This Rakesh Jhunjhunwala stock not hot enough? Market guru roasts management
Rakesh Jhunjhunwala along with his wife Rekha Jhunjhunwala bought 1,07,000 additional shares in Titan in the March quarter to raise their holding in the jewellery firm to 7.51 crore shares, or 8.46 per cent stake. It was 7.50 crore shares, or 8.45 per cent stake, at the end of December quarter.
This stock has been hot for a long time, but it has still left Rakesh Jhunjhunwala unimpressed. And the ace investor did not let this opportunity to grill the management of the company. In fact, the managements of many of the companies he invests in run scared of his reactions to their actions, especially those which comprise a major part of his portfolio. So, this time on his radar was none other than Titan Company. In a conference call with the management of Titan Company, Rakesh Jhunjhunwala asked some hard hitting questions from the honchos involved.
Jhunjhunwala along with his wife Rekha Jhunjhunwala bought 1,07,000 additional shares in Titan in the March quarter to raise their holding in the jewellery firm to 7.51 crore shares, or 8.46 per cent stake. It was 7.50 crore shares, or 8.45 per cent stake, at the end of December quarter.
On bonus and gratuity, Jhunjhunwala asked, “is the bonus that you provide one-time? The gratuity to employees is one-time, I understand. Where is the dividend in respective businesses?” he asked.
The management explained that the bonus is done one-time and it depends on performance and it is only a practice, not a policy.
"It is not part of the CTC, what happens is when we perform way above our own internal plans, this is something which is then shared with the employees. Therefore, from that perspective, it is a one-time for the quarter, that is the point, it does not get amortized over the years, it is given at the end of the year. If it is much above its budget, then you debit it to the respective businesses That is what we have done," said management representatives.
Rakesh jhunjhunwala highlighted that the company's margins from watches in the March quarter came in at 7.11 per cent against 15.5 per cent reported in the December quarter. "Since there was hardly a drop of 8 per cent and the margins were up by 7 per cent, was there some one-time expense correction mentioned?," asked Jhunjhunwala.
"We had one exceptional thing in Q4, which is the stockists, we corrected them, we sort of rationalised it, this is one-time," the management clarified.
"There was no cost involved because we reversed the sale. we took back stocks from RS, because we are consolidating them into other RS, we did not sell to them and therefore there is a drop in sales," they explained further.
Titan Company wrote off Rs 75 crores in the March quarter for an investment it made in Favre Leuba. Jhunjhunwala checked with them how much the company proposes to write off in the coming quarters.
The management said it does not expect to write off any further, adding they have been conservative in the accounting. The management further said that the company would continue to invest for five years.
Dissatisfied with the answer, Jhunjhunwala asked how much they intend to invest and what business plan they have.
"First of all, in the consolidated accounts, anyway it is all expensed off. The brand was bought at some Rs 8 crores. These are all losses that have occurred in that business during the last four years actually and we thought fit to impair," Bhaskar Bhat, Managing Director, Titan clarified further about impairment for Favre Leuba.
As of now, the company has a magnitude of Rs 200 crores to invest. Out of which, the company has already invested Rs 145 crore. It will invest another Rs 55 crore and then take a decision to make larger investments.
Such grilling is usually not expected from investors, but that did not stop Jhunjhunwala. However, the notable part is that he has been able to extract information into the public realm from management at the highest level. That is a major plus point for investors.
Titan share price has rallied over 100 per cent in the last one year. By comparison, Sensex gained just 14.73 per cent during the same period.