India’s largest jewellery company posted a good quarter riding the gold price surge, yet there is a genuine dilemma about what happens when the glitter fades
When gold prices are rising relentlessly, it is easy to mistake a tailwind for great execution. Titan Company’s Q3FY26 numbers are decent by any measure — consolidated revenue up 43.3% year-on-year to Rs 254.2 billion, jewellery sales (excluding bullion and digital gold) up 42.1%, adjusted profit after tax surging 75.4%. But the question is whether Titan’s business model can sustain this performance when gold prices eventually stop doing the heavy lifting.
The Gold Price Paradox
The jewellery segment, which accounts for the overwhelming bulk of Titan’s revenue, grew 40.4% year-on-year on a like-for-like basis of 32%. But that is because of higher gold prices.
ICICI Securities cuts to the heart of it: “Strong jewellery sales growth amid inflated gold price regime is primarily led by higher ticket sizes,” with buyer growth remaining flat. The brokerage notes that “new buyer share stood at 45% versus 48% a year ago,” suggesting that while existing customers are spending more per visit — partly because gold simply costs more — the company is not meaningfully expanding its customer base.
HDFC Securities frames the same data point with a slightly sharper edge, noting that domestic jewellery growth was “driven by gold price-led increase in average bill value but partially offset by flat buyer growth.” Plain gold jewellery grew 37%, aided by wedding demand and gold coins. Studded jewellery grew a slower 26%, with its share of the mix declining from 28% to 26%.
Studded jewellery carries higher margins than plain gold. When gold prices rise sharply, customers tend to trade down from studded to plain pieces — or simply buy gold coins — which dilutes profitability. ICICI Securities flags this directly, warning that “high gold price led margin dilution in studded segment and higher coin salience could continue to weigh on jewellery margins.”
The Margin Question
Jewellery EBIT margins came in at 10.9% on a domestic basis — a 50 basis point contraction on a normalised basis, according to ICICI Securities, “impacted by margin dilution in studded segment given the high gold price, higher coin sales and investments in marketing and campaigns.”
On a consolidated basis, HDFC Securities reports jewellery EBIT margins expanded 159 basis points to 11%, but cautions that this was “aided by a low base” — the year-ago quarter had a Rs 2.53 billion customs duty impact. Adjusted for that one-off, margins were essentially flat.
ICICI Securities believes “margin sustenance within the normative range of 11-11.5% may be a key monitorable” going forward. Management itself has suggested a shift in how investors should evaluate the business, with HDFC Securities noting that “management recommended that EBIT growth may be a better KPI to track than EBIT margin in a persistently rising gold price environment.” That is a reasonable argument — but also the kind of narrative shift that typically accompanies margin pressure.
Beyond Jewellery: The Bright Spots
The non-jewellery businesses delivered a genuinely strong quarter. Watches grew 13.9% year-on-year to Rs 12.9 billion, with analogue watches surging 20%. Watch EBIT margins expanded sharply to 12% from 9.5% a year ago. Eyecare grew 17.9% with margins improving to 10.5%.
CaratLane, the digitally-native jewellery brand, continued its impressive scaling — growing 42% year-on-year with EBIT margins improving to 13% from 11.8%. ICICI Securities notes that CaratLane’s growth was “led by omni-channel expansion and strong demand in studded jewellery, up 35% year-on-year.” With 24 new stores added in the quarter taking the total to 366, CaratLane is quietly becoming a meaningful profit contributor.
The emerging businesses segment — fragrances, women’s bags, and Indian wear — grew 14.9%, while losses narrowed from Rs 320 million to Rs 260 million. TEAL, the B2B engineering division, posted 67% growth to Rs 3.2 billion.
HDFC Securities highlights the overall non-jewellery performance: “Non-jewellery segment grew 20.5% YoY to Rs 19.8 billion, with margins up 174 basis points year-on-year to 9.6%.” These are businesses that do not depend on gold prices, and their steady improvement strengthens the investment case beyond the jewellery cycle.
The Retail Expansion Push
Titan is investing aggressively in physical retail. During the quarter, the company added 12 Tanishq stores (taking the domestic total to 545), 11 Mia stores (total 269), one Zoya store, and 24 CaratLane outlets. International expansion is gaining traction too, with two new Tanishq stores abroad and international jewellery revenue growing 83% year-on-year to Rs 10.6 billion.
The Damas Jewellery acquisition, completed at 67% ownership during the quarter, adds a significant international platform. ICICI Securities does not assign explicit value to Damas in its target price but acknowledges the strategic optionality it provides.
The Stock Take
HDFC Securities has maintained a Reduce at Rs 4,000, implying 50x March 2028 price-to-earnings. Despite revising FY27 and FY28 earnings estimates upward by 5-6% to account for higher revenue, the brokerage warns that “tough comparables courtesy of a high gold price base may weigh heavy on jewellery growth in FY27 and remains a key monitorable.”
At Rs 4,269, it seems tat a stock that is neither cheap enough for value investors nor growing fast enough in volumes to justify momentum buying. Besides, this is what ICICI Securities notes. “We remain cognisant of the fact that continued rise in gold prices could impact consumer behaviour and the business model.” And at 50x forward earnings, the margin for error is thin.
