Sanjiv Goenka says Rs 2 lakh crore market cap a conservative target for RPSG Group

What's the kind of investment and what's the kind of job creation expected?

We've identified an office in Exhibition Street, which is the main street in the CBD there and to begin with, we'll create about 500 jobs in Melbourne. But as our business grows, we hope to expand on that.

Any specific areas that you will be focusing on in terms of areas of expertise you will be offering to the Australian companies?

As a service provider, it's about what your client needs and how you can add value to your client. But today, the buzzword is generative AI. How you can use technology to give services cheaper, to add value, to give pointed, focused feedback and service, and we've been in some key sectors in the western part of the world. We hope to take that to Australia as well.

What's your growth outlook for Firstsource? And what are the markets that you're really betting on? Considering we have the US presidential elections coming, we're seeing a lot of protectionist noises coming from a big market like the United States of America. Are you looking at diversifying? You know, is that of concern to you?

Yesterday, the US Fed raised rates by 50 basis points, that's a good step. It helps us in certain segments of our business, for example, the mortgage business. What we've adopted for the company are simple building blocks.

We've built building blocks to grow our margins by 3 percent over the next 30 to 36 months and that is something that we are working on very aggressively. How do we take our growth rates to higher than industry? How do we mine our existing clients for a greater wallet share? So, of our 50 top business clients, we've had limited wallet share. Now, if we take that up to 8 percent or 10 percent, which is very doable, that in itself means an additional business of $550 million. And then we are changing the mix of onshore-offshore. We were very heavily skewed in terms of most of our businesses being onshore.

If we shift that ratio and we are successfully beginning to do that, that in itself changes the margin profile. We've invested in good G&A and we are beginning to see the results of this investment by a way of additional business. We are making inroads into world majors. We're doing well on the healthcare space. We're doing well on the BFSI space. We're doing well on the telecom space. We've made a beginning in the generative AI space. So, we're getting into value-added spaces. We're looking at adding margins. We're looking at adding revenues. So, it's about how do we grow the company such that by 2028, we can increase our bottom lines by two and a half times. That is the focus.

There are building blocks in place. We have a team that's driving the monitoring of each of these building blocks. So, it's about growing the business, growing margins and at the same time adding value to the customer. Simple. There's no great science in what we're doing. Yes, the science comes in technology, in the generative AI and those kind of spaces, but in terms of the building blocks, they're very simple blocks.

So, when you mentioned that the ratio of onshore versus offshore has changed, what was it earlier? What is it now? So, can we say that generative AI is going to be one of your key focus areas for the next one or two years? Is that what you're betting on for growth?

Generative AI is definitely going to be important for us. But what is equally important is to get the base business even more competitive than it is. So, we were significantly onshore and limitedly offshore. We have to change that ratio to the reverse. And we've made a beginning with one of our major telecom clients, or media clients rather. We've actually made a huge beginning and we've shared part of the upside of shifting the ratio with them. But it increases the margins overall. And the idea is to do this across clients. And when you can mine your existing clients for more business, you can generate additional margins. We had high attritions, we've cut down on those and we are going to cut down further. So, attrition is a high cost of operations. If you can reduce attrition, you can reduce your costs and thereby increase your margins.

So, tapping into the Australian market, Australia and New Zealand, what kind of other acquisitions can we expect going forward? Any other international markets that you're looking at? And within India, what are your expansion plans looking like?

So, we're expanding within India, we're expanding in South Africa, we're expanding in Australia, we're expanding in the US, we're expanding in the UK. We're looking at organic plus inorganic. And as we speak, there are multiple opportunities in the inorganic space that we're examining. But till they don't happen, they don't.

Any geography that you can share with us?

There are multiple geographies that we are looking at. But US, UK, South Africa, Australia, I think one or two geographies in Latin America. I think we're looking at expanding in all these.

That's for Firstsource specifically. Okay, moving on from Firstsource, in terms of your retail business, Spencer's, we saw a whole host of stores shutting down. So what's next for your retail business?

By March, the idea is to get to break even. So you cut down, you operate, we'll continue to operate in just two regions, which will be UP and East, (that's West Bengal), both of which are profitable for us. And we will close down the rest. So it's no more about vanity of becoming a national retailer, but revenues. It's about bottom lines. So with this, we expect to get to break even by March.

And do we see the business pivoting maybe to quick commerce, e-commerce?

It's happening. Quick commerce is also happening, but we're conscious that we don't do quick commerce purely for the sake of revenues or vanity, where we lose big sums of money. So it's a calibration between losses of that sector with revenues.

Okay, so you are thinking of getting into the quick commerce space?

How often do you really need something within 10 minutes? So, it depends on how you define quick commerce. Is the 10-minute space really a relevant space? We don't necessarily think so, but 30 minutes? Yes.

Okay. And will you go about it in a greenfield way or will you be looking at making acquisitions in this space?

No, we are not looking at making acquisitions in that space.

Okay, and what stage are you at in getting into the quick commerce 30-minute delivery space?

It's beginning to happen. It's slow. We will begin in selected geographies and we've started in the east. So we will use it in geographies that we operate in.

Okay, any timelines that you're working with?

Idea is to get to break even by March.

In an interview you had said that the group's market cap could exceed Rs 2 lakh crore within the next two-and- a-half years. I want to get a sense of the markets that you are looking at, the sectors that you're betting on for that kind of growth to come in. Also at a time when the RP-Sanjiv Goenka Group companies are doing very well,  we do see a slowdown coming in in the IT sector. There's a very muted guidance for the sector. So I just want to get a sense of what's driving your optimism.

It depends upon whether you believe Rs 2 lakh crore from Rs 85,000 crore is optimistic or not. I'm not so sure that's optimistic or it's challenging enough. It is challenging. We're going big on renewable energy and we expect a significant part of this is coming from the energy space. We are growing big in the chemical space. We're growing big in the carbon black space. We are getting into  chemicals which go into the EV batteries. Now that again, we expect to be a very big player contributor to this Rs 2 lakh crore.

Firstsource, we expect to be another big contributor. So these three put together, we expect that 75 percent or 80 percent of the Rs 2 lakh crore will come from these three. Then you have music and the whole content in the IP business which is growing and the moment the music OTT channels turn pay, it will increase profitability very dramatically and that will increase valuations. We are growing as it is by 23 percent year-on-year which grows irrespective of anything else. We are number one in the content space. So we do expect music to grow significantly. We expect our sports vertical to grow. Valuations have grown and we expect valuations to double from here on. So if you actually just make the total additions, it comes to way more than 2 lakh crores. So 2 lakh to my mind is a conservative number. But that's based on the assumption that there is no bear run in the market.

If you were to look at the investment climate in India, what's giving you optimism? What's giving you hope about the India story? And what reforms would you like to see Modi 3.0 deliver on to take the momentum forward?

Well, the biggest confidence booster is Prime Minister Modi and his government. I'm a firm believer in the “Modi Hai Toh Mumkin Hai” theory and he is the one who inspires us to think big and you know, he gives us that confidence that you can grow, please grow. That is so good and that is so encouraging. And you can always ask for more, but I think the government has done enough, has done a lot in terms of policies and a lot in terms of ease of doing business.

So if you ask me personally, there might be little things here or little things there, but overall I'm fairly happy with the environment that we have with the policies that we have, and I think it's now really up to us to go ahead, invest, grow.

So in terms of your investment plans for within the country, any specific states that you're looking at and what's the kind of cap spending that we can expect and the job creation that we can expect coming in from within India?

We would expect to invest about Rs 50,000 crore in the next few years and job creation is going to be humongous. I think we will add at least about 15,000 jobs to our existing 50,000. Yes, it's a very bullish phase for us. We will grow and grow very aggressively across all our segments and all our sectors, but it's based on very systematic solid plans which are worked at a very granular level.

And any specific states that you're targeting or you're looking at expanding?

We will go wherever opportunities present themselves, but we are very enthused by the opportunities that are presented in Gujarat, Maharashtra, Uttar Pradesh.

Any numbers you can share with us, Mr. Goenka, on the investments we can expect?

We are investing even in Tamil Nadu, even in Gujarat, even in Maharashtra, even in Uttar Pradesh. I continue to invest in my home state, West Bengal. So we're investing all over. We are setting up a new plant, a new carbon black plant in Andhra Pradesh. So we're growing actually literally wherever opportunities present themselves.

So in UP, any timelines that you can share? Any specific area of interest?

Well, power is certainly a very important area of interest. We already distribute electricity in the Greater Noida region and we do hope that we will be able to expand that. We want to get renewable power into UP and so, that's another area of growth that we're looking at. We're looking at setting up very major solar and wind projects in Rajasthan. So that's underway. We're looking at doing the same in Maharashtra, in Karnataka, in Tamil Nadu, in Gujarat. So we're literally growing all over.