products segment facing tough competition
Godrej said real estate will deliver his company’s fastest growth over the next
five years as foreign rivals such as Unilever and Procter & Gamble
constrain his flagship consumer goods unit.
growth potential we see is in our propertydevelopment business, Godrej,
chairman of the Godrej group, said in an interview at his office campus on the
outskirts of Mumbai.
Products, in which Temasek bought a 5 per cent stake in January, has faced
tremendous competition in recent years from international companies eager to
tap India’s booming consumer market, said Godrej, 70.
That trend is set
to continue, he said.
In real estate,
where investment rules constrain some global operators, Godrej said he mainly
contends with smaller, domestic rivals.
market is forecast to grow to $180 billion by the end of this decade from $66.8
billion in 2011, according to the India Brand Equity Foundation. Godrej’s
optimism isn’t shared by some investors and analysts.
has slumped 18 per cent in the past year, the worst performance among the group
s three publicly traded units.
“Not positive if
you compare the consumer business of Godrej with the property business, yes,
property will grow faster, but overall we re not very positive on Godrej
Properties,“ said Anubhav Gupta, an analyst at Kim Eng Securities in Mumbai,
who recommends selling the shares.
The group, which
started in 1897 as a maker of locks, has seven units with combined annual
revenue of $3.3 billion, according to its website. Godrej Properties posted sales
growth of 69 per cent in the year ended March, while revenue at Godrej Consumer
expanded 33 per cent, according to data compiled by Bloomberg.
profit fell to Rs 40 crore ($7.4 million) in the quarter ended March, compared
with Rs crore a year earlier. Godrej Consumer s net income rose to Rs 193 crore
in the period from Rs 142 crore.
Godrej consumer had
4.6 per cent of the Indian beauty and personal-care market in 2011, compared
with 32.2 per cent for Hindustan Unilever, the local unit of the maker of
Hellmann’s mayonnaise, and 5.4 per cent for Cincinnatibased Procter &
the world's biggest
consumer-goods company, according to data from the Euromonitor Group. Godrej
holds the lead in home insecticides, with 33.9 per cent of the market, followed
by Reckitt Benckiser with 23.5 per cent. For Godrej Properties to treble its
profit in six years is something that can happen, said Arun Kejriwal, director
of Kejriwal Research & Investment Services in Mumbai.
For Godrej Consumer
to do half of that, that is, oneand-a-half times profit in six years, the sales
would have to more than double.
That can't happen
unless the company undertakes large acquisitions, he said.