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TCS is the most valuable company of Tata Group. But which one comes at number two? Tata Motors, not Tata Steel. At number two comes Titan company whose market valuation today is more than Rs 3.5 lakh crore. Titan generates revenue of around Rs 600 crore every year. And the most interesting thing is that more than 80% of their revenue does not come from watches but from their jewellery brand Tanishq.
But do you know that Titan was not started by Tata Group alone. Tamil Nadu Government company TCO still holds about 28% stake in it and there was a time when Titan had a debt of more than Rs 500 crore. International expansions were failing and the Kanishka brand was almost about to sink and no one was ready to invest even a single rupee in it in the stock market.
But then Rakesh Jhunjhunwala enters. When big global joints like Morgan Stanley were dumping 90 lakh shares in the market. Even then Gul started picking up Titan shares at the price of Rs 32. How an Oxford educated corporate leader, Seksus Desai, broke the monopoly rule of HMT. How a German machine worth Rs 10 lakh changed the face of the entire Indian jewellery market.
And how Rakesh Jhunjhunwale executed India's most iconic stock market bet . Let's begin this thrilling case study of Titan. The story begins in the 1970s and 80s when there was the era of license raj. At that time, there was only one king of wrist watches in India, HMT Hindustan Machine Tools. This HMT, built during Nehru's time, was called the timekeeper to the nation.
Be it marriage, retirement or graduation in India. It was mandatory to gift HMT's Janta or Kohinoor watch. But there was a problem. HMT had become a government monopoly. The demand was in lakhs but the supply was in thousands. To get a watch, people had to wait for months. And at the same time, Sexus Desai enters.
Sextus Desai was educated at Oxford. He had also been an executive in the Tata Administrative Service. He had earlier modernised the Taj Hotel and, in collaboration with architect Charles Correa, built the entire township of Navi Mumbai. On March 21, 1977, at exactly 10:00 pm, he received a call from Anil Man Chanda, an associate of Sexis Desai.
He said that I have shortlisted five stocks for Tata Group and the biggest opportunity in them is watches. But the problem was that under the license raj, it was almost impossible for private companies to obtain a license to manufacture watches. And because HMT was protected. Tata sought permission from the Central Government for 8 years.
But his application was rejected every time. Then Sexius Desai found one such master stock loop hole. He formed a joint venture with PIDCO i.e. Tamil Nadu Industrial Development Corporation, a Tamil Nadu Government agency and since it was a state government joint venture. So the Central Government could not stop this project and in 1984 Titan Watches was born.
So now that Titan was born, where did Sexius Desai set up his first factory? Hojor in Tamil Nadu. There was a great strategy behind choosing Hozur. Hosur fell in Tamil Nadu which fulfilled the mandate with the Tidaks. But Hosur is just 40 km from Bengaluru. Was far away. And guess who had their headquarters in Bor?
Yes, in 1986, Titan directly called 350 precision engineers of HMT and said come brother and in one go Titan got decades of experience and for the assembly line they recruited young local women from the villages of Krishnagiri and Namak Kala and trained them in precision assembly. Along with this, he struck at the weak point of HMT by introducing Quads technology.
If understood in simple concept, HMT used to make old mechanical hand watches which had to be wound every day and then they used to run the whole day. If you are a minium, then you must have seen your grandfather's watches and they brought the Quads technology in which a small battery was installed and along with it was a Quads crystal.
If the Quads crystal received even a little electricity, it would vibrate exactly 32768 times. There was no hassle of winding the key and its accuracy was 10 times more than a mechanical watch. When Swiss manufacturers refused to provide technology to India, JRD Tata himself spoke in French and formed an alliance with the French company France Ebauche and introduced the Quads Revolution in India.
Titan transformed the watch from a mere time-telling device into a fashion statement, and with the introduction of the iconic sound of Mzar's famous sfini No. 25, HMT soon began to disappear from the market. Titan became the watch key of India. Now after winning in Watches, Saxus Desai took the next big step in 1994 with Tanishq.
But initially Tanish was a total disaster. Tanish set up a state of the art export factory of 18 carat European fashion jewellery in Hojor. But he made a big mistake in understanding the psychology of the Indian consumer. In the western market, people used to wear 18 carat jewellery as a fashion and style.
But in India, gold is not considered a fashion but is considered the biggest financial security of the family. Indian women did not want 18 carat fashion but they wanted 22 carat pure solid gold wedding jewellery and the 18 carat export designs completely flopped in India. Tennis showrooms remained empty.
Titan had also launched another master plan to sell watches in Europe and that too failed miserably. By 2001, Titan had a debt of more than Rs 500 crore. Management consultants were saying that Tanishq should be closed otherwise it will destroy Titan. Now let's come to its next chapter. In 2002, Titan had a new MD named Bhaskar Bhatt and his jewellery head Jacob Curreman decided that we will not close the brand but will bring out the bitter truth of the Indian jewellery industry.
At that time, a dark reality was hidden in India's unorganized jewellery market. Local goldsmiths used to claim that they were providing 22 carat gold. But when testing was done, it was found that only 18 to 19 carats were coming out. And the worst thing was that the customer did not even know that so much adulteration was taking place in his hard earned money.
So at this time Tanishq imported one carat meter machine worth Rs 10 lakh each from Germany. This machine used X-ray fluorescence technology. It would tell the exact purity of gold within 3 minutes without cutting or rubbing it. And then what? Tanishq has started a nationwide challenge ad campaign. And he said that you should bring your ancestral gold and get it tested for free in our showroom and when people came to know about this, the women of the house brought their old ancestral gold and when the women got their old jewellery tested, they were shocked.
The gold which they thought was 22 carat gold turned out to be 18 to 19 carat. The local jewellery market had caught fire. Local players started boycotting Tanish. But customers' trust in Tanishq remained forever. Tanishsh launched the 22 carat standard in the entire Indian jewellery market. And then within a few years, sales started increasing by 30 to 40% year after year.
Now let's come to the most thrilling financial twist of this story. During the period 2002 to 2003, Titan was struggling with its debt and labour dispute at the Hosur factory. Titan was then considered a failing stock on the broker script. And at that time there was a broker named Daki. He goes to Rakesh Jhunjhunwala's office in Mumbai and Daki tells him that he has a Titan block worth Rs 5 lakh.
The current price in the market is Rs 34. I will get it for you in 32. So Jhunjhunwala thought and then called Lakshit, his financial partner. Lakshit said directly, brother, don't buy this even by mistake. Global bank Morgan Stanley is holding 90 lakh shares of this and is dumping them in the market.
People will throw all these shares at your house. But was Jhunjhunwala going to agree ? He was a big bull and he was a big bull for a rezri. Jhunjhunwala thought against the entire institutional herd. He straightaway started a 3-hour meeting with Titan's new MD Bhaskar Bhatt. Bhaskar Bhatt did not say anything absurd.
He said bluntly that look the company is in trouble. But Tanishq Unit Economics and Indian Retail have tremendous faith in them and this could be their turnaround story. So Jhunjhurwala noticed two things here. Supply shock versus brand demand. The sale of Borgen Stanley was a temporary sale. That was not going to have any impact on the underlying business.
And the second point was the Gold on Lease model. Tanishq used to take gold on lease from the bank. This means that the risk of increase or decrease in gold was borne by the bank. Tanishq made profits only on making charges and volumes. So, after noting these two things, Jhunjhunwala started aggressively accumulating Titan shares.
And what was the result? Those shares which were bought in 2002 at the price of ₹32, are now at the level of around ₹3 to 4000. His initial investment of around Rs 506 crore became a multibagger wealth empire worth over Rs 300 crore in the coming years. So friends, this was the story of Titan. How a bicycle part and a new technology uprooted HMT in the era of state monopoly and how a carat meter worth Rs 10 lakh transformed a sinking company into the biggest king of India.
Three biggest business lessons emerge from this case study. The first is the underdog advantage. Do n't be cheaper or better when the competition is fighting on old technology. Just change the paradigm like they did by bringing quartz technology. The second is Trust is the Ultimate Mode. Where the market is unorganized, make transparency a marketing weapon.
Like it was in their carat meter strategy. Third was Contrarian Conviction. Identifying and holding real business and management integrity when the market is dumping in panic is what creates real wealth. If you enjoyed this deeply researched business documentary, please like it. If you want part two of this then comment part two.
Where we will see Titan build the Cassest Track and Carrot Lane. Like the video and don't forget to subscribe to the channel. I'll see you in the next video
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