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Over the past decade or so, Titan Industries has built up a portfolio of strong lifestyle brands, including the top-end jewellery brand Tanishq and the watch brand Xylys. The Rs 3,800-crore firm has positioned itself to cater to consumers’ growing incomes and aspirations, recently venturing into eyewear. The Bangalore-headquartered company not only addresses the top-end, but also has brands for the masses such as the Gold Plus chain of stores. In a conversation with Shobhana Subramanian, managing director Bhaskar Bhat talks about how high-growing disposable incomes appear to have cushioned the impact of high food inflation. Bhat observes that high gold prices have hurt jewellery volumes and it could take a while for volumes to stabilise.

With the economy recovering much faster than probably anticipated, how do you read the trend in consumer spending?

We have seen retail growth in the past three months and it’s not only because of the festival season. Consumers are willing to spend even in November and December. While in July-August, it was mass brands that were doing better, of late even the top-end brands like Titan are growing.

Do you think high food inflation could impact consumer spending?

Income levels have gone up fairly sharply over the past few years because of which food isn’t really a very big part of the consumption basket any longer. So, food inflation of 15-20% doesn’t really pinch like it used to be earlier, except for lower income groups. I haven’t really seen food inflation hurt spending too much, especially for the families that we cater to.

So, would you say consumer spending is back like before?

I think so, but I don’t know if it’s a trend because there is a fear that this prosperity may be short-lived. However, I don’t really agree with that. That fear is there more in the west because governments there have injected very large amounts of money into the economy whereas in India, it’s been more an effort to reduce taxes. Here, I do feel the spending is genuine, but I would wait until mid-January to pass any kind of judgement because the period between December 15 and January 15 is a low demand period. But sales haven’t fallen too much.

High gold prices seem to have hurt your jewellery volumes rather hard...

Gold prices have affected volumes, but the wedding season was fairly strong and helped volumes. What has happened is that because of the high price of gold, there has been a small shift to diamond jewellery because the difference in prices has narrowed. So, in the urban markets, diamonds have become relatively more attractive than in the past. And diamond jewellery fetches us better margins. So, in some ways, high gold prices have helped. But gold volumes will not pick up unless prices come down.

Has the Gold Plus model stabilised and are you ramping up?

The Gold Plus was affected more than Tanishq when gold prices went up because that brand is driven primarily by the wedding season. We are steadying that business and haven’t opened any new stores this year. We like the stores to break even, which takes about two years—by the end of the year, all of them should have broken even. We will start expanding only next year. Currently, we have 30 Gold Plus stores though we may close down some if we feel the capital is not being well-used.

How do you read the trend in gold prices?

I think gold prices will hover around at the $1,000 mark, though I feel they could fall below that mark. My opinion is based on the decrease in consumption in important markets like India. There has been a fall in gold imports and in India much of the consumption of gold is for jewellery. Therefore, I can’t see how consumption in one large part of the industry coming down won’t affect prices. After all, it’s a fundamental demand; otherwise, gold in the ETF form is just a financial asset. Any financial asset has to have an underlying utility.

Do you believe more people will buy gold as an investment after such a strong appreciation?

I think so. I observe more men buying gold in the form of coins and certainly not discouraging their wives and mothers from buying gold jewellery. The returns have been very good and, therefore, I do feel that apart from the fundamental liking for jewellery, there is now a rational basis for buying gold jewellery. However, it’s also true that after gold prices started moving up, people preferred to exchange old gold into new jewellery because they wanted to conserve cash. In fact, that trend still continues.

Titan has reorganised the distribution for Sonata watches by reducing the number of dealers. This move gives each dealer a bigger catchment area and reduce costs for Titan. How has this worked?

We have been doing this for about six months now and it’s an ongoing process. The strategy has brought in more efficiencies. A larger territory means that we can defray the fixed costs over bigger volumes and, therefore, their returns are now better. We also brought down the stock in the pipeline. Investments are now more reasonable and hence, the profitability has increased. We’re doing this in a phased manner and hope to complete the exercise by March next year.

How are the top-end brands of watches doing?

Both Xylys and Nebula have grown significantly because we have been promoting them aggressively. Xylys’s competitive advantage vis-a-vis Swiss brands is its presence in the World of Titan stores, of which there are around 275 outlets. That reach exceeds that of any of the Swiss brands. We had planned to roll out 40-odd Fastrack outlets and 40-odd World of Titan stores by March and we are on track to achieve this.

What kind of distribution reach are you looking at across brands over the next three to four years?

Today,we’re at a little over 500 stores across our brands and we are already the country’s biggest specialty retailer in terms of reach. By March 2010, we should have a little over 580 stores and in the next three to four years the number should hit 900 stores.

Are lease rentals coming down?

They’re not going up. They’re steady, but in some places we have been able to renegotiate downwards. But I would say that in only 10-15% cases we have been able to bring down the rates. We don’t encourage revenue-sharing models, unless the mall owners insist on it because malls are important. But most of our contracts are straight rentals and at times, we run the stores ourselves and we also have franchisees.

How big will the Titan eyewear business be in three or four years?

The goal is to open 200 stores in three years’ time, but we are holding back our expansion in the current year and plan to roll out just over 80 stores. We are not in a hurry to expand because this is a new business for us and we want to ensure that the customer experience is good because that’s the differentiator. At the business level, it could take at least three to four years to break even because new stores will be rolled out. Currently, about a fourth to a third of the stores have broken even.

Is media inflation an issue?

I don’t think so. We’ve kept our spends in check. We benefitted in the downturn because outdoor advertising became cheaper and our categories lend themselves to outdoor advertising. We have changed our mix and the cyberspace is very interesting and we’re putting in more money there.

One area which is more expensive is brand ambassadors—but it’s a strategic choice and part of our budget.

I came across this article which talks about an issue which is plaguing our nation for past few years - Kidney Transplants. It has become a big business these days with thousands of rupees changing hands in every sale of this precious organ. This article sheds some light about the practices in others countries and what needs to be done to make this organ transplant safer and better in India. Read on...

Author: Maitreesh Ghatak
Posted online at financialexpress.com

Let us assume for the purposes of our discussion that surgical procedures do not entail much risk. Would it be alright then to legalise the kidney trade? To answer this question as well as understand land transactions better, consider the example of heart transplants. Medical technology has made them possible, but the replaced heart comes from the body of a just-deceased person who had pledged beforehand to posthumously donate the organ. Should trading in human hearts be legalised, assuming that healthcare standards are high and there is no use of force or coercion? It is one thing if a dying man allows, in exchange for an agreed-upon sum, his heart to be taken out after his death and given to another person. But what if a healthy but impoverished individual, of his own free will, agrees to be killed and have his heart extracted for transplantation so that the money from the sale can help his family? No legal system in the world would find this acceptable, and with good reason.

It is well known that trading in hair, blood, sperm and eggs is legal in most countries, primarily because the human body can naturally replenish these. This is not the case with the heart and the kidneys, though the body can function quite well with one kidney instead of two. So, in thinking about whether to legalise kidney trade—or, for that matter any other trade that poses serious health risks on the participants—our judgement depends on the extent of these risks. Even the most aggressive advocate of free markets would agree that somewhere between the hair, where the risk is zero, and the heart, where death is certain, there needs to be a line demarcating the limits of the right to buy and sell.

In countries where government regulation is lax and healthcare for the masses is not up to the mark, this line needs to be drawn more conservatively. However, it would be naïve to think that imposing a legal ban puts an end to a troubling practice. There is a thriving black market for kidneys in India, and like all such markets, the biggest gain from it goes to the middlemen. Their presence ensures that sellers get only a fraction of the price paid by the buyers, and the latter are often duped too. And since everything happens outside the ambit of the law, corrupt doctors flout healthcare norms at will. Stories of organ rackets and scams abound in our newspapers. Many feel that legalising the transaction and imposing regulations on the organ market will help matters. While Iran is hardly the best example of a free market economy, it was motivated by similar sentiments in legalising the kidney trade in 1988. As a result, it is the only country where the demand for human kidneys is met with adequate supply.

It must be mentioned that in Iran, kidneys are not bought and sold in the open market, but only within a network created by the government and charitable medical institutions. But as noted earlier, the surgical removal of the organ has been problematic in Iran, and many sellers have ended up regretting their decision. Therefore, one feels somewhat hesitant to laud the fact that in this market demand is being met with supply.

Where a black market exists, such as India, potential sellers are deterred by the fear of being exploited by middlemen, of health risks, and of getting caught. Consequently, supply is always less than demand. Legalising the transaction could potentially reduce malpractices and health risks and ensure a better price to the seller. This is likely to push up the supply considerably in poor countries. However, increased supply will reduce the price. More importantly, unless the poor are provided adequate legal and medical safeguards, now a much larger segment of the population would be exposed to exploitation and health risks. As a result, it is not clear that legalising the sale of kidneys would lead to an increase in overall welfare compared to the earlier situation where a much smaller section of the population was involved in such transactions.

What about donations? The transaction is the same as in sales, with the same health risks and consequences. The difference is that one of the transactions is commercial, while the other is voluntary. There are no financial transactions involved in donations, and this automatically minimises the problems of quality control and malpractice. Health-related risks are similar for both, but the presence of middlemen and traders increases these risks considerably in the case of commercial transactions relative to donations. So, the arguments against legalisation mentioned earlier remain.

But society does have to pay a price for this kind of regulation. The biggest one in this context is the high probability of mismatch between donor and receiver organs. It is possible to start a system of exchange between all donors and receivers. The recent amendments to India’s 15 year law on organ transplants aim to facilitate this. But it is not difficult to gauge the limitations of such a system. The monetary system, after all, was invented because the barter system is subject to the problems of double coincidence of wants and coordination.

The recent amendments also aim to make it easier for the organ to be sourced from just-deceased or brain-dead individuals. In India about 1,00,000 people suffer from renal failure every year and about 80,000 people die of accidents. This suggests cadaveric donations could be an important source of organs. This is not as easy as it sounds, because donor and receiver kidneys need to match, and also, delays can make the organ unfit for transplants. In addition, there are social norms that go against putting a dead man under the scalpel.

In some countries of continental Europe, cadaveric organ procurement is based on the principle of presumed consent as opposed to informed consent as in the US and the UK. Under presumed consent, a deceased individual is classified as a potential donor unless he or she explicitly opts out before death.

Under informed consent, this is the case only if they volunteer, i.e., opt-in. Evidence provided by economists Abadie and Gay (2006)* suggests that the former increases availability significantly (see figure). Given the salience of the anti-legalisation arguments in countries like India, this seems to be a worthwhile direction to explore.

In November of last year, I published an interview post with Bhalchander who is determined to fight poverty with the help of donors like you and me through the micro finance organization he founded named United Prosperity. He strongly believed that micro finance/lending can make a huge difference in many families in the rural part of India and many other countries.

Recently he visited India, his ever first chance to witness how our money is shaping the lives and making prosperity. He visited first partner microfinance institution Ajiwika, based out off Jharkhand, India.  In the new published blog, he shared his experience and interesting stories about how he felt when he met few entreprenuers like Barki Devi and group, and Bandana Devi and group.

He was saying, the impact of the guarantee on Ajiwika has been remarkable. Six months back most of the smaller microfinance institutions like Ajiwika were struggling to raise funds because of the financial crisis. While development lenders such as FWWB and SIDBI were making some loans to smaller microfinance institutions, most of the banks had become extremely conservative in their lending. Banks often tend to work in an informal syndicate. If one bank lends then other banks are more inclined to follow. The converse also holds true, if the more development oriented banks become conservative, then the rest of the banks follow suit.

UnitedProsperity.org’s guarantee enabled one bank to lend to Ajiwika. Now that a mainstream bank was lending to Ajiwika, over the next six months several other banks have approved loans to Ajiwika.

The guarantee has had a catalytic effect. Not only did we directly support the entrepreneurs on our website, but we also provided the spark for freeing up funds locked with other banks to support many more entrepreneurs who are not listed on our website.

I would say thats the type of cascade effect we want to see in the countries to abolish poverty. You can read about his experience in his blog at Unitedprosperity.com.

In this visit, he was also able to accomplish one more milestone in UP's history by adding second partner microfinance institution. Because of that, there are several more loans online and we need your support to get them fulfilled.

Please check out the new entreprenuers listed and try to sponsor and support atleast one needy entreprenuer and make a difference.

I came across this report recently from my Kiva network and thought would pass it on to you all if you haven't read it.

A committee headed by an expert economist released the latest statistics on poverty in India. As per the report, 37% of the population of India is under the poverty line. 


Story by: TimesofIndia.com
Date: Dec 15, 2009

NEW DELHI: The Suresh Tendulkar committee report revising upwards poverty estimates across the country may further strain government finances with many of the states already demanding special status to address the issue and an enhanced allocation under many of the pro-poor schemes.

The committee, in its report submitted to the Planning Commission last week, had estimated that 37% of India’s population is under the poverty line, while the proportion of the poor is almost 42% in rural areas — sharp increases from official poverty estimates of 27.5% for all of India and 28.3% for rural areas.

The committee has changed the method of estimating poverty to a broad-based consumption basket that includes education and health.

More than half of the rural population of states like Orissa, Bihar, Madhya Pradesh, Chhattisgarh and Jharkhand are still living under abject poverty, not able to meet their basic necessities of food, health and education, according to the revised estimates of the expert group headed by former chairman of Prime Minister’s Economic Advisory Council Suresh Tendulkar. The new figures are not strictly comparable with the earlier estimates, because the Tendulkar panel has significantly changed the method of estimating poverty — from one notionally based on calorific intake to a more broad-based consumption basket that includes education and health.

Nevertheless, the revelation that poverty is higher than it was earlier thought to be may force the government to increase funding for social and rural development schemes such as the National Rural Employment Guarantee Act, Indira Awas Yojana and the Pradhan Mantri Gram Sadak Yojana, say economists.

Tendulkar himself told TOI that though this was not the mandate of the committee, as an economist he thinks government should put a lot of money into education and health, particularly considering the demographic profile of the country with a predominantly young population.

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* - Applies additional charges
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*** - Rate increases above 2500
**** - $0 fees above $1500 from US bank account

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Namesta, Namaskar & Vanakam to all Desi folks!!