News & Updates

Says consumer products segment facing tough competition

BILLIONAIRE Adi 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.

The strongest 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.

Godrej Consumer 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.

India’s property 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.

Godrej Properties 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.

Godrej Properties 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 & Gamble,

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.