Optimistic about agricultural business growth: Adi Godrej, Chairman, Godrej Group

Adi Godrej, Chairman, Godrej Group, in an exclusive interview with Swati Khandelwal Jain, Zee Business, said "I am optimistic about the growth of agricultural business and interestingly, the government also has a special focus on it and for the purpose it is working on all avenues to increase the income of farmers, who are directly associated with the sector". Edited excerpts from a wide-ranging discussion: 

Q: Economy is going through an interesting phase as there are changes in consumption patterns that are working in favour of India's growth story. What is your opinion and do you think that these consumption patterns are going to continue at the same pace in remaining part of the ongoing year or will they face glitches?  
A: I feel, there will be a growth in the economy and improvement in GST is something that has propelled growth. In addition, the economy has also picked up and there is an increase in consumption and this can be ascertained by looking at the first quarter results of companies. 

Q: But this pattern of growth is not visible in some pockets. Can you suggest the time by when this growth will be visible across the board and things will get better? Can you also name some visible challenges that can have an impact on the economy, except inflation, which is a matter of concern?
A: I don't think that there is something apart from certain political issues like trade war, among others. 

Q: What is your take on the weakening of rupee?
A: It is a regular event but I don't think that it will have a big impact on the growth or economy of the country. At the same time, you must see that rupee is stronger then several other currencies. You must not have an eye just on the dollar as we have the habit of comparing rupee with dollar, but we never think of comparing it with pound and euro.

Q: RBI has hiked the rates to contain inflation at the time when the growth is trying to take shape. What is your opinion as a corporate on this rate hike at least when there is talks that inflation will go up. Is it going to be an impediment to the growth story?
A: The rates were reduced in the past and now they are increasing it to contain inflation, which is a must. I think this is a good step. Even, the borrowing rates of our companies didn't go up because our borrowing rates are quite low. 

Q: When it comes to consumption story of India, we have seen a leap in rural areas, but it failed to show such results in the urban areas. What is your opinion on it and when will urban areas also start contributing significantly to the growth story?
A: Urban areas have also seen good growth and there was a time when it seemed that the rural areas will not contribute to it but now it is showing good results. 

Q: You have a special contribution in agriculture business and your investment in it through Agrovet and others is an example. Now, I would like to know your outlook for the sector? 
A: I am optimistic about it and have had faith that it has the potential for growth. In addition, the government is also paying special attention to the sector and is trying to increase farmers' income. 

Q: You have been very bullish about Godrej Properties prospects and have been saying that it is going to be a strong growth driver in the future. But the first quarter result, which was subdued, is saying a different story. What is your outlook for the sector?
A: We must not focus just on the result of every single quarter but focus on yearly results as quarterly results may change due to certain reasons like panning of bookings and completion of the projects. Real estate accounts are too complicated and were changed on April 1, 2018. This change in account pattern also had an impact on results. You should see the annual results of the sector as I feel the sector will grow at a fast pace. In fact, last year was the best ever year for Godrej Properties. 

Q: Real estate sector has seen a tough phase and is still recovering from it. Are you concerned with the fall in new bookings?
A: This is just a result of the changes in the account book of the sector. However, this year is going to be a good one for the sector.  

Q: Accounting is a factor, but I would like to know about recovery in the sector, at least when people are not confident about it and there is no fall in prices?
A: How the cost will come down and it is not going to decrease. I don't think that there is any problem in the market. As I have said that last year was our best ever year for us and I feel this year is also going to be a good one and you must not conclude things by having an eye on the results of a quarter or two. 

Q: You have been mostly in premium houses but I would like to know about your contribution to the affordable housing scheme?
A: We are into premium as well as middle-income group housing but have a small presence in the affordable segment. Our presence in big cities, where it is difficult to be in affordable houses, is a reason for the small presence in the segment. 

Q: You are in the defence sector as a component supplier and have signed a manufacturing deal with a UK based company in the recent past. What is your outlook for business in the sector?
A: My outlook in the segment is a positive one and is supported by the expansion in the business of defence supply, space supply and nuclear supply. 

Q: But, there are constraints related to expansion and investment in corporate India and there is an absence of gung-ho sentiment as they have not reached to the level where they should be when it comes to capacity utilisation. How confident you are, as corporate India, on India's story when it comes to fresh investment?
A: You must remember certain things related to it and that is that they are looking forward towards the alternatives to expand the existing capacity like in balancing equipment and more, where there is a growth and that is a reason that there is an increase in productivity. Secondly, the increase in demand will lead to fresh investment in the sector. The industry should focus on steel and mining at present as there is a need for long-term planning in the field. These are the areas that need a long gestation period. 
Consumer products look for a long gestation period and possibilities are there that new demand can be seen in the field in next nine months. That's why what is the need to plan for it as investments can be made as per the need. 

Q: There is no need of long gestation periods in the maximum business's that you have but what about defence and what will be your contribution under Made in India plan?
A: We will invest as per the need but our main focus is on consumer products. 

Q: Can you tell us about one or two of your business that will contribute the maximum and bring best returns?
A: More or less, every business is growing well and will be contributing in the best possible way. Godrej Agrovet or Godrej Consumer Products are just a few to name from them.  

Q: When we talk from the point of view of growth driver then which of your businesses will be providing best returns to you?
A: Godrej Consumer Products and Godrej Properties will give a good future in the long term. In fact, each of our businesses will have a sound future and that can be ascertained by looking at their performance on the stock market, which is quite high when compared with the last year rates. 

Q: As you are a big conglomerate with your footprints in a variety of businesses but can you let us know about other avenues of business towards which you are looking?
A: We handle a number of businesses and that is a reason that we are not concentrating on anything new but we will look forward towards agencies and are doing so by introducing a number of similar products. 

Q: How do you look towards investment and tell us about plans related to it?
A: We are not a capital-intensive group and thus we never plan our investments but we invest as per the requirements.

Q: The incumbent government, which is about to complete its 5 years tenure, has implemented several reforms like GST, demonetisation and many other programmes. Can you tell us about a programme, except GST, that is a game changer in your eyes? Also, tell us about something that would have done didn't happen and you want the next government to work on it?
A: I feel the ease of doing business is one of the game changers among them as it brought several improvements in the process. Undoubtedly, GST is the biggest reform and the GDP growth of 7.5 per cent in January-March quarter is an example for it and predictions suggest that there will be GDP growth between 7-7.5 per cent in the ongoing year. I feel, the reforms were implemented in a good way and will definitely India to hold its place as the fastest growing economy in the world. In addition, when it comes to purchasing power parity (PPP) then India is in the third position and lies just behind China (rank 1) and the US (rank 2). PPP GDP is the best way to calculate GDP in the case of India. 

Q: What is the thing on which the next government should focus on to propel India to the next level of growth?
A: Firstly, it should come up with growth-oriented policies and tax rates should be kept low and this was done in GST in recent past and interestingly, we passed on the reduction directly to the consumers. This reduction has helped in increasing the consumer demand and has led to an increase in government collections. Business, which runs the economy, can run in a pleasant way only if the taxes are kept at its lowest. 

Q: People are raising questions on governments approach to meet its fiscal target. Do you think that the government will be able to meet the target?
A: Good revenues from GST and others hint that it will be able to meet the target. 

Q: As we are a net importer of crude and that's why I would like to know your view on it?
A: Earlier, the prices of crude were very high but have come down back around $70 per barrel. This is a result of OPEC nations meet, where they decided to increase production to keep the prices under control. I feel crude prices at current levels will not be able to harm a lot. 

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Q: Godrej Group has been pursuing organic as well as inorganic growth. Can you let us know about the areas where you see opportunities for inorganic growth?
A: We always keep our eyes open on every opportunity of inorganic growth and feel that there are opportunities in Godrej Consumer Products and Godrej Agrovet. In fact, we have made two-three national and international acquisitions in both segments and will focus on all other areas where we can see a strategic opportunity for growth.