Ratan Tata wondered whether Titan was a watch company with a jewellery business or the other way round. But after an external assessment of the business, Tata decided to give it some more time. Bhat and his team made the most of it. Now Tanishq is the country’s largest jewellery chain. “That we would succeed in this manner was impossible to dream of,” says Bhat, sitting in his office overlooking a lake. His cabin — and the most of the campus — is not air-conditioned. But it is kept pleasant using air cooled by evaporating water.
Rama Bijapurkar, a management consultant who was an independent director on the board of Titan in the early 2000s, credits Bhat for his perseverance. “Success does not come from just being a visionary leader and envisioning the future. It comes from getting there, which requires patient, calm and resilient leadership, which Bhaskar has shown.” Bijapurkar was a batch ahead of Bhat at IIM-Ahmedabad and remembers him as a “confident IIT boy whom everyone loved”. She, like anyone who knows Bhat, attests to his abilities as a mimic.
It was under Bhat that Tanishq pioneered a strategy to guard itself against volatility in the price of gold. Instead of buying gold, Titan leased it from international banks for a fee and bought the gold from the banks at the same time it sold it to a customer. Some of Tanishq’s competitors also use this risk-mitigation tactic. This ensured Titan’s valuable capital was not tied up as stock in stores. Other challenges that Bhat had to deal with as MD of Tanishq included handling a lockout at the Hosur plant in 2003 and winding down Titan’s loss-making European operations in 2004. The European operations had saddled the company with debt.
However, he has also guided Titan to identify market segments that are unorganised or underpenetrated. As a result, it launched the Fastrack watches in 2003, Titan EyePlus in 2007, accessories in 2010, Skinn perfumes in 2013 and Taneira, its saree chain, in 2017. “There was no hoo-haa when Titan got into a new business like eyewear,” says Bijapurkar. “They quietly did it. Individually, these businesses may be small but together they add up to a nice jewel string that is valuable.” Eyewear brought in revenues of around Rs 510 crore in 2018-19 and other businesses Rs 270 crore. Watches, which accounted for 13% of the standalone revenues, notched up Rs 2,440 crore.
Titan has also launched and acquired new brands to widen its offerings — for example the purchase of 62% in online jewellery seller CaratLane in 2016 for Rs 360 crore. “We focus on those businesses where there can be a design-led differentiation,” says Ajoy Chawla, senior vice-president of business incubation at Titan.
The focus now is to do to the saree business what Titan did to jewellery. Bhat says the saree business is largely unorganised like the jewellery market and the company can put its knowledge of managing the supply chain for Tanishq to good use in Taneira. Chawla says the special-occasion women’s wear market is Rs 35,000-40,000 crore. There are five Taneira stores spread across Bengaluru, New Delhi and Hyderabad and Titan plans to take it to 60-70 in five years. Taneira came out of an internal programme that invited ideas from employees around 2015, as did EyePlus earlier. Of the many ideas that were received, three were finalised. The teams that submitted these were given six months to hone their ideas and make a final pitch. Of the three ideas, the one on sarees was chosen.
Chawla is loathe to disclose the other two finalists, which could be possible future diversifications for Titan. CK Venkataraman, CEO of the jewellery business who has been named Bhat’s successor, says one of Bhat’s strengths has been harnessing the collective potential of the workforce. “Modern-day managers are focussed on shareholders to the exclusion of other stakeholders. Bhaskar was never a slave to that.” Venkataraman points to Bhat’s constant queries about Titan franchisees’ profitability as proof of that. Titan has 1,700 exclusive outlets across India covering 2.1 million sq ft.
Besides Titan’s stellar numbers, what has endeared the company to investors is its transparency. “Titan has been upfront about negative developments and Bhat’s overall communication with investors has been exemplary,” says Abneesh Roy, executive vicepresident at Edelweiss Securities. He adds that Titan’s practise of releasing a preview before announcing the results for the quarter is uncommon among companies in the consumer space. Despite the immediate concerns over a drop in demand for the company’s products, he remains upbeat on Titan’s long-term prospects.
While the departure of a leader of Bhat’s stature usually results in some hand-wringing at a company, the transition at Titan has been smooth. That could be because Bhat is being replaced by someone who has been with the company since 1990 and has built Titan’s biggest business, the jewellery segment. “When a leader leaves, you see a ship with many holes. But at Titan, the system will not skip a beat as it moves on. That is what Bhaskar has done,” says Das Narayandas, a professor at Harvard Business School and former independent director at Titan.
So what after September 30 for Bhat? He jokes that he is only relevant as long as he is running a company. “I’m happy to have all the time in the world now. I’m still on several boards. It was impossible to manage all these responsibilities but I still managed with sleepless nights and extreme strain. Now that will reduce.” Bhat is on the boards of Tata Sons, Tata Chemicals, Trent and Bosch. He is also the chairman of Vistara and Rallis India. For now, Bhat is bidding goodbye to his employees in groups of 50-60 each. Most sessions are spent exchanging anecdotes with the employees of the company he helped grow.
His lauded stint at Titan has not been without its missteps, including Titan’s delayed entry into the smartwach segment, which Bhat says the company has made up for. Titan’s smart products clocked Rs 100 crore in revenues in 2018-19. “The company’s fundamental urge to continuously explore adjacent categories in the personal lifestyle space will impel it forward.” His successor may be inheriting a stronger company than Bhat did, but Bhat is certainly a tough act to follow.