Godrej plays three aces in buyouts to fuel growth
The diversified Godrej Group is on an acquisition binge. With three acquisitions — Tura in Nigeria, Megasari in Indonesia and 51 per cent stake in Godrej Sara Lee — worth around Rs 2,500 crore already in the bag during the first five months of 2010, group chairman Adi Godrej is now eyeing a company in the Latin America and Sara Lee’s global household insecticide business.business Updated: May 18, 2010 21:53 IST
The diversified Godrej Group is on an acquisition binge. With three acquisitions — Tura in Nigeria, Megasari in Indonesia and 51 per cent stake in Godrej Sara Lee — worth around Rs 2,500 crore already in the bag during the first five months of 2010, group chairman Adi Godrej is now eyeing a company in the Latin America and Sara Lee’s global household insecticide business.
“This is part of our three-by-three strategy for global expansion in three areas — household insecticides, soaps and hair colours, in three continents of Asia, Africa and Latin America,” Godrej told Hindustan Times. He declined to give the sizes of the upcoming acquisitions.
The Rs 8,800 crore in sales group is now preparing to pay for these acquisitions by raising Rs 3,000 crore during May and June, primarily through debt.
The market seems to be backing these plans — the market capitalisation of the group’s listed entities jumped three-fold in 12 months to Rs 19,500 crore.
“I believe it’s a smart move as Godrej is getting into markets where opportunity is big,” said Pinakiranjan Mishra, partner and national leader (retail and consumer product practice), Ernst & Young. “These new territories will offer long-term potential.”
Through this, Godrej plans to double its topline (sales) in next three years. “We hope to grow 15-20 per cent organically and another 10 per cent through acquisitions,” Godrej said. “Together, we expect a compounded annual growth rate of 25-30 per cent over the next five years.”
As almost one fifth of the group’s FMCG sales comes from overseas market, Godrej feels that he tasted success on overseas acquisitions because of the ‘focussed approach’.
“Though these are new markets, the acquisitions are in product segments the company has expertise in,” said Anand Shah, FMCG analyst at Angel Broking.
Amid all this action, Godrej is also busy finalising plans to set up an additional soap plant in Gujarat with an investment of up to Rs 150 crore. “Likely choices were AP and Gujarat, but given the Telangana problem we are focusing on Gujarat,” he said.
When it comes to growth, Godrej expects the property business to lead it with a topline growth of 50 per cent and an even higher profit growth over the next five years. The Rs 456 crore Godrej Properties has projects across 10 cities. “This was not our primary business but having done so well and the urban land ceiling act withdrawn in Maharashtra, we have focused on it,” he said.