Titan’s plan to acquire remaining stake in CaratLane reaches an impasse

According to the original deal between Titan and CaratLane, Titan can acquire the remaining business of CaratLane at a value agreed upon by both parties. Disagreement over the valuation of Caratlane has stalled the deal

The Tata Group and the founders of CaratLane are in disagreement over the valuation of the latter, which has stalled Titan’s plan to acquire the remaining stake in CaratLane, reports The Economic Times. Titan owns a majority stake in CaratLane, and according to the original deal between the two, Titan can acquire the remaining business of CaratLane at a value agreed upon by both parties. With no solution in sight, the talks so far have not delivered any positive results, and the issue has now been escalated to the offices of Tata Sons Chairman N Chandrasekaran. People aware of the matter were quoted in the ET report as saying that discussions are ongoing with a quick resolution as its objective.

A senior Tata Group executive said, “It’s an ongoing negotiation — these things take time. Titan is a listed company, so it has to follow certain guidelines. On the other hand, entrepreneurs want quick solutions as start-ups need to be nimble.”

Tanishq and CaratLane have shared a strategic partnership since 2010, in which CaratLane acted as Tanishq’s vendor. In 2016, Tanishq started acquiring CaratLane in parts, spending a total of Rs 440-450 crore.

As things stand, Tanishq has 72.3% ownership in CaratLane. Industry experts consider CaratLane as Titan’s most valuable subsidiary. The remaining 27.8% ownership of the company is still held by CaratLane’s founders, ET reported.

To arrive at a valuation agreeable to both parties, both sides could appoint an independent agency to determine the valuation. Later, the average of the two valuations was to be shortlisted, but this could only be done if both parties agreed to the arrangement, the report added.

Earlier, Titan appointed Bank of America to determine the valuation of the residual 28% stake. Bank of America valued the entire company at Rs 6,000-7,000 crore, meaning the founder’s stake was worth Rs 1,680-1,960 crore. However, the founders found this valuation too low.

In case the discussions do not conclude, the only way to find out the fair valuation of CaratLane will be through listing it on the stock exchanges. The listing may take two more years to be completed, the ET report said, quoting people in the know.

Courtesy: Business Standard