Titan is investing Rs 357 crore for a 62% stake in Caratlane

Titan Company, part of the salt-to steel conglomerate Tata Group, is investing Rs 357 crore for a 62% stake in online jewellery retailer Caratlane, it said in a filing to BSE. The announcement which was first made in May this year, without details of the transaction being shared by the group, values Caratlane at Rs 575 crore. At the time, Titan, which makes watches and jewellery under the Tanishq brand, said it had picked up a majority stake in the Chennai-based company.

Titan would be acquiring 19,142,545 shares representing approximately 62% of the company's share capital, the filing said. This marks the second such deal wherein a brick-and-mortar retail has invested in an e-commerce firm over the past few months. In April, Kishore Biyani-led Future Group bought out cash-starpped and troubled online furniture retailer Fabfurnish which was backed by Germany's Rocket Internet.

Titan's shares shot up when the markets opened Friday but ended just marginally higher from its previous close at Rs 417.50 on the BSE .

Started in 2008 by Mithun Sancheti, whose family is in the jewellery business, Caratlane has over a dozen offline stores across the country.It has raised about $50 million from Tiger Global Management. For Tiger, a New York-based investment fund, which has been one of the most ferevent consumer internet investors in India, Titan's majority stake acquisition essentially means it has recovered the capital it had ploughed in the company with a tiny profit. According to VCCEdge data, Tiger infused about Rs 302 crore ($52.22 million) since 2011 to buy 19.14 million shares of Caratlane, which Titan is acquiring now.

Titan's managing director Bhaskar Bhat said, Caratlane will give them the access to a growing consumer base online, mainly that of the youth. "This investment is not about the present but the future. They are the biggest and oldest online player and it fits our business proposition well now," Bhat said over the phone. Jewellery contributes atleast 80% to Titan's revenues. But it's growth has been slowing down since the last quarter of financial year 2016 as well for the full fiscal year. There's been an overall sluggishness in business sentiments with new restrictions kicking in wherein consumer's have to furnish their permanent account number (PAN) cards for purchases over Rs 2 lakh . Titan reported over 14% drop in its net profit at Rs 184.11 crore in the final quarter of last fiscal while sales for the same period fell by 1.5% to Rs.2,456.30 crore

"Caratlane is an established brand and it's a smart deal for Titan. If you check global trends, major jewellery players have significant online presence and Caratlane will give that access to Titan now. It's a global trend that fast fashion jewellery and small ticket size products do well online because transactions over Rs 1 lakh will still take place offline. As far as omni-channel presence goes, it will take few years before significant results will be visible," said Abneesh Roy of Edelweiss Research.