Sparkling Stocks
Globally, sales of a wide assortment of luxury items are booming, evident from the magazines devoted entirely to seducing the connoisseur of such artifacts and recording 5 per cent growth in 2017 as people from all walks of life, young and old see fatter wallets.
The global trade war notwithstanding, luxury and exclusivity command enormous interest across the world. Aggregate net sales of luxury goods top $217 billion for the top 100 companies in the world, according to a Deloitte report, Global Powers of Luxury Goods, 2018.
The wealth effect, in fact, is rocketing luxury stocks into stratospheric regions. In the past one year, the S&P Global Luxury Index, comprising 80 of the largest publicly-traded companies, surged 11.75 per cent. This index tracks some of the largest luxury companies globally such as LVMH-Moet Vuitton, Diamler AG and Tesla, among others.
While India is known for its age-old love affair with luxury—witness the erstwhile Mughals (the Peacock Throne), the Maharjas, the Nizams, and others), it was more known for its voraciousness for exotic jewels and elaborate apparel and finery. In 1926, Cartier, the iconic jewellery house, created the ‘Patiala necklace’ for Maharaja Bhupinder Singh, which flashed 2,930 diamonds, including one of the world’s then seventh-largest DeBeers’ diamonds.
Indians are also known to splurge on luxe goods from pricey (and designer) handbags, to similarly priced cars, jewellery, watches, wines, yatchs, and so on. India’s market for luxury goods of all sorts is rising; some estimate it at $14 billion to $16 billion.
India’s lush and affluent class, estimated to be crowded with around 1.85 lakh millionaires, according to a Credit Suisse report, is driving revenues for the luxury market. Market estimates suggest that, not only is ultra-luxury spending rising, but so too are affordable luxury products, for which India is a huge market.
Nevertheless, despite India abounding with the loaded and well-heeled, and while there are scores of listed luxury stocks globally, the bourses of the country lack luxe scrips, with only a glimmer of them here and there. 
Across the world, many funds follow and invest in luxe and lifestyles. Not so in India. “Globally, luxury is a huge theme, given that there are scores of choices in this arena. Many funds follow the luxury and lifestyle space,” says Naveen Kulkarni, Head of Research, Reliance Securities. “In India, we don’t have many companies that could be defined as high luxury. We have companies that operate in mass luxury to high luxury.”
Of the listed companies, large jewellery houses such as Titan, TBZ find worthy mention among the top-100 global companies in Deloitte’s Global Powers of Luxury Goods, 2018. Even unlisted Kalyan Jewellers finds mention there.
Further, in the Indian listed space, watch-and-dial manufacturer, KDDL, which also owns a retail chain selling high-end watches Ethos, is another company that fits the luxury label. Indian Hotels is a high-end luxury hotel chain. Tata Motors owns the luxury car maker Jaguar Land Rover.
To be sure, India’s love affair with jewellery has seen the segment come of age, and is expected to be one of the best revenue drivers in the luxury space. Top-end jewellers are opening large-format stores across towns to enhance customer experience and increase brand value for their products, while small-format stores are also being opened to cater to the affordable luxury market.
Online e-commerce in jewellery retailing is also a huge focus area for companies. Titan, for instance, purchased e-commerce play Carat Lane in 2016. The formalisation of the economy, and the introduction of GST are driving more luxe seekers to the formal markets. Says Kulkarni: “For some of the affordable luxury players, the formalisation of the market is a boon, with greater revenue and higher realisations for many companies.”
For luxury jewellery players, of course, a shift towards hallmarked and branded jewellery is one of the prime drivers of growth. On the other hand, one of the impediments to growth has been the requirement of a PAN card for purchases above Rs 2 lakh, though revenues have still been growing at a decent pace. Titan’s standalone revenue increased 19.8 per cent (over FY17) to Rs 15,483.45 crore in FY18. Due to better realisations and margins, its net profit zoomed 52.6 per cent to Rs 1,162.87 crore.
The domestic jewellery business is a Rs 3,000 billion market, expected to grow to Rs 3,600 billion by 2023, according to the latest report by HDFC Securities. The segment is expected to see about a six per cent CAGR from now till FY2023. Weddings are set to contribute about half of the growth for the jewellery sector.
Titan’s Tanishq is also set to double its market share to about 8.1 per cent in the next four years. The parent Titan is valued at Rs 74,804 crore on revenue of Rs 15,483.45 crore. Its stock has surged 38 per cent in the past year.
Other comparable companies in jewellery are PC Jewellers, valued at Rs 3,236.11 crore with revenue of Rs 9,485.50 crore, Thangamayil Rs 530.12 crore (Mcap), Rs 1,380.85 crore (revenue), TBZ Rs 467.78 crore, revenue Rs 1,380.85 crore.
In luxury watches, KDDL’s stock price rocketed more than 246 per cent on the back of the booming luxury-watch segment. The company manufactures dials and watches for high-end brands globally and retails luxury watches through subsidiary Ethos, with 40 stores across the country. KDDL’s revenue was Rs 145.81 crore, its market cap Rs 528.1 crore.
Indian Hotels, the luxury hotel chain, is also exhibiting steady growth. Revenue was Rs 2,583 crore, while its market cap was Rs 15,406 crore.
With the well-heeled more than willing to spend and the rising affluent class in the country who also want a piece of the status-symbol pie, the revenues of luxury companies should keep ticking.
All in all, luxe goods are not only here to stay, the stocks of such companies are scintillating. Sparkling, anyone?
