Western retail chains and distributors, especially from the US and Europe, create a "huge opportunity" for Godrej Enterprises Group (GEG) as they "derisk imports from China," says Executive Director and Chief Executive Officer (CEO) Anil G. Verma.
In an exclusive interview with Outlook Business, Verma said, "Our overall growth has been 2.5 to 3 times the growth rate of India’s GDP in the past few years."
"Hence, growing our exports, where we currently have a modest base, with a higher CAGR is very much possible," he added, talking about the group's aim of achieving 20–25% export growth by FY27. Verma also discussed GEG's expansion plans across its various businesses and the potential impact of tariffs proposed by US President Donald Trump
How do you see export and supply chain disruptions caused by tariffs affecting India business?
Most of the Indian businesses have done a fair bit of work on reconfiguring their supply chains post Covid-19. Domestic or Proximate suppliers are the new normal now that got further accelerated in India with the QCOs being announced. The PLIs announced by the GOI have also been spurred across Indian corporates to invest in local manufacturing for items and products that were imported.
We at Godrej have also worked on creating strong domestic resilient supply chains to secure our operations. In addition, we have worked on increasing our production efficiencies and stepped-up capacity utilization to manufacture some of the products in-house that we use to source earlier.
The announcement of basic tariffs and reciprocal tariffs in the recent past may have an impact on Indian industry for categories we export or are part of a global supply where the US is the end customer. However, it is an opportunity as well. What we visualize is many corporates, that hitherto chose to operate from low-cost countries are now expanding their manufacturing footprint to other geographies especially in India. We should make the most of this opportunity.
India as a country has a unique advantage of a large domestic market, presence of a stable union government and a strong legal framework. These factors contribute to derisking our exposure in international markets and provide a cover to Indian businesses from global shocks, as has been witnessed over the past few years during periods of uncertainty and volatility.
The government is pushing manufacturing across sectors—from semiconductors to solar and electronic equipment. How long do you think it will take for India to start seeing returns on these investments?
The government’s strong push to establish India as a global manufacturing hub for semiconductor, solar and electronics is both timely and can be transformative for India to emerge as a serious contender in high-tech manufacturing. This endeavour is beginning to attract FDI and technology alliances.
Large investments of this nature need sustained demand, and an environment of policy support coupled with infrastructure development at a fast pace. We are already witnessing returns in certain sectors like electronics and this success needs to be replicated by encouraging private companies to engage in capital expenditure.
Godrej Enterprise Group has set an ambitious target of achieving 20–25% CAGR in exports until FY27. Given the current macroeconomic environment, has the company revised its goals?
Our overall growth has been 2.5 to 3 times the growth rate of India’s GDP in the past few years. Hence growing our exports, where we have a modest base, with a higher CAGR is very much possible.
Historically, our export portfolio straddles categories such as Process equipment where we ship to all continents, Motor solutions which are exported to the US and products such Storage Solutions, Furniture, Safes and Locks where we have a strong play in MENA and part of the Far East Asia.
Going forward we believe there is a huge opportunity in the West especially in the US & Europe, for our Furniture, Security Equipment, Motor Solutions, Storage Solutions businesses and we are making progress on strategic partnerships with retail chains & distributors to be one of their prime suppliers. Many of them are wanting to derisk imports from China. The Far East Asian market, including Australia is attractive and a focus area for our Storage Solutions and & Office furniture products.
Incidentally for some of our categories such as Forklift Trucks we are the preferred source of manufacturing for some Global companies. This is a testament to our manufacturing prowess, quality consciousness and cost competitiveness, adding to our strength of providing a dependable and robust supply chain.
GEG has also announced its foray into battery storage and green energy solutions. What are your expansion targets for these segments?
We have initiated the manufacturing of zinc-based rechargeable batteries through a JV with US based Urban Electric Power (UEP). In the next decade, India is poised for an extraordinary surge in energy storage capacity and our Battery Energy Storage Systems (BESS) will enable energy transition to fulfil India’s ambitious clean energy goals.
While commercial production of BESS is yet to take-off, we remain optimistic about building significant scale and long-term value creation in this area.
Summer heat waves have reportedly boosted demand for electrical appliances in India. What trends are you seeing in your business?
We did see some heatwaves at the onset of summer but have since witnessed intermittent rains and generally lower temperatures in many parts of India. This may dampen the ambitious growth rate that the Indian Appliances Industry has planned for FY 26, based on the extraordinary sales of last year. Sales of cooling categories such as ACs, refrigerators, air coolers are driven by the duration and heat intensity of the summer season.
Overall, the industry AC sales grew by 30-35% last summer season, however, Godrej’s Appliances business registered more than 100 % growth in this category. This season the industry is expected to grow by 30-35%, and we are expecting to grow at double this rate thanks to our deeper distribution and impressive premium product portfolio.
Do you plan to invest in boosting capacity in the appliances business?
Poised to generate a billion-dollar business led by a 30% growth in topline, our appliances business is set for a remarkable growth.
We have already announced an investment of Rs 1000 million for ACs as well as Washing Machines to augment our appliances production capacity at our Shirwal and Mohali facilities and believe that this investment continues to be a strategic lever in Appliances business’ long-term roadmap to strengthen domestic manufacturing (derisk global supply chains) in line with the government’s 'Make in India' vision.
Mr. Verma, you also serve as Director of Godrej Infotech, the IT services arm of GEG. Weak discretionary spending has impacted India’s this key growth sector. Do you foresee any changes in the near future, especially given ongoing macroeconomic uncertainty?
While the current narrative is that of a slowing economy, it is relative to what the earlier projections were. The reality is India will continue to be a growth story in the global canvass. We believe that IT and Digital spends go hand-in-hand with GDP growth and hence the IT industry and Godrej Infotech should post robust growth going forward.
