The slowdown is behind us and the country will grow at around 9-10 per cent, believes Adi Godrej, chairman of the Godrej Group. This, he adds, spells good news for his fast moving consumer goods (FMCG) business and properties venture, as well as for Godrej Agrovet. In a chat with Business Standard, he says Godrej Properties will now be a focus area for the group, with an emphasis on affordable housing. Edited excerpts:
Do you believe the worst is behind us?
Definitely. Look at our results. Except for the sales figure of Godrej Industries (GIL), which was affected by the sale of Godrej HiCare, all our businesses have done well. The other point is that Godrej Sara Lee gets consolidated with Godrej Consumer Products and not with GIL, further bringing down the sales growth. However, the consolidated net profit of GIL jumped 240 per cent in the reporting quarter, as compared to the figure of the corresponding quarter a year ago. On a standalone basis, it was 350 per cent.
Meanwhile, the other subsidiaries, Godrej Agrovet and Godrej Properties, have done very well in the reporting quarter. While last year the commodity cycle affected our core business, this year it's doing well, with the prices of commodities like vegetable oil (the raw material for GIL's oleochemicals business) becoming reasonable once again.
Could you expand on your plans for Godrej Properties?
We have filed a draft red herring prospectus (DRHP) with Sebi to divest 13.5 per cent stake. The pre-IPO stake sale (of 4 per cent) and IPO should happen by the year end. Money from the IPO will be used for the expansion of Godrej Properties, in which we will continue investing, since we see a strong revival in residential property. Our focus will be on residential -- especially affordable housing -- and commercial properties. Godrej Properties will soon become our fastest-growing business.
Did the monsoon season disappoint you this time?
Had the monsoon season been good throughout, it would definitely have helped us in bettering our results. However, it wasn't all that bad. The latter part of the monsoon season was good, and hence I do not see the kharif crops doing too badly. Besides, the rabi season should be good. In fact, our Godrej Agrovet business thrives even in a bad monsoon, since the need for animal feed grows if the rains aren't good. And we are the leaders in compounded animal feed.
Which means rural demand remains good.
Yes. Look at Godrej Consumer's results, wherein rural sales have grown by 40 per cent in the past six months, double of that in urban areas. We have also increased our penetration in rural markets. The rural segment contributes 42 per cent to our total sales and we expect to increase it to 50 per cent in three years.
Will this translate into increased marketing spends?
Very much. In fact, we have been investing a considerable amount of money on marketing and our advertising budgets have almost doubled.
You appear bullish about the overall economy. But the stock markets are reacting differently...
True. We expect India's gross domestic product figures to rise to 9-10 per cent. I wonder why the markets are reacting differently.
Is it because they've factored in all the positives?