Fifty years after India got rid of its foreign shackles, and six years since the process of liberalisation was kicked off, some nagging questions continue to crop up: Can Indian brands hold their own in this period of turbulent change? Are Indian companies ready to face intense international competition? While the industry is divided over these issues, one of India's oldest corporate houses --Godrej -- has no doubts on this score. Godrej Soaps managing director Adi B Godrej articulates his opinion to Namrata Singh of The Financial Express on what liberalisation means to the country, industry and his group:

Deregulation of economy

Our group welcomes the deregulation of the Indian economy. However, it is not happening as rapidly as it should. In reality, half the process of deregulation has been done, as is necessary, and this has had a positive impact. For instance, inflation is under control and so is forex in a good macro-economic situation. The growth rate is at a moderate level of 6-7 per cent. It can rise to the 8-10 per cent level easily, if we not only liberalise and globalise but also become more efficient. The compound arithmetic of growth is extremely important. If we are growing at the rate of 6 per cent, it would take, say, 50 years to achieve our goals. If growth is increased then it will take us that much less time to achieve the objectives. For this kind of growth we need to inject the scientific temper and modern thinking, which I don't see happening. Modernisation, however, does not mean Americanisation.

Impact of liberalisation

For industry, liberalisation has been very good. However, it does not mean that there will not be any hiccups. The section of individuals or companies which does not keep pace will be negatively affected. Success has got to do with an individual's calibre. I feel deregulation should be carried out in a step-by-step manner but the pace should be fast. Part of the problem industry and companies face is modernisation and not necessarily liberalisation. For instance, irrespective of liberalisation, computerisation is here to stay. A lot of people are mistaking modernisation with liberalisation.

The Godrej group

The Godrej group will benefit most if India's economic growth is strong. We understand that competition will increase, pressure to perform and excel will increase. To be able to survive and thrive in a totally deregulated environment will be more difficult. I welcome these challenges. The main advantage the Godrej group has is that it is closely held. The holding is 100 per cent in most of our companies. In joint ventures, we either have 49 per cent stake or a 51 per cent. In our other public limited companies it is over 70 per cent. This has made us more competent. We are very clear in our minds; we do not see any major dilution in the future. We do not want growth at the expense of control. For us, financial resources are not a constraint to growth, but managerial resources.

Competition from MNCs

Competition with MNCs is nothing new to us. We have been competing with them ever since they set foot in India. Three core competencies of our group are: precision and engineering skills, oils & fats technology, and the knowledge of India's marketing and distribution mechanism. As far as possible, we would want our companies to leverage on any two of the these competencies.

Diversification

Most probably, the group will not venture into a new field like setting up a caustic soda plant, or getting into other unrelated businesses. We have our hands full within the existing business anyway.

Globalisation

My feeling is that India will spawn at least 20 MNCs in the next 20 years. And we hope to be part of this. Today, very few companies have made a mark globally, like the Aditya Birla group. Our group has gone global with a company in Singapore. We are also looking at other countries like Vietnam and Oman.

Mergers & acquisitions and threats to Godrej

The pace of mergers and acquisitions will definitely increase. Smaller companies may be taken over or merged. Some of our businesses are weaker than others. We see the possibility of divesting part of our businesses, if there is the right opportunity. We are open to joint ventures and acquisitions.

Viability of the Godrej brand

The Godrej brand is one of the 10 strongest brands in India. It has been around 100 years now, and it is still going strong. Talking about the life of a brand, I think the Godrej brand (the umbrella brand) is as good as eternal. Among other strong brands, Cinthol, GoodKnight, Storwel and Jumpin' will thrive and we will continue to invest in our brand promotion activities. (Cinthol itself is a very old brand for the group. It was launched in 1952).

Soaps and detergents industry

It is a very mature market with penetration levels peaking at over 95 per cent in the urban and rural markets. India is the largest manufacturer of soaps and detergents in the world. I do not expect volumes to exceed single digit growth ever now. The growth in value terms, on the back of growth in population and higher incomes, will record 20-30 per cent. This is so because companies will gradually upgrade their products/brands to the premium end of the market. Major growth will come from other personal products segment.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.