Titan axe on Favre Leuba
The Tatas are wielding the axe on cash-draining or loss-making operations as they look to make businesses competitive and profitable in a post-Covid environment.
On Monday, Titan Company announced that it is scaling down operations of Favre Leuba. Analysts gave the move a thumbs-up as there would be lower losses from the venture in the future.
In October this year, Titan had announced that it will end its five-year joint venture with Montblanc in December to focus on its primary business and proprietary brands.
Titan holds a 49 per cent equity stake in the joint venture — Montblanc India Retail. Titan entered into the JV with Montblanc Services BV, the Netherlands, to operate retail boutiques in India for Montblanc products.
Shares of Titan on Tuesday closed marginally higher at Rs 1,427.25 — a gain of 0.15 per cent over the last close.
Favre Leuba AG (FLAG) is a wholly owned subsidiary of Titan and it was incorporated in 2012. It had acquired the Swiss watch brand a year earlier for up to 2 million euros or nearly Rs 14 crore to expand the product portfolio.
FLAG is now based in Solothum, Switzerland and it owns the Favre Leuba brand.
Titan said that Favre Leuba is amongst the oldest watch brands in the world, and considering the rich heritage of the brand, it had incorporated FLAG, acquired the brand and presented it in a contemporary form.
“While the company has been continuously supporting FLAG, and has made a series of investments aggregating to approximately Rs 275 crore over a period of time for the revival of the Favre Leuba brand and its growth plans, the current Covid-19 pandemic has severely impacted these revival plans and prospects,’’ the company said.
It added that the board of the company decided to request the FLAG management to scale down its operations substantially with immediate effect so that further investments from Titan to FLAG cease as early as possible.
“Consequently, this will lead to Titan making provisions in the current financial year for additional impairment pertaining to its investments in FLAG, in addition to the impairment of Rs 145 crore already made in earlier years,’’ Titan said.