Titan has decided to buyout balance 27.18% stake from the promoter of Caratlane, Mithun Sacheti.
- This will increase Titan’s stake in Caratlane from 71.09% to 98.28%.
- Titan had bought 62% stake in Caratlane seven years ago (2017) from US-based hedge fund and venture capital investor Tiger Global for about Rs 357 crore.
- The transaction then had valued Caratlane at around Rs 576 crore.
- Tiger Global had invested similar amount over the previous 5 years and hence was only able to get back it’s principal. No significant profit or loss.
- Titan is now buying 27.18% for Rs 4,621 cr i.e., a valuation of Rs 17,000 cr. This is almost 30x of the valuation in 2017.
- For ease of comparison – in FY16 (year preceding 2017 transaction) Caratlane’s revenues were Rs 141 cr. In FY 23, it has become 15.5x of FY16 at Rs 2,177 cr.
- Caratlane reported a PBT of Rs 119 crore during FY 23
Prima facie, at 8x of revenues and >100x P/E, it seems an expensive transaction. Guess, that’s the premium Titan is paying to buy out the promoters.
Besides, Titan itself is currently valued at 6.3x of trailing revenues and 85x of the trailing profits. That further would have helped Caratlane’s promoters negotiate a price based on the similar valuations, especially given the size difference and the higher possible future growth rate of Caratlane (vis-a-vis Titan’s core business).
Titan is reported to target the balance stake of 1.72% through buying out the employee ESOPs at a cost of Rs 340-380 cr