RP-Sanjiv Goenka group eyes turnover of Rs 40,000 crore in the next 5 years

Fourteen people are zeroing in on acquisition targets for the RP-Sanjiv Goenka group’s fledgling FMCG business. This segment is expected to clock in revenues of Rs 10,000 crore, or about a quarter of the group turnover, in the next five years. According to Sanjiv Goenka, the group turnover in five years would be around Rs 40,000 crore from the present level of Rs 26,000 crore. Power distribution and FMCG are likely to lead the pack, followed by retail, IT and carbon black.

The non-power businesses demerged from CESC —Spencer’s Retail and CESC Ventures comprising FMCG, BPO, realty, and the new entities — are likely to get listed soon. The size of the FMCG business is Rs 500 crore, but the plans are ambitious. An acquisition, for instance, would give it a foothold in a new segment. The size of acquisition being weighed? Goenka makes it clear that he doesn’t want to limit to any size, it could even be Rs 1,000 crore or more.

An FMCG fund has been started. Like a private equity, it picks up stake in small firms. While the primary objective is to make money, the fund gives an opportunity to acquire the firms. Two investments have been made so far: The Souled Store (which does franchisee printing of clothes for Disney etc) and True Elements (into breakfast cereals).

Ambitious plans 

• Group turnover to be Rs 40K cr in five years from the present level of Rs 26K cr
   
• FMCG to become a Rs 10K cr entity
   
• Power distribution, FMCG to account for major chunk followed by retail, IT/ITeS and carbon black
   
• Actively looking at buys in FMCG space

If in terms of valuation, FMCG is likely to command a significant chunk of Goenka’s portfolio going forth, asset-wise, it will be power. In the primary business of electricity, Goenka has made a conscious decision to focus more on growing the distribution.

“We will expand in power distribution. We have concluded a distribution deal in Malegaon, which marks our foray into Maharashtra. In Bharatpur, we have started making profits, but not yet in Kota and Bikaner,” Goenka said, adding, “Distribution is where you are dealing with retail customers, so you have to be cautious.” CESC has 20-year contracts for Kota, Bikaner and Bharatpur. It also has power distribution rights in Kolkata and the adjoining Howrah-Hooghly belt and Greater Noida in Uttar Pradesh. The carbon black vertical is also assuming importance. Phillips Carbon Black remains India’s largest manufacturer of carbon black and is still looking to add capacity. “We will look at capacity may be Tamil Nadu or Andhra Pradesh,” he said.

Spencer’s Retail has just added 28 stores. “That is the largest expansion we have done in a year. Next year, too, will be similar, in terms of addition of square footage,” said Goenka. 

On the IT side, Firstsource had applied for land in Bengal Silicon Valley and bagged it (for a BPO). Saregama, on the other hand, is getting its act together. “Four out of six films have done exceptionally well on digital media.

Eighteen films are under production right now. Films are going to be a big part of our business,” said Goenka, who is undecided on serials, but could give it a shot for digital streaming.

Goenka, made a debut in the luxury retail space with Quest Mall in 2013, is now looking for space to set up a mall along the lines of Foodhall.

The growth plans are significant but Goenka said that the balance sheet position is fairly healthy. “I think, we will close this year at Rs 2,500 crore PBT and PBDT of Rs 3,500 crore. Our debt-equity for the whole group is 1:1.1 which was 1:1.5, so debts have gone down.”