The billionaire chairman of Godrej Industries, one of India’s oldest conglomerates, said he expected tough times for his businesses in Africa as companies braced for a global economic downturn.
Godrej has expanded beyond its home market of India into Latin America, Indonesia and Africa, where it sells products ranging from pesticides to hair extensions. But Africa could be quite a challenge in the coming months, said Nadir Godrej, the company’s president and managing director. “Even now it’s difficult,” he added.
The more than century-old conglomerate is among emerging-market companies bracing for an expected slowdown as central banks wind back pandemic-related stimulus and raise interest rates.
The group’s businesses range from palm oil holdings and production to agrochemicals and skin care, attracting savvy international investors. Singapore’s sovereign wealth fund Temasek has a $108 million stake in listed chemical subsidiary Godrej Agrovet.
In Africa, the Godrej Consumer Products Group unit focuses on hair products and has acquired several personal and hair care brands since 2006. A quarter of revenue in the 2021-2022 financial year came from Africa, the US and the Middle East. But annual profit from Africa was “very poor” in the last quarter due to “stock theft” in South Africa, the company said.
“We’ve done a lot of different acquisitions in Africa and it’s hard to put them together into a coherent whole,” Godrej said. “But we have a new initiative to improve management and build synergies.”
In contrast, Godrej said that “in India, we are not seeing a big impact of the global recession. We seem to be pretty insulated from that.”
Despite his optimism, the latest quarterly results of subsidiaries of Godrej Industries were too poor. The group’s consumer products unit had a “seemingly poor” start to the financial year, its CEO Sudhir Sitapati told analysts, with quarterly revenue falling in Indonesia and Latin America but rising in India and Africa.
Godrej Agrovet increased quarterly volumes but said profitability was squeezed by rising raw material prices and falling domestic prices of soybean meal, used for animal feed, leaving it with a costly backlog. Managing director Balram Singh Yadav told analysts that its crop protection business had been “stuck a lot” due to outdated systems.
India’s strong post-pandemic recovery has been threatened by wild swings in commodity prices since Russia’s invasion of Ukraine, which has pushed inflation to more than 7 percent. New Delhi has neither condemned nor supported its long-time partner Russia’s war, but Indian oil refineries have benefited from diverted and discounted Russian crude.
Godrej said his father instilled in him an “anti-authoritarian” streak and that his “sympathies are much more pro-Ukraine, but I kind of understand where they are [the Indian government] coming”.
He added that in the case of the chemical manufacturer Astec Lifesciences, majority owned by Godrej Agrovet, sales to Russia declined. “They only sell prepaid and they were just about to send something that the Russians paid for in advance, but then the ship refused to carry it because of sanctions.”
India’s central bank last month introduced a scheme to allow payments in international trade to be made in rupees, a move widely seen as helping Russian and Indian companies avoid sanctions problems by avoiding the dollar. Godrej said the company had not “yet” considered using a rupee settlement, “because so far the Russians are able to pay, either through unsanctioned banks or other means. But when we might look at it.”
He said India is likely to benefit from Russia’s war in Ukraine in the form of “getting cheaper raw materials [than] the rest of the world — perhaps fertilizers, crude oil — and to the extent that Russia is forced to sell cheaper.”
Godrej, an avid amateur poet who studied Russian and other languages, presides over the family group from an office in the company’s eastern business hub in Mumbai, overlooking the mangrove forests the family has owned for decades.
Founded in 1897 by Godrej’s great-uncle Ardeshir, a Parsi entrepreneur, the family business made locks, soaps and safes and produced 1.7 million ballot boxes for independent India’s first elections.
Ardeshir died childless and left the business to his three nephews, including Godrei’s father. While the businesses are run professionally, the fourth generation of Godreys is now joining the group.
“Currently, there is no family member who is the CEO,” Godrej said. “However, we insist on playing a strong role in governance and strategy.”
Like many Indian family conglomerates, the Godrej empire has its own succession problems.
Nadir, who was named chairman of Godrej Industries late last year after his elder brother Adi Godrej became chairman emeritus, has to deal with a complex separation of businesses between his side of the family and that of his cousin Jamshyd Godrej.
Jamshyd is chairman of privately held Godrej & Boyce, which covers 10 industries, including aerospace, and owns large acreage around Mumbai, India’s financial capital.
Last year, both sides of the family began talking about officially disbanding the group. Godrej did not want to answer questions on this topic.