Overseas contribute one-third of biz: Godrej Consumer
Godrej Consumer is betting big on the overseas market. A Mahendran, MD of the company says that overseas revenue contributes one-third of the current business.
September 25, 2012 / 18:01 IST
Godrej Consumer is betting big on the overseas market. A Mahendran, MD of the company says that overseas revenue contributes one-third of the current business.
In an interview to CNBC-TV18 he says, "We are expect fairly a robust growth quarter by quarter which you have been seeing in the last eight quarters, both organic as well as inorganic."The company has entered into an agreement for exclusive rights to include the hair extensions business in Kenya and exports to other East Africa geographies in its partnership with the Darling Group. The Godrej Darling business will include about 65% of the overall Darling Group business. In October 2011, GCPL had completed the acquisition of 51% stake in Darling Group in Mozambique.Mahendran also adds that price correction in soaps biz not on the anvil. The company is expecting volumes to sustain at current levels.Below is the verbatim transcript of the interviewQ: Your push towards inorganic growth continues. What else can we expect from Godrej Consumer Products Limited (GCPL)?A: You can expect a fairly robust growth quarter by quarter which you have been seeing in the last eight quarters, both organic as well as inorganic. As you might have heard, last week we did close the second phase of acquisition in Darling Group in Africa in the hair extension business. We acquired the business in Kenya. This Kenyan business supplies goods to the entire Eastern Africa, to countries like Rwanda, Uganda as well as Tanzania.Q: What part of your business comes from non-India destinations? Over there, are you confident of the growth continuing? What is the growth pace and is there any slowdown indication?A: One-third of our business comes from outside India. Within India domestic is about two-third. Growth rate, both within India as well as outside India is pretty healthy. Growth rate outside India is steady. We don’t expect the growth rate to come down outside India because we have chosen those assets which are growing. We have also chosen those geographies which are emerging in nature. So, we don’t expect that to come down.Q: The one story that’s often discussed these days is the fallen palm oil prices, that being a key constituent in terms of your raw materials. How much of that benefit will reflect in gross margins? Also, given that a lot of the other players will also benefit for example, HUL, do you see comparative pressure in terms of pricing increase now because you have leeway on the raw material?A: We don’t see that. As far as palm oil is concerned, we were getting sober price levels. But I don’t see any price increase on the soaps or personal wash segment at the moment. This year, at least for the next two quarters we should be stable in terms of price.Q: What percentage of your costs are really accounted for by these raw materials? I would assume that packaging and marketing would be a far more expensive venture than raw material?A: If you are talking only about palm, the total cost should go up to about 13%. Total raw material cost should be around 30-35% which includes packaging and other raw materials.Q5: If you are suggesting that pricing remains stable for the moment, then gross margin definitely is in expansion mode. It should improve, at least well on a YoY basis. What’s the volume growth picture looking like? Have you been able to maintain the levels we have seen in Q1 or has it softened? What has the trend been?A: We are expecting to maintain volume levels. At least in this quarter, the volumes are good. We are also anticipating improvement in margins. Margins will definitely have a positive effect if prices sober down further.Q: How are ad spends? What percentage of your sales would be accounted for by ad spends? We understand that ad spends were up last quarter to about Rs 153 crore. What would it be this quarter?A: We have the growth rate of ad spends which has got a direct link to our top-line growth rate. We will definitely improve our spends when you compare to the previous year. But that has got a direct correlation with the top-line growth also in terms of absolute spends. We will not be able to disclose what we are spending as a percentage because of our competitive reasons.Q: What are your inorganic intensions within the country itself? Can we get to hear something in 2012?A: If we get a good acquisition target in India, we will be happy to look at it. Are we looking anything right now? No, nothing at the moment. But we are always open to pro-domestic acquisitions. But nothing on the cards at the moment. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
