The Hindu Business Line : FMCG sector buoyancy to continue: Adi Godrej

THE buoyancy in the FMCG sector is expected to continue. "I can think of no negatives that could hamper growth, save unforeseen developments,'' Mr Adi Godrej, Chairman, Godrej Group, said.

On Friday, Godrej Consumer Products Ltd (GCPL) had reported encouraging second quarter results with a 60-per cent rise in profit after tax at Rs 27.81 crore (Rs 17.43 crore) on a 16 per cent growth in sales revenues of Rs 157 crore (Rs 135 crore).

"Sixty per cent growth in profit looks sustainable," he said, pointing out that the growth momentum was spread across urban and rural markets. The monsoon had also been good.

Of specific help to GCPL in second quarter sales had been its product line-up, consumer loyalty and sustained cost cutting. Additionally, improvement on the logistics side, implementation of VAT and manufacturing at excise-free locations in Uttaranchal and Assam had also provided benefits.

On the raw material side, Mr Godrej said GCPL had drawn considerable mileage from the fall in vegetable oil prices that gave the company an edge over competition that made mineral oil-based products. On the average, vegetable oil prices have been 15 per cent lower from a year ago. "We expect these prices to remain benign," he said when asked if the higher price of mineral oils could enhance interest in vegetable oils and thereby cause an increase in its price.

In any case, GCPL has taken forward cover in its vegetable oil procurement till March 2006, he said. Buoyed by the macroeconomic situation in urban as well as rural India, Godrej Agrovet and Godrej Properties were also expected to continue on their steep growth trajectory. The Rs 5,500-crore group believes that Godrej Agrovet and Godrej Properties - subsidiaries of Godrej Industries Ltd - would attain fast growth. "Both these businesses operate in a large space," Mr Godrej said.

Godrej Properties, which works on a model of joint ventures with landowners, is in the process of developing large projects in Mumbai, Pune and Bangalore. "We are setting up two software parks in Kolkata and finalising projects in Chennai," he said.

Godrej Agrovet is into animal feeds and has made a foray into the rural retailing business under the brand name `Aadhaar'.

"Aadhaar would be a major growth trigger for Godrej Agrovet," he said. The company has expanded the number of Aadhaar outlets from 14 to 18 during the September 2005 quarter. It eventually targets to have a few hundred such outlets over the next five years.

Aadhaar, though not a conventional retail outlet, is a supermarket, which retails agricultural inputs such as fertilisers, pesticides, animal feeds and small implements along with FMCG products and appliances. They also offer veterinary and soil testing services.

"Our expansion would be taken up in phases. We will revisit the project regularly to take a call on the investment need," Mr Godrej said. Godrej Agrovet's Aadhaar will have a synergistic link with the company's urban retail outlet called Nature's Basket, which entails retailing of fruits and vegetables in the metros.

At present, two Nature's Basket outlets have been opened in Mumbai. Aadhaar will provide the connectivity for sourcing fruits and vegetables for the urban market, Mr Godrej said.

While Nature's Basket would remain confined to fruits and vegetables, Aadhaar would expand its basket of offerings. "We will experiment with footwear and clothing," Mr Godrej said.

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