'Our diverse businesses are our strength': Jamshyd N. Godrej

Over the past few decades, most urban Indian families have been touched by the Godrej brand. From locks and safes to consumer products, electronics and real estate, the group has diversified into various businesses over the years. Helming the flagship company of the 125-year-old group is Jamshyd N. Godrej, Chairman & MD of Godrej & Boyce. In a freewheeling interview with Business Today’s Global Business Editor Udayan Mukherjee, Godrej explains what it will take to boost manufacturing in India, the synergy between his B2B and B2C businesses and the road ahead. Edited excerpts:

Q: You know, I spent most of my career looking at the stock market. And I would often wonder why your companies were privately held. Why was Godrej & Boyce not listed on the bourses? You have such iconic businesses. Why did you choose to never take the company public and do an IPO?

A: Well, it’s a complex issue. But you know, the main reason to go to the public is that if you need to raise finances for your expansion and growth, then you would go to the public. I think we always had strong cash flows and adequate resources for our businesses. And we never felt the need to go public.

Q: That’s one reason to go public. The other is to share your wealth and fortune with shareholders. Even going forward, you don’t feel that Godrej & Boyce and its allied businesses could ever see an IPO?

A: You know, nobody will ever say never. But for the foreseeable future, I don’t see that happening. Nobody can really predict exactly what should be done or can be done. So I would not rule it out, but I would not say that this is something that is being planned.

Q: Let me talk about the group that you are at the helm of because it has very diverse businesses. At one end you’re looking at appliances, which is very successful; and then there is aerospace, electronics, there’s capital goods. Do you want to keep it all under one umbrella? Or do you think these diverse businesses should be separated, even demerged, and they can be run as independent and strong entities on their own right?

A: That’s a fair question. My view is that the strength of Godrej & Boyce is the diversity of its businesses and the complementary nature of many of them. If you look historically, we expanded into the businesses in which we are for good historical reasons… now, whether those historical reasons hold for the future or not is a different matter. I have always found that there is enormous benefit to the diversity of our businesses. About two-thirds of our businesses are related to consumers, directly or indirectly. And one-third are essentially industrial businesses, which make things like forklift trucks, equipment for the oil and gas industry, etc. Newer businesses in the past 30-40 years have been aerospace and defence, etc. So, I see that there are a lot of commonalities in two-thirds of the businesses, which are all consumer-facing, and one-third which are all B2B facing. I look at it basically as these two major buckets that we work with; yes, they are different businesses, but there’s a lot of synergy amongst them.

Q: Now, that’s a fine distinction, Jamshyd, and I want to talk a little bit more about it. The government’s capex thrust has been something that has been very pronounced over the last couple of years. And we’ve seen the issues of inflation, Covid-19, etc., and consumption has gone through a few bumpy patches over the last couple of years. Keeping these in mind, which would you say is the stronger engine of growth at Godrej & Boyce? The B2B businesses or the B2C businesses?

A: Well, frankly, if you ask me, I think both and more or less equally. Because if you look at penetration levels of consumer-facing industries that we are in, it’s still very, very small… whether it’s home appliances, furniture, etc. So, I don’t see any major roadblock to increase the penetration in the consumer-facing businesses. India is a young country with greater disposable income, and we sell all over the country. And so, I don’t see that as a problem area at all. In fact, I see it as a big growth engine.

As far as our industrial businesses are concerned, again, because exactly what you said, you know, the greater emphasis on manufacturing, greater emphasis on investment-led growth… there will always be a very strong market for capital goods and for intermediaries… and even as far as defence and aerospace are concerned, till very recently, when the private sector was not being encouraged to enter into that field. Recently, the defence minister made a statement that 85 per cent of India’s purchases for defence and related items will be from Indian suppliers. So, I think that both areas have enormous opportunity to grow. There is no barrier as such in terms of the market.

Q: I want to speak specifically about Godrej Aerospace because it seems like an exciting space to be in at a time when there is finally so much of opening of doors from the government to private enterprise. Are you seeing it translating into orders on the ground for companies like Godrej Aerospace?

A: Yes, I think the interest for us is mutual. The government is interested in buying more from India, the government is interested in buying more of what we do. And I think that we are interested as much in doing that. I think as long as we have a healthy relationship with the government in terms of programmes, [this is a good business to be in]. This is one business, which has a very, very long gestation [period]. So, if I get an order today, it doesn’t mean you can deliver tomorrow. It takes two to three years, depending on the programme, to gear up, build knowledge and expertise in it, and to supply. So, it is a long-term business, it’s a business which essentially depends on competencies, which we have, and you can only build more and more on that. And as and when the government does open up these sectors for export, I think you will see more acceleration. Take satellites, for instance. ISRO has been putting satellites in space for decades. And if you see the market for satellites, it’s many hundreds of times what we are doing. Our own requirement is not being met fully. So, there is really no area that will not grow both in aerospace and defence. I think that as the industry matures, as the industry becomes more realistic on both sides of what the industry can do, I think there will only be a very healthy opportunity and a very healthy business for the private sector.

Q: I want to extend this question to the broader manufacturing team. And I want you to wear your former head of CII hat as well in this. All this excitement about India becoming a manufacturing destination… the China plus one opportunity, etc… is there an element of hype out there? Or do you believe that India can become a successful manufacturing destination? Some of our neighbours, like Vietnam, have done well on the low-end manufacturing front. Do you think we could make some serious inroads over the next few years?

A: It’s a very interesting question. It’s a question that I have been grappling with on many fronts, including with CII and other organisations. I think there is a poor realisation amongst various government authorities—not just at the central government level, [but] at every level… at the state-, local-, even at the village level—there is very little realisation of how complex manufacturing is. It’s not like a service industry like software, where as long as you have a place for people to work from, and they are well qualified, they can work from anywhere and do it.

I think manufacturing requires highly efficient factories, there’s a lot of interdependencies between manufacturers and suppliers, the supply chain has to work efficiently. So, there is just not enough realisation. My belief is that the reason why countries like Vietnam moved ahead of India on the manufacturing [front], the only reason is because they took care of the entire entry and operational part of how industry works with local bodies, with the central governments, etc. We have still not done it. In Vietnam, when you have an industrial park, the park authorities take care of every type of clearance, permission, etc., that you need. So, it is literally a one-stop shop, and it works very efficiently. I have my experience of that because we have been running a factory in Vietnam for 20 years. India has still not understood that it is the softer aspects of managing manufacturing, and industrial parks, etc., that are really crucial for efficiency. And I think when we realise that, it is going to be painful because what it means is that all government authorities—central, state, local—have to give up their power, so to speak, and designate one authority that will take care of all of this on their behalf, so that the industrial organisation is not running around getting permissions, etc. This is the most crucial thing about manufacturing. If we can nip this problem [in the bud], you will see that there will be an explosion in manufacturing.

Also, during Covid-19, when the supply chains were badly affected, a lot of companies in India realised that the only answer to that was you have to build more and more in India, which means that you have to support your supply chain, you have to work closely with them. And those who’ve done it have found that it is entirely possible—not in every case, but in most cases—to move the base to India, whether it came from China or Vietnam or Malaysia or anywhere. It is entirely possible to do that. But our mindset must be clear that you know what it takes to do that.

Q: It’s a very important point you raise, but is all this easier said than done? Because people in positions of authority, the very bodies that you spoke about, including the bureaucracy, why would they want to give it up? It’s not just a question of mere authority in name, but there are financial incentives or motivations to keep the status quo as it is today.

A: You see, it’s a very simple point. If the leadership of this country believes and wants industry to grow well beyond the 15-16 per cent [of the GDP] that manufacturing is today and has been for decades, there is no other way. It is really a strategic decision that has to be taken and implemented. I can’t say anything more than that. I think it has been demonstrated in lots of other places where this works, and I think it is the basis for a strong manufacturing industrial base.

Q: Let me come to your consumer businesses for a bit because you spoke about penetration earlier. And I want to start by asking you about Godrej Interio, because you’re making very significant inroads into the branded furniture space, which hitherto has not been how Indian homes consume furniture. What has been your experience like? And can you take Godrej Interio even into smaller cities and make it an even bigger brand success?

A: You know, right from the beginning, our furniture has been available in almost every town of any significant size in the country. We’ve always had the widest reach, and I think the point about branded versus non-branded, or, you know, what is otherwise called organised and disorganised, or unorganised sector, I think that the role of carpenters, the role of local industries, etc., is not going away… It’s going to stay. I think that the type of customisation that you can get from those aspects is very high. And I don’t see it going away in a hurry.

I think the important point here is that there is a greater realisation amongst the consuming public that brands are entering the country in a significant way. What we found [was] the biggest gripe that customers have when they let a carpenter into their house is that they take forever. What we are saying is that look, we are giving you some things that may be slightly more expensive. But it is something that you can decide, what you want and have it installed and done within a very short time. So, I think that proposition is what is appealing to people quite a bit. So you will see more and more of that happening. I think there’s a realisation also, especially among younger people, that they want to redecorate their homes more often; they would like more conveniences; and as their incomes allow it, they would want to do that. So you will see greater penetration of furniture brands, but I don’t believe that we will be displacing the billions of carpenters in the country who do this job very effectively. And we have to learn how to work with them... [and] make them our customers in a way.

Q: On the appliances front, how are you faring in the face of imported competition? How is Godrej Electronics or consumer electronics appliances able to deal with in terms of gaining market share from the likes of LGs and Samsungs and even imported Chinese products?

A: I think you rightly say that. The space for home appliances is a very competitive market. There’s no doubt about it. I think we are competing with all the major home appliance manufacturers in the world. There is room for everyone. Our approach has been to be as innovative as possible, and to be different, and especially to be more sustainable and greener. For instance, when in cooling appliances, you have to use the refrigerant. Now, the traditional way of using a refrigerant was that you buy a branded refrigerator. Twenty years ago, we worked with Swiss and German research organisations and we came up with alternatives. So the refrigerant that we use today is the only really green refrigerant that there is, with zero global warming potential in it; also, it is more energy efficient. And we have capitalised on that by saying that our range of products is extremely energy efficient. And we promoted the energy efficiency. So like that, I think we differentiate ourselves in every way, whether it is in cooling products and washing products, etc. So, our approach has been: be as innovative as possible. In fact, just a few days ago, we launched a range of air conditioners that will guarantee that they will not leak, because one of the big complaints of consumers is that, you know, when it’s humid, etc., there’s always water dripping and leaking, etc., that takes place. And we have devised ways to prevent that from happening. So we are depending on innovation to compete, and we are depending on sustainability and green technologies to compete. And that’s how we will work in a very, very competitive space.

Q: Is there any kind of formal succession plan?

A: My niece—my sister’s younger daughter [Nyrika Holkar, ED of Godrej & Boyce]—has been working with me for many years now. And she’s learning all about our businesses and what we do, how we approach brands. She’s a lawyer herself, so she supports our legal branding [and] helps with issues like M&A… so yeah, the next generation has to be groomed. But you know, just to put the record straight, the entire business has always been run by professionals. We have very few family members who have been involved in all our businesses. So essentially, it is a professionally run business. Yes, there may be a family member at the helm as a chairman, but that’s about it. But really, I strongly value the professional management of the organisation.