Titan Industries and Timex Watches have announced an end to their five year long relationship, with Timex taking over the marketing, design, sale and service of its products from Titan.
The deal, forced upon the two partners by Timex dipping performance, also allows Timex Watches USA to hike its stake in Timex Watches Ltd (TWL) by buying out the stakes of Titan and other Tata group companies.
Timex Watches USA and Titan hold 28.5 per cent each in TWL. The deal will allow Timex US to progressively gain complete control over TWL.
In a statement released yesterday in Mumbai, Titan said the move recognises the organisational achievement and growth of TWL. The strategic alliance between Titan, TWL and Timex Watches will continue.
The details of the arrangements are currently being negotiated and substantial progress will be made by the end of the financial year, said the statement.
Titan Industries a joint sector partnership between the Tata group and the Tamil Nadu Industrial Development Corp (Tidco) and Timex Watches USA came together in the early 1990s to form TWL to focus on the lower end of the market. The gameplan was that Titan would focus on the price range of Rs 1,000 and above, while Timex would concentrate on the range below Rs 1,000.
Watches manufactured by Timex were marketed and distributed by Titan, with its large retail reach of 4,500 dealers and 60 exclusive showrooms. The strategy worked well for some time but long-term problems gradually cropped up.
Timex soon realised that Titans reach was not helping it to penetrate the rural sector, the main market for its watches. In other words, Titans distribution channel was just not geared to Timexs needs. The result was a fall in volumes, rise in input costs and an inventory pile-up. Volumes fell from two million units in 1995-96 to 1.6 million units in 1996-97, while realisations slipped to Rs 435.7 per watch from Rs 456.6 per watch.
Timex is now trying to correct this strategy and one of the obvious ways is to restructure its alliance with Titan.
Titan posted sales of Rs 408.51 crore in 1996-97 with a net profit of Rs 24.21 crore, down from Rs 27.6 crore in 1995-96. Operating margin was up slightly to 22 per cent from 21 per cent, while interest costs rose to Rs 56.4 crore from Rs 34.22 crore.
In the first half of 1997-98, Titans turnover rose 7.5 per cent to Rs 184.52 crore. Operating profit rose from Rs 43.15 crore to Rs 44.80 crore, while net profit rose from Rs 6.43 crore to Rs 6.61 crore.
Press Trust of India adds: Titan chairman A L Mudaliar, a Tidco nominee, has denied any move to replace the companys managing director, Xerxes Desai.
