“Take it from me, The Tata’s will never make Watches !!”

The above quote was made in September 1982 to Minoo Mody, then CEO of Tata Sons by Arun Ghosh, Secretary of the Ministry of Commerce when the Tata’s applied to make watches. Today, with a market value of 120,000 Crores and revenues of 20,000 crores, Titan is one of the world’s largest watch makers and the Tata Group’s biggest consumer company.

In the midst of our festive season, it seemed appropriate to read about the history of Titan, through a wonderful book, “Titan – Inside India’s Most Successful Consumer Brand”. Written in 2018 by Vinay Kamath, this book covers the history of Titan in a wonderful manner and makes for fascinating reading. If management styles, marketing, consumer brands, leadership are areas of interest to you then do take time out to read the book.

As investors, we are always on the lookout for high quality companies. We would like to share some of the interesting learnings from the anecdotes in this book. Please note that this article is not a stock recommendation for Titan and the points are for our learning in our quest to identify quality companies.

What we can learn from Titan’s success

Passionate Management never gives up –It took a decade to move from an Idea to Production.  Xerxes Desai, the founding CEO of Titan joined Tata Press in 1975 and his colleague Anil Manchanda suggested making watches in March 1977. However, it took a full decade before they could convince the Tata group, get government approvals, find a suitable technical partner and overcome a host of challenges to start production of watches in February 1987 (an exact decade !!). The entire team never gave up over a decade

– Titan happened because of one man – J.R.D Tata. In the 1980’s the Tata group had several strong leaders including Russi Mody (Tata Steel), Darbari Seth (Tata Chemicals) and Ajit Kerkar (Indian Hotels). They were all skeptical whether the team could execute this project. In fact the veteran director Nana Palkhivala, begged the team to give up the project!! The numbers did not add up. JRD had trust in Minoo Mody and asked him to go ahead

Aesthetics and Design matter– Xerxes’ attention to detail changed watch and store retail in India.With every great brand design and attention to detail matters. On a limited budget, the role model for Titan was European showrooms and their shop layouts, lighting and usage of space changed the way watches and jewellery were purchased in India

Related Diversification– Tanishq jewellery is many times bigger in revenues than Titan watches. While Titan started out making watches, they have started related business lines like Tanishq (Jewellery) and Titan Eye care (Eyewear) which have become market leaders over time. The next phase of that journey is with Skinn (Perfumes), Taniera (Saress). The challenges Tanishq faced in entering the Jewellery market deserves a book by itself

Technology and Research matters– Titan made the slimmest watches in the world. While Titan was started in collaboration with a French watch maker and with equipment from Switzerland and HMT, Titan made big investments in research and technology. Not every technical innovation succeeded. But innovations like the Karatmeter (in Jewellery) made Titan stand out

Policy restrictions do not stop great companies– Tata group faced multiple policy issues.In September 1982, Arun Ghosh, the Secretary of the Ministry of Industry met Mody for only two minutes and told him that the Tatas would never be allowed to make watches. That was only for small scale industries and public enterprises. They were asked to source chips from National Physical Labs (NPL), a government firm in Delhi. There were quotas for quartz and analogue watches. Titan refused to compromise in any of the areas and found innovative solutions.

Successful public private collaboration is possible– TI stands for Tata Industries and TAN for Tamil Nadu. Titan is a joint venture between the Tata group and the TIDCO (Tamil Nadu Industrial Development Corporation). There has been no equity dilution and the JV has endured over the years.

Learnings for Investors

• Great brands take time and are enduring– We have several global brands like Unilever and ITC in India, which have also delivered handsome stock returns for investors over decades. Building such brands takes time and once it is built, they form an enduring moat. Such quality does not come cheap, and we should take advantage of temporary market events to get exposure to them (e.g. Maggi incident for Nestle)
• Our Shopping basket has great stock picks– The great investor Peter Lynch used to point out several outstanding stock ideas he got from the regular shopping for his family. Titan is a great example – we would have all heard and possibly used Titan products. Even if we had picked up the Titan stock 10 years back (when it was a 20+ year old mature brand), we would have got a 20 bagger. Rakesh Jhunjhunwala brought 6 crore shares of Titan in 2002-03 at Rs 3 per share (as per media). The value of his holdings in Titan is more than 7000 crores. The question is how many retail investors have held on to the stock
• Believe in the India story– High quality firms and brands have been successful in India over the past decades, riding the consumer boom and overall economic growth. Despite the media hype and cyclical challenges, we have a structural growth story unfolding over the next decade. As equity investors, we need to invest in quality portfolios and be patient over time