Ace investor Rakesh Jhunjhunwala may have lost Rs 715 crore after shares of Titan Company tumbled nearly 10 per cent following disappointing Q2 earnings. Billionaire investor and his wife Rekha together hold nearly 5.77 crore shares or 6.51 per cent stake in the company at the end of the September quarter, as per the data available with the exchange.
The maker of Titan watches and Tanishq jewellery on Tuesday reported lower-than-expected earnings for the September quarter, dented by subdued performance in jewellery business. The jewellery and watch manufacturer reported a marginal growth of 1.8 per cent in standalone net profit at Rs 320.16 crore for the second quarter ended September 30, 2019, as compared to Rs 314.38 crore in the same quarter last year. The total income rose marginally by 0.7 per cent to Rs 4,466 crore in Q2FY20, from Rs 4,434 crore in Q2FY19.
Weighed down by disappointing Q2 results, Titan Company share price declined as much as 10.45 per cent to hit an intraday low of Rs 1,150 on the Bombay Stock Exchange (BSE). The stock opened sharply lower at Rs 1,160, against previous close level of Rs 1,283.85, and closed 9.96 per cent lower at Rs 1,156 apiece. Titan Company investors lost Rs 11,350 crore in wealth on Wednesday.
At Tuesday's closing price, Jhunjhunwala's shares worth was around Rs 7,414 crore which declined to Rs 6,699 crore (at Wednesday's intraday low level), which left him poorer by 714 crore. In a bid to realise the loss, Jhunjhunwala will have to sell his stake in the company.
Reduction in growth guidance of jewellery business in wake of the subdued market and consumer sentiments led to negative sentiments around the stock today. Jewellery growth guidance was trimmed to 11-13 per cent from 20 per cent after the jewellery business posted revenue of Rs 3,528 crore as compared to Rs 3,582 crore last year, amid higher gold prices.
High gold prices have posed a challenge for Titan in the last few months. On August 29, gold price hit all-time high of Rs 40,220 per 10 grams, according to the All India Sarafa Association.
Analysts at JM Financials have recommended Titan to 'HOLD' with a target price of Rs 1,145, taking into account the company's decision to lower jewellery growth guidance for FY20. The brokerage expects the stock to react adversely to this result.
"We also suspect that a section of the Street could again start to worry about structural issues for the jewellery business ("millennials do not like to wear gold jewellery the way their mothers did"), as is typically the case whenever there is a cyclical downturn in an otherwise high-growth category," JM Financials said.
The agency, however, recommended ignoring such noise whenever they arise and to instead use them as opportunity for entry once the stock has fallen enough to reflect a saner valuation and the lower near-term earnings trajectory.
Edited by Chitranjan Kumar