The Hindu Business Line : Godrej to invest more in agri, property biz

The group would continue investing in all its businesses but the need for funds at these two companies would be higher because of the organic growth possibilities inherent in the market. "They are growing faster and therefore capital needs would be higher," Mr Adi Godrej, Chairman, said.

Godrej Agrovet is into the animal feeds and rural retailing businesses while property development business is vested with Godrej Properties.

Both are subsidiaries of the stock market listed Godrej Industries Ltd, which has done well in processed foods but finds the going difficult in branded edible oils. The situation is similar for most players in branded edible oils.

While Hindustan Lever Ltd chose to sell its portfolio, Godrej Industries though viewing portfolio churn as a natural part of business growth, has disclosed no plans of exit.

Pointing instead to the company's promising subsidiaries, Mr Godrej said, "The macroeconomic situation is very favourable for these two businesses. GDP growth rates are good and consumer confidence is strong."

According to him, Godrej's market share in property development and rural retailing is small. "If you have a small share of the total market, opportunities for expansion are immense," he said.

The Rs 800-crore Godrej Agrovet's businesses in poultry, animal feeds and rural retailing have potential for exponential growth. Godrej Properties, which ended the 2004-05 fiscal with a profit before tax of Rs 9 crore, has a strong order book.

"For property development, we do joint ventures with landowners. We either share the profit, revenue or the space. We do not buy land. Therefore, ours is a risk-free and low capital-intensive model," Mr Godrej said.

The property development company is not a candidate for FDI though a listing of the two subsidiaries in the future is not ruled out.

"There are no such plans at present," he emphasised.

Godrej Agrovet's foray into rural retailing through supermarket chains under the name Aadhaar provides expansion opportunity in a completely untouched area.

The company has set up 14 Aadhaars in Maharashtra, Gujarat, Haryana, Tamil Nadu, Punjab and Andhra Pradesh.

"It is not a conventional retail model. These are supermarkets which retail agricultural inputs, FMCG products and consumer durables, both ours as well as that of competitors," he said.

Typically, an Aadhaar is set up in a totally rural area where consumers are truly dependent on the rural economy.

"We are not in towns," Mr Godrej said.

An Aadhaar store would typically retail products such as animal feeds, agricultural appliances, pesticides, fertilisers, soaps, toiletries and durables such as refrigerators.

It would also offer veterinary and soil testing services.

It also provides inputs in terms of sourcing fruits and vegetables for Godrej Agrovet's urban retailing of fruits and vegetables through its outlets named, Nature's Basket.

However, Mr Godrej said the business model of Aadhaar is not sourcing-driven but sales-based.

"We will definitely expand this to other States. The bigger the operations the better the return on investments as there are greater purchase efficiencies. We will look at different types of rural retailing such as clothing," he said.

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