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Properties will be our fastest growing business: AdiGodrejQ&A with chairman, Godrej GroupShyamal Majumdar & Abhineet Kumar | Mumbai February 3, 2013 Last Updated at 14:32 ISTTop 10 Stocks to Buy 201420-25% Return/call in short-term, Highly accurate Calls, Free Trial stockaxis.com/Top-10-StocksAds by GoogleAdd to My PageRead more on: Properties | Godrej | Business | Adi Godrej | Godrej Group | Future GrowthRelated NewsSobha sells properties worth Rs 1,540 cr during Apr-Dec 2012ISB's meet on family business kick-starts todayRoshni Nadar set to become chairperson of HCL CorpTGB to go green for tea growth'Effective use of five webs key to business model innovation'Kotak Investment FundsThere Is a Reason To Choose Us,8/2/2014 Properties will be our fastest growing business: Adi Godrej | BusinessStandard Newshttp://www.business-standard.com/article/companies/properties-will-be-our-fastest-growing-business-adi-godrej-113020300088_1.html 3/13

Our Investors Enjoyed 43.12%Returns!kmfcommunications.com/Know-MoreSubmit Resume NowImmediate Requirement. Sign upto Apply & Find Jobswww.monsterindia.comAds by GoogleAdi Godrej, 70, is enjoying his role as the patriarch of the Godrej Group, travelling non-stop and restricting himself toproviding strategic advice to his three children and group CEOs. The Chairman ofthe Rs 13,500 crore group talks about

how his group has kept its reputation intact by following a prudent financial strategy. Excerpts from an interview withShyamal Majumdar & Abhineet Kumar.The 10x10 vision sounds great. But is it achievable?The vision requires a 26 per cent CAGR (compound annual growth rate) and we havegrown by more than 30 per centover the last two years. So we are ahead of the curve.Do you agree that the Godrej group was extra conservative in the past?If you look at the older family-owned groups, we are one of the fastest-growing.Over 500 million consumers use ourproducts every day. Thats more than any other group in India. I agree some othershave overtaken us on size, but weare still among the top 5 to 10 per cent of growth-oriented groups in the countr

y. And if you talk in terms of financialleverage, we have been and will continue to be conservative. The debt-equity forGodrej Consumer Products Ltd(GCPL) has gone down to 0.5:1; for Godrej Properties, its 1:1. We do not want toget into high borrowings; we do notwant to go to banks saying we want to renegotiate our loans. Our reputation is important for us.Your biggest bet for future growth is Godrej Properties? Whats the thinking behind this?We feel Godrej Properties will be the fastest growing part of our business we ha

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ve already been growing by 50-100per cent. Thats because unlike our other businesses, we do not have to be concerned about competition, market shareor size in properties, as no company even has a 5 per cent market share. GCPL isgrowing fast, but there is a limitation.It cant suddenly double its sales as there is huge competition. It has to sacrifice a lot of its profit if it wants to growrapidly. There is no such problem with Godrej Properties.So the share of GCPL in the total business will come down?Godrej Properties will see the maximum growth, but the share of GCPL will continue to be 25-27 per cent of our totalbusiness. Thats because, some other businesses like chemicals may not grow as fast..The group has been buying companies only in niche areas. Are you planning any big bang move?Some of the companies we have acquired are very big. For instance, our per capita FMCG sales in Indonesia, SouthAfrica, Argentina, Uruguay or even the UK are higher than our per capita sales in India. The size of our Indonesianbusiness is going to be over Rs 1000 crore this year.8/2/2014 Properties will be our fastest growing business: Adi Godrej | BusinessStandard Newshttp://www.business-standard.com/article/companies/properties-will-be-our-fastest-growing-business-adi-godrej-113020300088_1.html 4/13

Are there any gaps in your consumer portfolio that you would like to fill?We are open to acquisitions in India even in categories where we have no presence -- for instance, oral care, powderdetergents etc.Are you happy with the performance of your children?My oldest daughter Tanya joined the business about 20 years ago; my second daughter Nisa and son Pirjosha have alsobeen in the business for many years now. They are very passionate about the business, have brought in good people andhave strategised very strongly. They are taking the business forward.What would be the familys role in the group going forward?Almost all our businesses are led by non-family professionals. Family may be inan active role for a short period of time,

to gain experience etc. But the family mainly is going to be at the board, strategy level and into innovation and new ideasetc. That is also broadly the trend now.In the early part of the last decade, the group started diversifying into businesses such as retail, chicken,confectionary etc. But in the last three years, you have exited a lot of these businesses. How do you explainthe shift in the strategy?Despite the divestments, we have grown at 30 per cent. We are clearly focused oncore now. We divested what wethought is not core to our business. We do not want to be in retail, except forNatures Basket which is premium gourmetfood. That is why we divested stake in Aadhaar, our rural retail business. We al

so do not want to be in the food businessin a major way. So we divested our stake in Godrej Hershey and recently announced divestment of our non-core foodbusiness in Indonesia which came along with the acquisition of Megasari for their big personal and house care business.We are just strategizing the focus on our core business. Our food businesses, especially the confectionary and edible oilpart, have not been doing too well because we didnt have scale and size. Our personal and house care business hasbeen doing extremely well. We decided to focus on things which can grow well and

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de-focus on the food business.Godrej Properties follows a joint venture model with landowners, which is workable on a small scale. As yougrow, at some point would the company also start buying land?Well, our main model will be joint venture, but we have formed a company with European investors which can invest inland where we have a certain share holding. And that company, when it buys land,can do a joint venture with GodrejProperties. Godrej Properties will not buy land. But we are developing a lot ofland which Godrej group owns -- forinstance in Vikhroli in Mumbai. That is also a joint venture with other group companies that owns the land.We follow this model as this makes our dealings with the government minimal as the land owners get the permissions. Wedo not want to get into businesses such as infrastructure, mining where dealingwith the government is more.Is consumer business getting difficult because of competition from MNC and theirmoney power in terms ofR&D and access?Thats not true. We have done very well. Look at the last 11 years since GCPL wasformed. We have had the highestmarket cap growth. We are very successfully competing with MNCs. We have alwaysbeen a very R&D-consciouscompany. We have also invested heavily in advertising. Our whole group is run on

an important financial metric calledEconomic Value Added (EVA), which means profit after the cost of capital is deducted. We have a very strong variableremuneration for a large number of employees which is based on EVA improvement.And that closely aligns with the8/2/2014 Properties will be our fastest growing business: Adi Godrej | BusinessStandard Newshttp://www.business-standard.com/article/companies/properties-will-be-our-fastest-growing-business-adi-godrej-113020300088_1.html 5/13interest of our employees with that of our shareholders. This has been a very successful endeavour leading to a lot ofvalue creation.What is your M&A philosophy in the light of the growth you are seeking?

We will continue to look for inorganic growth. Our ambition is to have 26 per cent growth. We think 15 to 20 per centof this will come organically and the rest inorganically. But inorganic growth must be profitable and the value creationmust be strategic. We formed an international team headed by Shashank Sinha. Inthe past he worked with Sara Lee andprior to that with Reckitt Benckiser. He has worked in South Africa, Latin America so he knows these geographies. Eversince we started acquiring these international companies, our profits have grown, market capitalization has grown andshare holders have benefited. I think we have strategically worked well.Godrej Agrovet is a turnaround story. What efforts have gone behind this?We put it in a very strong team. We brought in Mark Kahn from global agri-busine

ss giant Syngenta to head the strategyfor Agrovet. The company has been very successful in the last few years. Singapores sovereign fund Temasek took 20per cent stake in the company last year. We are also looking at leveraging theirlarge R&D centre in the University ofSingapore. They will be on our board. And we hope to leverage further growth through this relationship.How satisfied are you with the performance of the strategy team?Our strategy team led by Vivek Gambhir has done an excellent job. In Godrej Consumer Products, our market

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capitalisation has grown by 75 per cent in the last year. Across the board our companies have done very well, althoughthe economy has not done well. I attribute a lot of success to our strategy team.You have brought new people in key positions in recent years. A lot of old timers are feeling left out.If you compare with other groups, exits from our groups are very few. A lot of our employees have been life timerthrough their career. There are people who leave because they get opportunitiesoutside. Also as you go up in thetriangle, there is less and less space at the top. So people will leave. But ourgeneral attrition level is low.Does Godrej plan to enter any new business?No, we are in too many businesses already. We have good growth opportunity in the existing business, so we will stickto them. We started aBPO business but got out of it. Same with foods business. So we want to stick tobusinesses where we are doingextremely well and invest more in those businesses.Whats your capital-raising plan?In the near future, we do not expect to raise any equity capital. Last year, wehave raised equity capital in differenttranches. We are the only group that has followed the SEBI guidelines for paringthe promoter holding to 75 per cent.

We have raised capital in Godrej Consumer Products and Godrej Agrovet from Temasek. We dont need to raise anyfurther equity capital in the near future.What is the synergy with Godrej and Boyce?We are one group, of course we are in different businesses but we work together.For example Godrej and Boyce ownsall the land in Vikhroli, but it is being developed in a joint venture with Godrej Properties. So we are always working8/2/2014 Properties will be our fastest growing business: Adi Godrej | BusinessStandard Newshttp://www.business-standard.com/article/companies/properties-will-be-our-fastest-growing-business-adi-godrej-113020300088_1.html 6/13together. Five years ago, we launched a new Godrej branding exercise for the ent

ire group. We have a family board andwe meet once a year. We also have a family council comprising all family shareholders who are above 16 years old. Thecouncil meets once, sometimes twice a year.