Indian conglomerate Godrej Industries braces for ‘tricky’ overseas markets

The billionaire chair of Godrej Industries, one of India’s oldest conglomerates, has said he expects a difficult time for its businesses in Africa, as companies brace themselves for a global economic downturn.

Godrej has expanded beyond its Indian home market to Latin America, Indonesia and Africa, selling products from pesticides to hair extensions. But in the coming months, “Africa could be quite tricky”, said Nadir Godrej, the company’s chair and managing director. “Even right now it’s tricky,” he added.

The more than a century old conglomerate is among the companies working in emerging markets that are positioning for an anticipated slowdown, as central banks withdraw pandemic-related stimulus measures and raise interest rates.

The group’s businesses range from property and palm oil production to agrichemical products and skincare, attracting blue-chip international investors. Singapore sovereign wealth fund Temasek has a $108mn stake in listed chemicals subsidiary Godrej Agrovet.

In Africa, the group’s Godrej Consumer Products unit focuses on hair products and has bought several personal and haircare brands since 2006. A quarter of revenues for its financial year 2021-22 came from Africa, the US and the Middle East. But annual profits from Africa were “very poor” in the final quarter because of “theft of inventory” in South Africa, the company said.

“We made many different acquisitions in Africa and it is challenging to put them together as a co-ordinated whole,” said Godrej. “But we have a new initiative to improve governance and build synergies.”

In contrast, Godrej said that “in India we don’t see much of an impact of the global recession. We seem to be fairly isolated from it.”

Despite his optimism, the most recent quarterly results from Godrej Industries subsidiaries were underwhelming. The group’s consumer products unit had an “optically poor” start to the financial year, its chief executive Sudhir Sitapati told analysts, with quarter-on-quarter revenue falling in Indonesia and Latin America, but rising in India and Africa.

Godrej Agrovet increased quarterly volumes, but said profitability had been squeezed by rising raw materials prices and a crash in the domestic price of soyabean meal, which is used for animal feed, that left it with an expensive backlog. Managing director Balram Singh Yadav told analysts that its crop protection business had “goofed up big time” because of outdated systems.

India’s robust post-pandemic recovery has been jeopardised by wildly oscillating commodity prices since Russia’s invasion of Ukraine, which have pushed inflation to more than 7 per cent. New Delhi has neither condemned nor endorsed its longtime partner Russia’s war, but Indian oil refiners have benefited from diverted and discounted Russian crude.

Godrej said his father instilled him with an “anti-authoritarian” streak and that his “sympathies are far more with Ukraine, but I sort of understand where they [the Indian government] come from”.

He added that in the case of Astec Lifesciences, a chemical manufacturer majority-owned by Godrej Agrovet, sales to Russia had fallen. “They’re only doing sales on prepayment and they were just about to ship something where the Russians pre-paid and then the ship refused to carry it because of sanctions.”

India’s central bank last month introduced a scheme to allow payments on international trade to be made in rupees, a move widely seen as aiming to help Russian and Indian companies avoid sanctions issues by bypassing the dollar. Godrej said the company had “not yet” looked at using rupee settlement “because so far the Russians are able to pay, either through non-sanctioned banks or other means. But we could look at it at some time.”

He said that India was likely to benefit from Russia’s war in Ukraine in the form of “getting cheaper raw materials [than] the rest of the world — maybe fertiliser, crude oil — and to the extent that Russia’s forced to sell cheaper”.

Godrej, a keen amateur poet who has studied Russian and other languages, chairs the family-owned group from an office in the company’s east Mumbai business centre, overlooking mangrove forests that the family has owned for decades.

Established in 1897 by Godrej’s great uncle Ardeshir, a Parsi entrepreneur, the family business went on to make locks, soap and safes, as well as manufacturing 1.7mn ballot boxes for independent India’s first election.

Ardeshir died childless, leaving the business to his three nephews, including Godrej’s father. While the businesses are professionally managed, a fourth generation of Godrejs is now joining the group.

“Right now, there is no family member who is a CEO,” said Godrej. “But we insist on playing a strong role in governance, as well as in strategy.”

Like many Indian family conglomerates, the Godrej empire has its share of succession issues.

Nadir, who was appointed chair of Godrej Industries late last year after his older brother Adi Godrej became chair emeritus, must navigate a complex separation of businesses between his side of the family and that of his cousin Jamshyd Godrej.

Jamshyd is chair of privately held Godrej & Boyce, which straddles 10 industries including aerospace and owns swaths of land around Mumbai, India’s financial capital.

The two sides of the family began discussions on a formal split of the group last year. Godrej declined to answer questions on the subject.