See tremendous opportunity in agriculture space: Adi Godrej

In the second half of the year, goods and services tax (GST) will lead to strong growth in many industries where efficiencies, logistics, costs and consumption will improve. Overall gross domestic product (GDP) growth will improve. So he expects the economy to do well and some of the business to benefit from that particularly.

The company has no plans to list standalone business other than Godrej Agrovet.

Real Estate Regulatory Authority (RERA) will favour businesses which consumers trust, he further mentioned.

Below is the verbatim transcript of the interview.

Anuj: Timeline for Godrej Agrovet IPO and what kind of growth do you think this company could report going forward because we have seen some of your peer companies reporting decent growth over the last six months or so?

A: Godrej Agrovet should do well, monsoon is shaping up very well but unfortunately I am not permitted to talk about the IPO.

Anuj: I was referring to the kind of opportunity which is there in this particular space because some of your listed peers have done well?

A: We think there is tremendous opportunity in this space. We think that things in the agricultural sector are changing very dramatically and our R&D in Godrej Agrovet has led to very good forward looking products and performance.

Reema: If you could talk about the industry then, the poultry industry in particular. The reason we ask is because the market is practically rerated most of the poultry stocks so what is the industry growth looking like in FY18 and is it higher than what we have seen in the past?

A: I do not follow each sections’ details because I am not directly running Godrej Agrovet.

Surabhi: On a broader level, talking about GST, a lot of sectors where there is a big unorganised play, they perhaps will benefit with the move to organised, could that happen for the poultry space as well?

A: Yes, I think it could happen in many spaces that our companies operate in because it is not a question of small scale or medium scale versus large scale. It is more a question of any business which evaded taxes earlier will find it very difficult now.

So I think there will be a movement from tax evading businesses to tax compliant businesses with GST and this will apply to all sectors to my mind.

Anuj: You will be hampered by the fact that since you are in the process of IPO of Godrej Agrovet, you won’t be able to give us too much information but on a consolidated basis for Godrej Industries, most of your businesses are doing well, Godrej Properties clearly is doing well, Godrej Consumer we saw phenomenal numbers after the last quarter and the rerating in the stock, overall how is FY18 shaping up?

A: FY18 will be very good for Godrej Industries because as you rightly put it, the constituent businesses will do very well. I think one of the major reasons why Godrej Consumer products, Godrej Properties will benefit will be the introduction of the GST. I think in the second half of the year, the GST will lead to strong growth in many industries where efficiencies will improve, logistics will improve, costs will improve and in many cases even the rates of taxes have been very moderate. So I think consumption will improve. So overall GDP growth will improve. So I expect the economy to do well and some of our businesses will particularly benefit from that.

Reema: You are in the process of listing Agrovet but the standalone business also includes chemicals, estate management and finance investments etc, any plans of restructuring in Godrej Industries or listing of your sub-industries now?

A: No, other than Godrej Agrovet we have no plans at this point of time.

Surabhi: On the consumer side, is the entire supply chain now pretty much in sync with GST and can we start seeing normalisation as quickly as the second quarter itself, the restocking so to speak?

A: We feel things will improve. There was some downstocking in the month of June. In July and August things should improve but I expect strong benefits from the effects of GST from October onwards.

Anuj: A word on Godrej Properties as well now with RERA coming to effect, the feedback that we have is that larger players are going to get bigger as the smaller players will cave in. would that be a right assumption?

A: Yes, I think RERA will favour businesses which consumers trust and in our case we have already registered some of our new projects under RERA and as the governments all over the country get active on implementation of RERA, we think there will be some benefits to players like us. GST itself will also benefit players like us.