Around since 1897, with a formidable reputation for its locks in the century gone by, the 117-year-old Godrej group is today synonymous with Good Knight, Cinthol, Ezee and Hit. Its interests have expanded beyond India to Africa, Europe and Latin America and across sectors ranging from consumer goods and electronics to chemicals, real estate and software solutions. BLink spoke with the group chairman, Adi Godrej, for his recap of the year gone by, the challenges they faced, the factors that worked in their favour and those that didn’t. Outlining his group’s global growth and acquisition plans, he spells out the reasons behind his optimism for the year ahead, despite sluggish consumer demand. Edited excerpts:

How has the new government changed things for India Inc?

The overall mood in India has been quite upbeat with the new growth-oriented government coming into power. GDP growth trends are looking positive, with growth rates being better than the sub-5 per cent in the previous year. The easing of Wholesale Price Index and Consumer Price Index augurs well for the Indian economy. The decline in crude oil and other commodity prices, too, should help in reducing our current account deficit. Though industrial production has been sluggish thus far, the ongoing economic reforms and focused campaigns like ‘Make in India’ should hopefully aid the recovery of the manufacturing sector. The Indian stock market too has responded well to the new government and the recent reforms. It is encouraging to see movement on the Goods and Services Act in Parliament last week. If the Government is able to bring the Act into force by April 2016, it would be very good for the economy.

How was 2014 for the Godrej group in particular, and India Inc in general?

Despite the slow change in consumer sentiment, our businesses have done reasonably well this year. Our consumer goods business significantly outperformed reported category growth rates across categories in India. Our innovations are focused on creating value-for-money products, which can increase both penetration and consumption in this country. Our real estate business, Godrej Properties also had a good year. The second quarter of FY14 was the third consecutive quarter in which sales crossed one million sqft.

Other companies in the group — Godrej Agrovet and Nature’s Basket — have also sustained a good growth momentum. We are continuing focus on cost control and operational efficiency programmes to improve our margins across all businesses.

How are your international businesses doing? Godrej has bet big on emerging markets, but some of them are now battling currency depreciation?

Overall, our overseas business is growing moderately. Most developing countries have been slightly affected by the overall global economic slowdown. But I would say that despite the uncertainties in global macro environment, our international businesses have been doing fairly well, led by the success of new product launches and distribution expansion. We continue to strengthen our position as market leader for urban household insecticide and air care in the Indonesian market, for instance. Our Latin American businesses have also shown a sharp improvement in margins backed by better business performance. Africa is a key market for us and we continue to be market leaders in our hair extensions business there.

The recent devaluation of currency in the developing world affects our company to a certain extent, because then the rupee growth tends to be lower than the growth in the currency of that country. But, typically, in many of these countries, if the currency devalues, like it has recently in Argentina, for example, and in Indonesia, then the local prices tend to rise because a lot of the local pricing depends on some imported items. Therefore, it evens out over a period of time. Overall, we expect good progress.

Will you go slower on future investments in emerging markets?

The three-by-three strategy for our consumer goods business has worked well for us. We are focused on three business categories (personal care, hair care and home care) in three geographies (Asia, Africa and Latin America). Close to 47 per cent of our revenues now comes from our international businesses, as compared to 15 per cent in 2009-10. This is one of the most significant changes for us as a company. Today, over two-thirds of our team members are based outside India and our products are available in more than 60 countries across the world. Going forward, we will continue to look for acquisitions in developing countries such as Africa and South America in the home- and personal-care businesses. A few months back we increased our stake in African hair-care firm Darling Group Holdings, in Ghana, to 100 per cent. Going forward, we will be increasing our stake in the group in other African countries as well. We have also added new countries to the Darling Holdings’ operations which include Uganda, Tanzania and Angola. We also believe there is high potential in SAARC countries such as Bangladesh, where we have operations in both consumer goods and agrovet (agri-based and poultry-based products) businesses.

How will you tackle the slowing consumer demand in India?

I agree that consumer demand has remained largely subdued so far. Demand in the second quarter of fiscal 2015 was very low, making this one of the slowest years of growth for the Indian FMCG industry in over a decade. Even rural demand, which was holding up well relative to urban demand, was hit due to erratic monsoons this year. As spending habits take time to change, companies have not seen an immediate pick-up in sales even with the economy improving, but hopefully this should change over the coming quarters. We have started to see some signs of improvement. Both October and November have been significantly better than the previous months. So I expect that the growth in the FMCG sector in the second half of this financial year will be much better than in the first half. The cooling commodity prices should help firms pass on the benefits to the consumers in the coming months. For example, our consumer goods business is planning to pass on the benefit of softer input prices to consumers in the form of consumer promotions. We are also planning to reach out to a wider audience by expanding distribution network by about 10 per cent. Our top priority is to stimulate consumer demand. We will be betting on new sales initiatives and innovative products to drive volumes in the next two quarters.

Your outlook on slowdown in China, the continuing slowdown in Europe and the US recovery in the year ahead?

Some of the uncertainties in the global macro-environment have been a bit worrying. Back in January this year, the IMF had projected world growth to be close to 3.7 per cent, which has now been revised downwards to 3.3 per cent in the latest report. The growth trends in China will play a key role in the global economic outlook. China has till date had a large impact on global growth. The recent statistics on the Chinese economy show a downward trend. But the government has come up with some policies to revive growth. So we will have to see the impact of the same, but I expect that China’s growth in the coming years will remain below 7 per cent. Euro-economy has been in trouble for a long time now, but what is worrying is that core countries such as Germany, which would have had the power to pull the Euro zone out of crisis, appear to be exhausted. Even though countries such as Greece, Spain and Ireland are showing some signs of improvement, until the large, core countries pick up speed, Euro zone recovery would be elusive. The silver lining has been the American economy, which is finally beginning to feel like it is picking up pace. Job growth figures look promising. The big worry for American economy would be its demographics, which is not as attractive as that of the emerging markets like India or Indonesia.

In India, the Index of Industrial Production has declined and WPI is negative. Are we going back to the 1990s?

These metrics should be viewed in conjunction with the broader economic outlook. Even though the recent GDP growth figures have not been as encouraging as expected, this financial year is likely to close at 5.5 per cent growth, which, although not spectacular, would be a reasonable improvement over the sub-5 per cent growth witnessed over the last two years. In fact, it has been recently estimated that India will overtake China to become the fastest growing major economy in 2016-18. High prices in recent times have weakened the buying power of consumers, so reducing inflation certainly bodes well for the Indian economy. Also, current account deficit is likely to be contained, given the reduction in crude and other commodity prices. Of course, a lot more needs to be done to stimulate growth even further.