Titan acquires additional 27.18% stake in CaratLane; what brokerages are saying

Shares of Titan jumped nearly 1 percent in early trade on August 21, post the announcement of a share purchase agreement to acquire equity stake in CaratLane.

At 11:51 am the Titan Company stock was trading 0.44 percent higher at Rs 3063.12 on NSE.

Details about the deal

The jewellery-watch-to-eyewear maker has entered into a share purchase agreement to acquire additional 27.18 percent equity stake in CaratLane Trading from its founder and his family members, for Rs 4,621 crore in cash according to a filing with BSE on August 19.

CaratLane is a subsidiary of the company and on completion of the aforesaid share purchase, would result in an increase in shareholding of the company in CaratLane from 71.09 percent to 98.28 percent on a fully diluted basis.

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Brokerage Views

Brokerage firm Macquarie has assigned a ‘outperform’ rating to the Titan stock with a target price of Rs 3400 per share. The brokerage firm further stated that it “likes attractive valuations for stake increase and continuation of most of key management team.”

Further, “to factor higher interest expenses the firm has cut FY24/25/26 standalone earnings per share (EPS) by 2%/4%/3% respectively.”

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HSBC has given a ‘buy’ rating to the Titan stock with a target price of Rs 3580 per share. The brokerage firm further stated that the company acquires founders remaining 27.2 percent stake in CaratLane for Rs 4,620 crores. CaratLane is an omni-channel jewellery retailer, that has turned profitable in FY21. CaratLane’s valuation increased 30x under Titan’s ownership.”

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JPMorgan has given an ‘overweight’ rating to the Titan stock with a target price of Rs 3260 per share. The brokerage house further stated that, “CaratLane is a high-growth business with opportunity to ensure healthy revenue and margins. The transaction will be EPS dilutive in short-term.”

CLSA has assigned an ‘outperform’ rating to the Titan stock with a target price of Rs 3270 per share. The brokerage firm further stated that, “the move highlights focus of Titan on building CaratLane as an integral component of jewellery business. The acquisition is unlikely to have a material impact on earnings.”

Stock Performance

Titan stock has given a return of 2.54 percent over the last one month and has outperformed the benchmark Nifty50 index which has lost 2.20 percent of its value over the same duration.

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