Titan takes over remaining 27.18% stake in CaratLane for Rs 4,600 crore, to hold 98.28% share now

Tata group company Titan has bought over the remaining 27.18 per cent stake in its jewellery arm CaratLane for Rs 4,621 crore in cash from the brand’s founder Mithun Sacheti and his family, the company said in an exchange filing on Saturday.

CaratLane is an unlisted private company engaged in the manufacture and sale of jewellery and is a subsidiary of Titan. Titan said that it was acquiring 91.90 lakh equity shares in CaratLane, following which it will hold 98.28% stake in the company.

Titan is likely to complete the acquisition of the additional stakes in CaratLane by October 31, 2023.

"This is to inform that Titan Company Limited (the Company) has entered into a Share Purchase Agreement today to acquire the entire 91,90,327 equity shares held by the Founder of CaratLane Trading Private Limited (CaratLane) and his family members representing 27.18% of the total paid-up equity share capital of CaratLane on a fully diluted basis," the company said.

The transaction will be subject to completion of customary regulatory approvals and closing conditions and is expected to be financed through a combination of cash balances, internal accruals and debt, Titan said, adding that only approval from the Competition Commission of India is needed.

For FY22-23, the turnover of CaratLane was Rs 2,177 crore. The transaction values the company at 7.8 times its FY23 sales, taking it to Rs 17,000 crore.

The deal has been pegged as the second-largest exit for an e-commerce founder in India after Flipkart founders Sachin Bansal and Binny Bansal quit and sold their stakes to Walmart.

On acquisition, the Company would hold an aggregate of 98.28% of the equity share capital and voting rights ( on a fully diluted basis) in CaratLane. The transaction will be subject to completion of customary regulatory approvals and closing conditions and is expected to be financed through a combination of cash balances, internal accruals and debt.

“We have great faith in the India consumer story and believe that the growth journey of CaratLane has only begun and has a long way to go. We thank Mithun Sacheti, founder and managing director of CaratLane for having jointly built a customer-centric brand that all of us in Tata Group can be proud of and wish him continued success in his future endeavours,” C K Venkataraman, MD, Titan, said.

“Looking into the future, there couldn't be a more ideal destination for CaratLane than Titan and the esteemed Tata Group who will provide the perfect opportunities for CaratLane to continue to grow from strength to strength. I whole-heartedly thank Titan as well as extend my heartfelt gratitude to colleagues, partners and million+ customers whose support and love has paved the way to our success and made it India's largest digitally native omnichannel jewellery brand. I wish CaratLane and all those associated with it many more successes in times to come,” Sacheti said in a statement on Saturday.

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.

Earlier it was reported that CaratLane’s takeover talks by the Tata Group had hit a roadblock over the pegged valuation. The remaining 27.8 per cent was held by the three CaratLane founders and some of its employees.

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. But it was rejected by the company.

Besides Caratlane, Titan's jewellery division has prominent brands such as Tanishq, CaratLane, Zoya and Mia by Tanishq. It had a revenue of Rs 31,897 crore for FY 2023, contributing around 88% of the turnover of the company.

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