The Godrej group is revising its investment plans and revisiting its growth targets for the current financial year, as well as for the next five years, in anticipating of a higher GDP growth rate now that the Congress-led United Progressive Alliance (UPA) government is firmly in the saddle for a second term at the Centre.
“The big plan over the next month or two is to be prepared for a complete change as the economy goes back to the 8-9 per cent growth level,” Adi Godrej, Chairman, Godrej Group, told Business Standard.
He refused to divulge any details though, saying the company is waiting for the budget announcement and also the global markets’ reaction to the development.
Due to the global financial slump, “Godrej Industries’ growth rate had dipped to 15 per cent in the financial year 2008-09, compared with 20 per cent a year ago.” he added. “We had never really cut back on our spends, but now we expect global interest in India to be tremendous and India will bloom. As such, we will cast our plans accordingly in the post-budget period,” explained Godrej.
On the cards is going ahead with its initial public offering (IPO) for Godrej Properties within the current financial year, as well as growing its fast moving consumer goods (FMCG) business, which comprises Godrej Consumer Products, Godrej Sara Lee and Godrej Hershey Food & Beverage.
In the consumer products business, the company has said it would look at acquisitions and mergers in the domestic as well as overseas markets in regions like West Asia, Africa, Russia, China, Brazil and Egypt.
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“We are focused on growth. We would look at acquisitions to grow our consumer goods business and could leverage funds of up to $1 billion if required,” said Godrej, adding that the FMCG sector had not been particularly affected by the slowdown.
“It will have its best year ever in 2009-10. The growth in the first half of the year will be in terms of price as well as volume, as prices at the current level are higher than prices last year. In the second half of 2009-10, the growth will be largely led by volumes,” Godrej said.
For the company, the focus areas will be its key brands, like Godrej No 1, Cinthol, the hair colour Godrej Expert from GCPL, its insecticide Good Knight under Godrej Sara Lee and the Nutri confectionaries from Godrej Hershey.
“We will invest heavily in these brands and some others as well. We will also have new launches in the coming year, even as we increase our advertising and marketing expenses by 20 per cent,” said Godrej.
The company has also renewed its emphasis on modern retailing and rural retailing with the formation of the FMCG cell.
“Currently, revenues from rural India account for 25 per cent of our overall revenues and we see this increasing in the coming years as rural markets are growing at a higher pace than urban markets,” said Godrej.
Also, with the new government in place, the Goods and Services Tax (GST) will be implemented in the next 10 months.
“All other things being the same, GST implementation will add 1-2 per cent to the GDP growth of India as all invasion of indirect taxes will disappear, costs will come down and there will be more efficiencies in the system,” concluded Godrej.