Titan Company Limited: Return, Risk and Financial Performance in Jewellery Sector

Titan Company Limited (Titan), one of the largest companies in the gems and jewellery sector, derived roughly 80 per cent of its revenues from the sale of jewellery. Jewellery buying was discretionary and prices were largely dependent on the price of gold. In India, jewellery sales were also seasonal, with a spike in demand during annual festivities and traditional events like marriages. A research analyst intern has been tasked to analyze Titan’s finances from 2014 to 2022. She had already completed a DuPont analysis, which is presented in the case, and now she must analyze the stock’s return and risk to help investors better understand whether Titan with its heavy dependence on jewellery sales is a wise investment. Interestingly, the analyst discovers that as Titan’s reliance on jewellery sales increased, its overall risk dropped. Students thus have an opportunity to also consider what other factors, such as a strong business model, good financials, and customer-friendly policies, contribute to the risk–return paradigm.

The case serves as a primer to understand the risk–return paradigm, offering different computations of returns and risk and bifurcation of the total risk into systematic and unsystematic parts. The case is suitable for MBA-level courses on foundations of corporate finance or security analysis. This case is also suitable for in-house company training, investors’ training, and management development programs for practitioners because it offers extensive calculations using Microsoft Excel with basic derivations. Upon completion of the case and assignment questions, students will be able to: <ul><li>Decipher the logic of using simple compounding and continuous compounding returns.</li><li>Understand the computation of returns and risk using the stock price data.</li><li>Examine the stock returns generated by a firm.</li><li>Assess how the firm’s business risk relates to the total risk derived from the stock price.</li><li>Evaluate whether organizations that depend on the discretionary product segment show an increased total risk as mirrored in their stock prices.</li><li>Explore the underlying model (market model or the single index model) to derive the systematic risk component (i.e., beta analysis).</li><li>Understand the performance of a stock before and after it is included in a benchmark index.</li></ul>

• Financial Performance
• Risk
• Beta
• Sustainability