18
Aug
13

Opportunities in Titan Industries..

Titan Industries has been big wealth creator for its shareholders for past decade. Company had a dream run for last several years under Mr. Bhaskar Bhat and successfully created brands like Fasttrack and Tanishq. Titan is trying to model itself as lifestyle company and trying to build other brands in different product categories. Its Jewellery division is the major contributor to both topline and bottomline. But with recent regulatory changes, company is facing the heat and stock price fell sharply on Friday. As per RBI Wednesday circular, Jewellers like Titan have to make full payment for import of gold. Earlier Titan was buying gold on lease rather than payment full upfront amount. Now titan will have to take price risk and in case it chooses to hedge, it will have to incur some costs. Moreover its working capital requirements and interest costs will increase and return ratios like ROCE will come down. Titan balance sheet is clean and doesn’t has much debt so taking on extra debt shouldn’t be a problem. But in the short term, RBI measures to control INR slide has added another uncertainty factor for Titan shareholders to cope up with apart from consumption slowdown in the economy.

I was selling Titan Industries calls before RBI Wednesday circular. I had sold 310 & 300 calls aggressively. But after Friday’s fall I have squared off 300-310 calls and moved down to 280-290 calls. For protection, I have also bought 250 call. It’s a ratio spread – for every 250 call bought, I have sold ten 280-290 calls.

Disclaimer: Please take reasonable care while trading in options, especially while selling. I am not advising anyone to sell or buy options. My purpose of writing this blog is to highlight my trading strategies.

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