Bhaskar Bhat, 53, has just been made managing director of Titan Industries [Get Quote] for a second five-year term. Titan is also at a milestone in two other ways. The provisioning for the earlier unsuccessful Euro watch project has all been made and it is readying to make another global foray -- this time through jewellery -- into the US. Excerpts from his conversation with Business Standard. Excerpts: 

Do you have any special thoughts looking at the next five years?

We have established ourselves as somewhere near the best in class in the Indian market in the categories in which we operate -- watches, jewellery, and within that, in product retailing, communication and manufacturing. Now I think we need to move to world class. I want to distinguish between world scale and world class. iPod is world class. So also is a small brand like Tiffany, but it is not world scale. Swatch is world scale and also world class but in India it has not done well. Titan's Edge, the slimmest watch in the world, is a very good example of world class. It's now been around for seven years and continues to be the slimmest as well as very appealing and contemporary. Now we have entered a third business, eye wear.

Are you now more of a jewellery company than a watch company?

If you look at our turnover, yes, jewellery is big. I think we are an accessories company. But the number of customers who interact with us is more in watches. We have 700,000 customers who buy our jewellery every year. We have 10 million customers who buy our watches.

And jewellery is likely to remain big.

Jewellery will become much bigger in turnover terms but watches will still be a very large volume business in terms of interaction. Plus, there is this other interaction when a customer comes back for battery replacement, service and so on. So the number of touch points is some 12-13 million a year. But again the margins are very different between the two. The margins in watches will be roughly double that of jewellery in terms of percentage. But jewellery sales are double that of watches, so in value terms they become almost equal.

Can we say that the bread and butter will come from jewellery and the jam from watches?

I wouldn't say so. The jam also comes from jewellery. To me, jam is return on capital employed. Ultimately if someone can measure the return on effort employed that would be the perfect measure. If we make Rs 200 crore (Rs 2 billion) profit, it roughly comes to Rs 100 crore (Rs 1 billion) from watches and Rs 100 crore (Rs 1 billion) from jewellery.

What benchmarks do you foresee in eye wear in the next few years?

Around 150 stores and Rs 225-250 crore (Rs 2.25 to Rs 2.5 billion) in three years. By then we will be maybe a Rs 4,500-5,000 crore (Rs 45 to Rs 50 billion) company. Eye wear will account for 4-5 per cent of the turnover. Still small but that will be our next horizon business. Precision engineering is another business we have invested in -- the leveraging of our engineering expertise in making aerospace and automotive components.

Overall, are your diversifications going according to your expectations or are there hiccups?

Precision engineering is a year late in terms of catching up on profitability but we have come out of that. Jewellery is ahead in a way. In watches, from low growth in the early 2000s we are now on a high growth compared to the rest of the industry. At 15-20 per cent, it is a healthy growth rate. But it is relatively low compared to jewellery which is growing at 50-plus per cent.

At this juncture, how are you taking on the global competition in watches?

You need to ask the global competitors: how are you taking on the Indian giants? They are unable to compete with us in terms of sheer volume, distribution, brand image and width of range. We sell nine million watches. The next biggest competitor, our oldest, Timex, sells 1.5 or 1.6 million. So also Maxima. The rest, like Esprit, Citizen, Tissot, Rado are nibbling at the fringe of the urban market. In the mid-market there is nobody.

In all this is there a sense that margins are pretty tight, under pressure?

Margins are not under pressure in the short term, but in the long run, yes. We can and ought to be much better if you look at world class companies. We are far better than the Japanese. I am telling the investor that if you look at margins, then that's your choice, but we give you terrific return on capital employed, the best in the retail industry. We are doing with less and less capital every year. Last year we grew by Rs 600 crore (Rs 6 billion) and we increased our capital employed by only Rs 50 crore (Rs 500 million) so the marginal return on capital employed is very-very high.

In jewellery, do emerging names like Gitanjali or Rajesh Export make you a little alert?

They are again like the watch companies of the earlier years like Star and Shiva. We are currently more concerned about the family jewellers in every town. They are far more aggressive and competitive and they have the customer relationships with them. To get those customers to come to us is a bigger challenge. There is enough and more room in the jewellery market. We have less than 2 per cent share. We have launched Gold Plus, our mass market jewellery brand in the small towns. We have 12 stores doing quite well.

Can one say that you have finally put the past behind you, all the provisioning done, and so on?

All over, Rs 126 crore (Rs 1.26 billion) (laughs with obvious relief). We have got to pay Rs 6 crore (Rs 60 million) per annum for our trade mark which we bought from the overseas company. That will go on for ten years, amortisation of the trade mark. But the brand is now in the domestic market.

You're taking Tanishq to the US this Christmas.

Not this Christmas. It is still a pilot. The US is the largest jewellery market in the world. It is a very different market, not driven by price per gram considerations. Going there will certainly help us to get more competitive in India because the Indian market is also going to transform. Before that happens if we can learn on product design, quality, higher order retailing which America is famous for and bring those learnings to India and make money. America is the most open market in the world.

Perhaps, strategically in the mid-nineties we should have gone to America rather than Europe. I did find that Europe was closed. They are very, parochial is not the word, but certainly they have not welcomed with open arms Japanese cars or watches. There is this arrogance -- BMW, Swiss watches.