CRISIL reaffirms bank facility ratings of Titan

CRISIL has reaffirmed its ‘CRISIL AAA/stable/CRISIL A1+’ ratings on the bank facilities of Titan Company Limited (Titan) and withdrew its rating on the commercial paper on the receipt of request from the company. The withdrawal of rating is in line with CRISIL's withdrawal policy.

CRISIL expects Titan's operating performance to moderate in the fiscal year 2021 due to the impact of COVID-19 pandemic with normalcy returning in the fourth quarter. Operating income is expected to de-grow while, operating margins are expected to contract in fiscal 2021; on account of store shutdowns and drop in sales as a result of lower footfalls. Most of the products that Titan sells are discretionary in nature and consumers can delay buying them.

However, sales recovery by the first week of June (for the stores that were opened for four weeks) has been encouraging for the jewellery segment with average daily sales recovery of 80 per cent (pre-COVID level) for Tanishq. Recovery for other segments namely watches and eyewear has been subdued with average daily sales recovery of 44-46 per cent up to the first week of June 2020. Furthermore, Titan has opened nearly 1,400 of its 1,800 stores by early June 2020.

Rating note further added that the company's adequate liquidity, as indicated by a largely unutilised bank limit of over Rs 2,100 crore, will help mitigate any impact on cash flows in the near term.

Since the beginning of 2020 (January 1 till July 3, 2020), the stock of Titan Company has given an absolute return of -14.13 per cent. This is in-line with the broader market index Nifty. In the same period, Nifty has given an absolute return of -12.93 per cent. As of June 30, 2020, Titan Company has a weightage of 0.91 per cent in Nifty.