Short-term volatility in shares not a worry: Nadir Godrej

Godrej Industries’ chairman Nadir Godrej (Mint)
Godrej Industries’ chairman Nadir Godrej (Mint)

Summary

He delved into future plans for Godrej Capital, Godrej Industries’ chemicals vertical, as well as Godrej Agrovet, besides the international market strategy for Godrej Consumer.

Godrej Industries’ chairman Nadir Godrej said that the promoter family would continue to purchase shares in group companies if they perceive short-term undervaluation. Family businesses tend to be somewhat immune to market fluctuations as they are oriented towards the long term, he added. He also delved into future plans for Godrej Capital, Godrej Industries’ chemicals vertical, as well as Godrej Agrovet, besides the international market strategy for Godrej Consumer. Edited excerpts:

Are you happy with how group companies are valued since promoters have been buying shares?

It is a well-known problem that in a capitalistic society, people look at quarterly earnings. It’s also well known that family businesses are slightly immune to that as they have a long-term view. If we are confident of the long-term and market trends, we will buy our shares. We will not go out of the way to try and get the share prices up. We will tell the markets that we are not bothered about short-term fluctuations but are interested in the long-term. We will ensure the long-term is a success. I know people are a little disappointed with (Godrej) Agrovet because the price has fallen below its IPO price, which of course, was better than we expected. But we are pretty sure that long-term is good.

There are a lot of opportunities for Godrej Agrovet in the B2C segment, whereas the current business is focused more on enterprise clients. How do you plan to proceed?

For businesses such as Godrej Tyson Foods and Creamline Dairy, it was a challenging year (FY23), but we’re increasing value-added products. And in April, there is already a lot of progress.

Dairy companies are consolidating. Do you have acquisition plans?

Our focus is to stabilize the existing business because milk prices shot up, leading to a big problem for the dairy industry. Once we get more value-added products, we will expand to other geographies and even try a national presence in easy-to-transport products.

How are your global businesses doing under Godrej Consumer?

Indonesia is doing well. In Africa, there are a lot of challenges because, first of all, we have a lot of disparate businesses which we are trying to clamp together. In Nigeria, the challenges were demonetization as well as devaluation. However, things are improving. In Latin America, we are doing fairly well. We will continue investing in Africa, especially in existing locations, but I doubt we will buy new things. We may even export from there. We are seriously thinking of making Nigeria a big production hub for the rest of West Africa.

How has growth been in the chemicals business?

We’re going more and more into speciality chemicals. Some of our commodities have become specialities, especially in our rapeseed oil portfolio. With Indian import duties on vegetable oils coming down, Indian rapeseed oil is very competitive. This year (FY24), we face a few more challenges, but last year was extraordinarily good for us. In Astec Life Sciences, we had quite a lot of challenges because of two of our major products. Prices fell as China came back into the market. The previous year, we did very well because China was pretty much out of the market. But China seems to be back, and that’s affecting us a bit. In oleochemicals, China is not a major manufacturer, so there is no issue at all, but in agrochemicals, China might be an issue. The good news is that the CDMO business (contract development and manufacturing business under Astec Life Sciences) is doing extremely well and acts as a hedge against China. Godrej Agrovet’s crop protection business has been doing well, especially the new products we have launched from Japanese manufacturers.

What is your plan for Godrej Capital?

It is largely focusing on home financing right now but has moved on to other fields as well. The objective is to make it a broad-based firm. Naturally, it will go into fields where the group is the strongest. They started off with housing finance, now they are looking at agriculture finance and distributor finance, all of which will sit well with the group. We will have to keep investing for another two years or so. Godrej Industries will need to invest, and after that, it will probably be able to raise its funds, or the need for funds will be much less.

What technologies are you exploring, given the focus on climate?

One of the cheapest offsets is trees. Our oil palm business is a huge offset, considering in India, there’s no deforestation, unlike Malaysia and Indonesia, and almost all of it is grown in agricultural land. We sequester a lot of carbon, even when you are harvesting so much. Bamboo is similar, as you harvest the top of the bamboo, but the roots go deeper and keep sequestering carbon. (the process of reducing atmospheric carbon dioxide). We are looking at carbon sequestering opportunities – as climate change is a big problem. India is very well suited to use this solution. We have a huge amount of arable land.

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