IN EVERY RELATIONSHIP TITAN COMPANY LIMITED ANNUAL REPORT 2017-18 Announcement We are taking our first steps to move ANNUAL REPORT to Integrated Reporting in line with our continuous commitment to 2017-18 voluntarily disclose more information to our stakeholders on all aspects of our business. Accordingly, we have introduced key content elements of Integrated Reporting <IR> aligned to the Integrated Reporting Council Framework (IIRC) and as per SEBI’s circular dated 6 February 2017. We will add more IR content elements over the years as we move towards a complete <IR>. It is possible that some IR related data Contents are management estimates. Reporting Principle Financial Statements About TItaN The financial and statutory data presented in this Report is in line with 02 Financial Highlights Standalone Financial the requirements of the 03 Operating Context Statements Companies Act, 2013 (including 04 The Titan Journey 116 Independent the Rules made thereunder), Indian 06 Titan Today Auditor’s Report Accounting Standards, the Securities 08 Business Review 112 Balance Sheet and Exchange Board of India 18 Journey towards 113 Profit & Loss Account (Listing Obligations and Disclosure Integrated Reporting 115 Cash Flow Statement Requirements) Regulations, 2015 and 26 Engaging with 117 Significant accounting the Secretarial Standards. our Stakeholders policies 28 Outlook and Opportunities 130 Notes to Financial The non-financial section of the Report 30 People and Culture Statements is guided by the framework of the 31 Leadership Development International Integrated Reporting 32 Purity of Intent Consolidated Financial Council (IIRC), Securities and Exchange Statements 34 Board Of Directors Board of India and Principles of 130 AOC-1 36 Awards National Voluntary Guidelines on 169 Independent Auditor’s social, environmental and economic Report responsibilities of business. Statutory Reports 174 Balance Sheet 175 Profit & Loss Account 178 Cash Flow Statement 38 Notice of 34th AGM 180 Significant accounting 48 Board's Report & policies Annexures 192 Notes to Financial 78 Management Discussion Statements and Analysis 192 Financial Statistics 87 Corporate Governance Report 105 Business 192 Attendance Slip and Responsibility Report Proxy Form Integrity - The new Corporate Office in Bengaluru About this Report This report combines the INTEGRITY at Titan underscores Annual Report with key elements of Integrated every aspect of our many Reporting <IR> framework laid down by IIRC. Our relationships. Emanating from focus has been on a holistic evaluation of how we create the deeply ingrained TATA and sustain value using financial as well as other non- Ethos, integrity permeates financial capitals. We have used simple infographics to every stakeholder group. illustrate the value creation process through our business model and demonstrated the FROM CUSTOMERS relationship and interlinkages of various inputs under each capital with outputs TO KARIGARS and outcomes. Key Reporting Topics FROM INVESTORS under IR Being our maiden attempt TO associates at Integrated Reporting <IR>, we have explained the two fundamental <IR> concepts of value creation FROM EMPLOYEES using the six multiple capitals. The <IR> content TO COMMUNITIES elements we have highlighted separately are Overview and Context, Performance Every person, every activity and (including individual business performance), Business Model every relationship at Titan starts and Strategy. Other <IR> content elements with the purity of intent and like our engagement with key stakeholders, risks, endures with commitment governance, CSR and environmental initiatives to fairness. are further explained in the statutory section of the Annual Report under topics like Management Discussion and Analysis (MDA) and Board’s Report as well as Business Responsibility Report. Annual Report Titan Company LIMITED 17-18 FINANCIAL HIGHLIGHTS Revenue EBIDTA PBT `15,656 Cr. `1,782 Cr. `1,662 Cr. `12,999 Cr. `1,164 Cr. `1,130 Cr. 2016-17 2016-17 2016-17 PAT ROCE ROE `1,163 Cr.* `35.1% 24.5% `. 762 Cr. `29.2% 19.4% 2016-17 2016-17 2016-17 EPS Dividend Net Worth `13.10 `333 Cr. `5,194 Cr. `8.58 `231 Cr. `4,312 Cr. 2016-17 2016-17 2016-17 M Capitalisation CSR Spend Employee Volunteering `83,656 Cr. `23.44 Cr. 8,000 Hours As on 31st March 2018 `41,082 Cr. As on 31st March 2017 * PAT and ROE after VRS cost of ` 100 Cr. 02 / 236 Overview OPERATING CONTEXT The Indian consumption story continued to gather FOR Titan, THE operating CONTEXT momentum during the year. Buoyed by 6.7% growth in GDP, India’s affluent middle class and aspirational youth are the key FOR THE YEAR was EXTREMELY POSITIVE. drivers of the impressive and increasing Indian consumption ALL THE KEY BUSINESSES OF THE trajectory. Long-term reforms like the implementation of the Company DELIVERED AN EXCEPTIONAL Goods and Services Tax (GST) are in line with formalisation of the economy as they create a unified marketplace for the PERFORMANCE. TWO OF OUR BUSINESSES first time. HAD A STERLING YEAR; THE watcHES India today is home to over 245,000 dollar millionaires BUSINESS HAD AN IMPRESSIVE DOUBLE- and has over 400 million millennials, who are set to triple DIGIT GROWTH WHILE THE JEWELLery consumption in India to US$ 4 trillion by 2025. As the Indian BUSINESS RECORDED ITS consumption story unfolds, there are interesting themes that are emerging: BEST PERFORMANCE EVER. OTHER BUSINESSES CONTINUED TO STRENGTHEN AND GROW. US$5 India’s household Trillion wealth 12 % India’s YoY nominal expenditure growth rate compared to global rate of ~5% Rural consumption 97% from e-commerce India’s villages are electrified 15 % Source: BCG, Credit Suisse, Morgan Stanley, IMF, Industry data 03 / 241 THE TITAN JOURNEY THE Titan JOURNEY BEGAN WITH SMALL BUT CONFIDENT STEPS IN 1984 AS A JOINT VENTURE BETWEEN THE TATA GROUP AND TAMIL NADU INDUSTRIAL DEVELOPMENT Corporation (TIDCO). Started WITH AN OBJECTIVE TO create WORLD CLASS watcHES FOR EVery INDIAN, Titan today IS THE FIFTH LARGEST integrated watcH MANUfactURER IN THE WORLD. In 1995, Titan launched its jewellery business. In a short span of two decades, Tanishq has become India’s most trusted brand, renowned as much for its elegance and design as for its authentic quality and craftsmanship. Titan continued its journey entering more lifestyle categories like eyewear (Titan Eyeplus), accessories and fragrance (Skinn). The latest foray is a natural extension of the Titan value proposition: design, lifestyle and self-expression, with handcrafted sarees by Taneira. 04 / 236 Our Vision WE create ELEVating EXPERIENCES FOR THE PEOPLE WE TOUCH AND SIGNIFICANTLY impact THE WORLD WE WORK IN. Our Mission WE WILL DO THIS THROUGH A PIONEERING SPIRIT AND A CARING, VALUE-DRIVEN CULTURE THat FOSTERS INNOVation, DRIVES PERFORMANCE AND ENSURES THE HIGHEST GLOBAL standards IN EVerytHING WE DO. Our Values and Standards Total Customer Orientation Customers take precedence over everything else, always. Employee Appreciation We value and respect Titanians and endeavour to fulfil their needs and aspirations. Performance Culture and Teamwork At Titan, high performance is a way of life and is nurtured by teamwork. Creativity and Innovation Driven by innovation and creativity, we thrive on questioning the status quo and investing in current technologies. Passion for Excellence In all our pursuits, we ceaselessly strive for excellence. Corporate Citizenship We ensure that a part of our resources are invested in the betterment of the environment and community, in general. 05 / 236 Annual Report TItaN COMPANY LIMITED 17-18 TITAN TODAY 5th `83,656 Cr. `15,656 Cr. 4 times largest Market cap Annual revenue In Forbes Asia integrated As on 31st March 2018 For FY 2017-18 fab fifty watch maker in the world 1,480 11k+ 6,856 15 Strores with Multi-brand Employees on rolls Brands of 1.9 mn sq ft outlets that sells which 11 are in retail space our watches the mid-market segment Key Strengths and Differentiators Design and Development Brand Building 800+ New products every year Titan: 5th largest integrated watch Reach and Presence 2 Edge Watches awarded the maufacturer Red Dot award Sonata: India’s largest selling in India watch brand Differentiated Jewellery 1,480 EXCLUSIVE Collections Fastrack: India’s largest youth brand STORES IN 276 CITIES/ Customized lenses with 3D Tanishq: India’s leading TOWNS spanning visual mapping Jewellery brand Raga: Exclusive watch brand for OVER 1.9 MILLION Manufacturing women SQ FT OF retaiL space 12 Manufacturing and Skinn: India's leading Fine Fragrance assembly facilities brand State-of-the-art Karigar Centres Retail and Customer Service for Jewellery Exceptional Customer Experience Suppliers of watch components to Swiss customers Merchandising Effectiveness 3,600+ employees engaged Impactful Retail Identities in factories Engagement of Store Staff Machine Building and Automation Extensive After Sale Service Network 06 / 241 Overview Our Brands Luxury Premium Mid Market Mass Market The Indian consumption story being one Licensed Brands of the world’s most compelling; Titan is committed to cater to this demand. With over Tommy Hilfiger 15 lifestyle and aspirational brands, a pan- Police India reach and presence of 11,000 consumer FCUK touchpoints, state-of-the-art integrated Annie Klein manufacturing, cutting-edge in-house design and innovation, every Titan product is created Kenneth Cole with purity of intent, thoughtfully designed Esprit and manufactured with ethically sourced materials and sustainable processes. WHERE ELEGANCE MEETS EXCELLENCE, DESIGN MEETS INNOVation AND Transparency MEETS TRUST – THIS IS WHat differentiates Titan. 07 / 241 Annual Report TItaN COMPANY LIMITED 17-18 BUSINESS REVIEW Jewellery Business The jewellery business of Titan started in 1995 with the launch of the brand Tanishq. Tanishq quickly emerged as a flagship brand and was an immediate success that redefined the highly fragmented Indian jewellery market by offering products that were premium by design with a strong value proposition in terms of pricing. Tanishq today is synonymous with trust, purity, style and design. The jewellery business multiplied the Tanishq success with both brand and reach expansion.