Titan's total takeover bid for CaratLane hits roadblock on differences over brand valuation: Report

CaratLane’s takeover talks by the Tata Group have hit a roadblock. The founders of CaratLane, which is India’s largest digitally native omni-channel jewellery brand, and the Tata Group have differences over the valuation of the residual stake held by the founders, leading to a months-long deadlock, a report in The Economic Times claimed.

Since 2010, CaratLane has been in a strategic vendor relationship with Titan’s jewellery brand Tanishq. Between 2016 and 2019, Titan increased its stake in jewellery retailer CaratLane to 72.30 per cent by infusing Rs 99.99 crore. The investment was done through a secondary purchase of shares from tech-focused hedge fund Tiger Global.

The remaining 27.8 per cent is held by the three CaratLane founders as well as some of the employees.

The report said that as the talks between the two groups have been inconclusive, the matter has been forwarded to Tata Sons chairman N Chandrasekaran in a bid to resolve the situation quickly.

A Titan official quoted in the report said that as Titan is a listed company, it has to follow certain market guidelines, whereas entrepreneurs want quick solutions.

Titan had signed a share purchase agreement with CaratLane under which, starting from 2021, it had an option to call for the remaining 28 per cent stake.

As per the pre-agreed formula, remaining shareholders too have the right to have a put option on Titan for their stake starting from 2023.

To determine the value of the jewellery brand, both the sides had an option to appoint a banker of their choice for a third-party independent valuation. After the valuation, the average of the two would be considered, agreed by both the sides. There was no arbitration clause to resolve disputes.

Earlier this year, Titan roped in Bank of America to evaluate the residual stake. In March, BofA submitted an offer that valued the entire company at Rs 6,000-7,000 crore, which is about Rs 1,680-1,960 crore for the founders’ stake.

CaratLane founders have reportedly turned down the offer as it was much too low. Avendus, the founder’s banker didn’t participate the in the valuation exercise.

Titan and Tata Group officials have been trying to re-engage with the CaratLane founders and banker to seal the deal, and also the revised offer to a Rs 15,000 crore valuation.

CaratLane, which designs, manufactures, trades and retails gems and jewellery online and through physical stores, was floated in September 2007 by Mithun Sacheti and Srinivasa Gopalan.

Despite a slowdown in customer sentiment towards the end of the Q4 FY23, CaratLane delivered a revenue of Rs 571.24 crore for the year 2022-2023 and EBIT at 6.9 per cent. The brand searches have grown over 60 per cent in the year. The silver business Shaya closed Q4 INR 8.4 Cr with 50% growth over the previous year.

The company saw a record 47 new store additions in the March quarter, taking the total to 222, with a spread in 88 cities.

Also read: Zerodha’s Nikhil Kamath youngest, 4th Indian to join Giving Pledge; commits to give away majority of his wealth

Also read: Days after horrific triple train tragedy in Odisha, 101 bodies still unidentified; 200 being treated