Adi Godrej, Chairman of the Godrej Group, is a proud Indian whose group has its roots in the country’s independence and Swadeshi Movement since its inception in 1897. From locks, soaps, property, retail and animal feed to the engines that power India’s space programmees, the $5-billion Group is now poised to leverage its future growth based on new reforms like GST. In a chat with BusinessLine, Adi Godrej shares his thoughts on the 70 years of independence and the future plans for his group. Excerpts:
What are your thoughts on India celebrating 70 years of independence?
India has seen great economic reforms in the last 25 years and the economy has grown reasonably well. Most recently, GST, which is an outstanding reform that will boost consumption and help companies grow. Overall, India may see growth post this development, in fact GDP growth may rise 150 bps. By 2050, I expect India to become the largest economy in the world by purchasing power parity.
I would say Godrej Consumer Products because FMCG was more impacted due to dealer down stocking but other businesses were less affected. Not only can it recover, but it will recover. We expect FMCG will be much better in Q2 and even better in the second-half of the financial year. The wholesale channel may not have fully recovered, but Q2 will be much better than Q1. This will be on the back of GST recovery. Once GST is smooth, it will have a huge impact as GDP will go up, business will go up and it has already started from July onwards. The wholesale channel will have to change its ways of dealing with cash. I do not think there will be a problem.
You are also in the process of listing group company Godrej Agrovet. How do you see this business shaping up post the IPO?
Godrej Agrovet has become a large company and we have growth plans. Cannot comment too much as we have filed the DRHP since SEBI has strict rules on the same.
Do you think black money will actually reduce in real estate post GST and demonetisation?
Generally, black money has come down in the country after demonetisation, and after GST it will come down further. The days of black money are going away.
Post GST, do you think domestic companies will have better valuations and would you consider more acquisitions within India than looking abroad?
That depends. We always had a 3X3 strategy. Three means in the three continents of the developing world, which includes Asia and India is a part of Asia, and certainly, we will look at acquisitions in India. We will have to see if valuations are better since our past acquisitions. Domestic companies could become attractive post GST.
Is succession planning over at the Godrej Group with your children heading respective businesses like FMCG and real estate.
No it is not over. We do not comment on our internal issues and family matters. But while Nisaba and Pirojsha are the chairman of GCPL and Godrej Properties, respectively, I am the Chairman Emeritus in both but one cannot say the succession exercise is over.
What are your plans for the retail business of Nature’s Basket under the holding company of Godrej Industries? When is it expected to get profitable?
Acquisition of start-ups like Ek Stop has helped Nature’s Basket. Like anything new, it all depends on how things turn out even in new ventures like retail. But currently, the concentration is on expanding stores than getting profitable.
Would Godrej Consumer Products consider reducing its dependence on the wholesaler trade post GST and focus on direct distribution?
Not all wholesalers are back to normal but that does not mean that we will reduce our exposure to them. The wholesale channel does not account for a large part of our sales as a lot of it is done through our own distributors and we do our own retail. I do not want to go much into more retail formats but concentrate on our branded business.
Why are you still fighting with the erstwhile Managing Director of GCPL (A Mahendran) over a non-compete agreement since he entered the household insecticide segment, a business similar to yours in the FMCG industry?
We are not saying there was a non-complete clause, but if there is any violation of IP (intellectual property), we have to fight. The case continues but we are always open to out-of-court settlement but there must be proper settlement in the matter.
How are you looking at the future of the country with respect to your group?
India will do well and GDP rate will accelerate. Lot of reforms coming in and we have to make sure we leverage it properly as a Group. I am optimistic about the future for the country and the Group.
As a Group we are already in adequate number of lines of business. Expanding the number of lines of business is not going to be our objective but expanding respective businesses. The Group has revenues between $4 billion and $5 billion and every year the growth rates varies depending on how the economy grows.