Mumbai: The Godrej group which is in business as varied as locks, office furniture, and real estate conglomerate, had in 2000 undertaken a 10-year restructuring of the group to transform each of its businesses into successful individual companies.
Eight years on, Adi Godrej, 66, chairman and managing director of the group speaks to Mint on the state of the restructuring. He has consolidated some of the existing businesses and plans to invest heavily in real estate projects, including two special economic zones (SEZs) for information technology (IT) and IT enabled services.
Two-pronged strategy: Adi Godrej says the group will develop both residential and commercial properties on land they own. Abhijit Bhatlekar / Mint
He also plans to take the Rs7,500 crore in revenue group into new areas such as IT and outsourcing. And where it isn’t possible for a company to be the market leader, Godrej says he is open to joining hands with other companies to form partnerships. Edited excerpts:
The Godrej group has significant presence in commercial real estate development across the country, and you have two SEZs on the cards. Have you learnt any lessons from the land acquisition controversy in Singur (in Kolkata, over Tata Motors Ltd’s Nano project)?
The main reason for the Singur controversy is political infighting. Our group will build SEZs only when we have complete possession of land. We do not want to get into a slanging match and get our corporate reputation affected. The government’s policy to buy land and later offer it to private parties to build projects is bad.
What is your approach to the whole land issue as a developer?
Godrej Properties Ltd has devised a two-pronged strategy. We will develop both residential and commercial properties on land we own. Again, we will join hands with a partner that will own land and Godrej will be the developer.
Your group makes and sells products from locks to animal feed. Have you ever come close to losing focus from having too many businesses?
Yes, we have diverse businesses. But we started making locks and then moved to steel furniture and later appliances. Soaps, detergents and toiletries are related. We entered new areas of IT products distribution, business process outsourcing (BPO) and medical diagnostics. Our core business philosophy is to grow any business where we can be a leader.
We do have a strategic review of our business portfolio. If we feel some business needs a strategic partner to grow, we form joint ventures.
In our animal poultry business, which sells chicken under the brand name “Real”, we have tied up with Tyson Foods (Plc.), the world’s largest meat processor and marketer. Similarly, Godrej Agrovet Ltd has formed a venture with Future Ventures for rural retail underGodrej Aadhaar (an agri-services and rural retail company that sells consumer durables, food, grocery, apparel and foot wear).
As cities develop, manufacturing units are moving to their periphery. Your group has many units in the heart of Mumbai. Will you continue to make goods here?
I cannot talk about it. There are industrial relations and political issues. You are right that lots of manufacturing units have moved out. Earlier, most of our manufacturing units were in Mumbai. Now, we have 100 factories across India in 12 states, and 13 centres outside India. We still have 15,000 employees in Mumbai. Some of our factories have been developed and leased to BPO and IT companies.
Take Godrej Agrivet that makes animal feeds. There were logistical constraints to transport a low price commodity and our manufacturing cost rose rapidly. We shut down the factory and moved it. Most of our soaps and toiletries are now made in factories in Himachal Pradesh, Uttaranchal (now Uttarakhand) and in the Northeast.
Globally, in family-run business groups, families have given way to professionals...
We are a totally professional-run group. Every business of our group has a non-family chief executive. Family members need to be professionally qualified to run or even enter the core team.
Succession planning has gained more significance as many promoter families end up fighting over the business. Does the Godrej group have a plan?
We have a succession plan for every position in the group. We identify three or four candidates well in advance and choose from them. At the board level, there is a nomination committee. We have similar succession planning within the family. We do not want to talk about it in public.
But I can tell you that after 111 years (of existence), the succession plan has been implemented very successfully in the family.