REPORT ON ADI GODREJ

SUBMITTED BY: BAKHAYALAKSHMI.B DINESH.J HABEEBUR RAHMAN KHAN.K JEYA DHIVYA.S MAHENDRAN.M NAGAPPAN.RM VIMALA.E

INTRODUCTION: NET WORTH AGE NATIONALITY RESIDENCE RELIGION MARITAL STATUS : $5.2 BILLION : 69 : INDIAN : MUMBAI : ZOROASTRIANISM : MARRIED, 3 CHILDREN

Adi Godrej was born on 3 April, 1942 in Mumbai. He is an Indian industrialist and the present Chairman of the Godrej Group, which includes many Indian companies. He is also the Chairman of 2 international companies; Keyline Brands, U.K and Rapidol, South Africa; as well as the Chairman of the Board of Trustees of the Dadabhai Naoroji Memorial Prize Fund. In 2010, Forbes estimated his net worth to be US $5.2 billion. FAMILY: Adi Godrej hails From a Business Family. His Father was a successful businessman and his mother was Mrs.Jai Godrej who spent her life as a school teacher at one of the Godrej schools. He was married to Parmeshwar Godrej and the couple has 2 Daughters and a Son. His eldest daughter, Tanya, is the Executive Director and President, (Marketing) of the Godrej industries Ltd. His second daughter, Nisa Godrej has joined the group after completing her studies from the Harvard Business School, USA. His Son Pirojsha Godrej finished his management studies from abroad and has now joined Godrej Properties. Godrej always taught his children the value of money and ensured that they went through rigorous training, together with other managers in the company.

GROWING UP: At the age of 17, Adi Godrej left India and got enrolled at the Massachusetts Institute of Technology (MIT) in the United States. Initially, he planned to study Mechanical engineering but ended up studying Management. He received his Bachelors and masters degrees in Management from the Sloan School, MIT in 1963.

THE BEGINNING: After completing his graduation, Adi Godrej returned to India and joined the family business The Godrej Group. The management had high expectations from him as he was the first business graduate to join the company. The Godrej Group was started more than a century ago and since then it manufactured Locks and Vegetable based soaps which displaced many foreign brands. The Godrej Group continued to function with an inflexible style of management which it followed under the controlled era of British rule, even after India's independence. Hence when Adi Godrej joined the group, he faced the challenge of modernizing the management structures and making them more flexible and systematic. His efforts towards process improvements led to the progress and growth of the Godrej Group. Adi started the group's movement away from family hegemony that inflicted many family businesses of that time in India. This was ensured by appointing CEOs from outside the Godrej family to head the various group companies. Adi instilled new business processes at a time when companies perceived change to be disruptive and threatening. He created an emotional connect of both his personal and the group's brand image with people by maintaining traditional middle class core values have remained middle class. From the beginning, Adi as a businessman was very tech-savvy took special interest in technology adoption which benefited his business. Under his leadership, the Godrej Group kept overhauling growth targets and reached great heights of success.

ACHIEVEMENTS: Adi Godrej is considered to be one of the top business icons of the Indian Industry as the Chairman of Godrej Group. His other achievements are: He is the Chairman of The Board of Trustees of the Dadabhai Naoroji Memorial Prize Fund. He is a recipient of several awards including the prestigious Rajiv Gandhi Award 2002. He has actively worked for the growth of a variety of industries by leading key trade and commerce organizations in the role of: A former Chairman and President of the Solvent Extractors Association of India, the Compound Livestock Feeds Manufacturers' Association, the Indo-American Society of the Indian Soap & Toiletries Makers Association, the Central Organization for Oil Industry and Trade. A member of the Governing Board of the National Council of the Confederation of Indian Industry.

He is also Chairman of Godrej Industries Ltd., Godrej Consumer Products Ltd., Godrej Sara Lee Ltd., Godrej Properties Ltd., Godrej Hershey Ltd., Godrej Hicare Ltd., Nutrine Confectionery Company Ltd., Godrej SCA Hygiene Ltd., Godrej Consumer Products (UK) Ltd., Keyline Brands Ltd. U.K. and Rapidol (Pty) Ltd., South Africa. The Godrej Group is one of Indias largest conglomerates He has also actively participated in imparting management

education as: A former Chairman of the Governing Council of the Narsee Monjee Institute of Management Studies. A former member of the Deans Advisory Council of the MIT Sloan School of Management and the Wharton Asian Executive Board. A member of Tau Beta Pi (The Engineering Honor Society). A member of the Governing Board of the Indian School of Business.

GODREJ GROUP-COMPANY PROFILE:

The group was established in 1897, and since then it has grown into one of Indias most trusted brands. Its Chairman is Mr. Adi Godrej. It is headquartered at Mumbai. The Group is one of the largest conglomerates in India at present. Over the years it has diversified into various industries including security, materials handling and industrial storage solutions, construction, information technology, furniture, health care, interior solutions, office equipment, appliances, precision equipment, machine tools and food-processing. The Godrej group is divided into two major companies which work independently: Godrej Industries Ltd. Godrej & Boyce Mfg. Co. Ltd.

The Group has many subsidiaries, some of them being: Godrej Consumer Products Ltd. (GCPL) Godrej Hi-Care Godrej Global Solutions Godrej Properties Godrej Hershey Foods & Beverages Ltd.

Today, Godrej has a customer base of over 470 million Indians and its turnover crosses US $2.6. It is present in more than 60 countries and 20% of its business is done overseas. To extend and improve its connection with its three-and-a-half million retailers, the group has started using IT to integrate its supply and distribution chain.

AWARDS AND ACHIEVEMENTS:

The Godrej Group's achievements have made the Group, one of the leading and most envied corporate houses in India. Some of them being:

In 1897, Godrej introduced the first lock with lever technology in

India. In 1902, Godrej made the first Indian safe. In 1920, Godrej made soap using vegetable oil. In 1955, Godrej produced India's first indigenous typewriter. In 1989, Godrej became the first company to introduce PUF ( Polyurethane Foam) Introduced India's first and only 100% CFC, HCFC, HFC free refrigerators.

Under the able leadership of Adi Godrej, the Godrej Group has been a recipient of many awards: GCPL was ranked 14th in The Best Companies to Work For study conducted by Business Today. GCPL ranked 6th in ET-Hewitt Best Employers of India survey. The Group received The Corporate Citizen of the Year award given by Economic Times. The Group's flagship brands; Goodnight, Cinthol and Ezee were selected Super brands by the Superbrands Council. GCPL was selected as a Business Superbrand by the Super Brands Council. GCPL recorded the highest returns in Corporate India on Capital Employed and Net Worth ratios. GCPL was given the Best Managed Workforce award given by Hewitt Associates and CNBC TV18. Godrej Industries received the Lifetime Achievement Award from CHEMEX Council. Godrej was ranked at 22nd position in The Brand Trust Report published by the Trust Research Advisory.

SOCIAL RESPONSIBILITIES: The Godrej Group has been actively involved in many philanthropic and social activities.

It has built schools, dispensaries and a residential complex for their employees and their families. It has also established many Trusts and Foundations which invest in education, health care and upliftment of the underprivileged. It has built many green environs, nurseries and gardens which show its love for nature. It is an active donor to the World Wildlife Fund in India and has also developed a green business campus in Vikhroli, Mumbai. The campus includes a 150 acre mangrove forest with flourishing wildlife and a school for its employees' children.

GROWTH STRATEGY OF GODREJ: Godrej Consumer Products is implementing a two-pronged strategy for growth, going forward. On the one hand, it is planning to expand its product portfolio and augment its market share in the domestic market. On the other hand, it has set sail for overseas markets. With the acquisition of Keyline brands in the UK in October 2005, it has made a strong entry into the UK market and is trying for a couple of more acquisitions. On the domestic turf, it is leveraging its leadership position in hair colorants and is diversifying its soap brands. Easing of competition pressure to some extent and resurgence in FMCG sales will only aid the company post better numbers. Godrej brands posted a 20 per cent growth in FY06. Analysts peg the sales growth in FY07 and FY08 at over 40 per cent and 25 per cent, respectively. With control over raw material costs through in-house production of fatty acids (highest in India), Godrej is expected to register better bottom line growth in the coming years.

OUTWARD BOUND: Godrej is going in for international acquisitions with twin strategies - diversifying risk and tapping new markets. It expects good synergies from the Keyline acquisition and a double-digit growth in these brands. It plans

to introduce one brand in India in FY07. Moreover, Keyline outsources half its production, a major chunk of which could come to Godrej. "We would use the existing distribution channel of Keyline brands to market Godrej products, with an eye on the Indian diaspora in Europe and the Caribbean," says Hoshedar Press, executive director and president. Analysts believe that Godrej is in the advanced stage of making a couple of acquisitions this year. The Keyline brands garnered revenue of 5.2 million (about Rs 44.08 crore) during November 2005-March 2006, while PBT was 0.6 million (about Rs 5.09 crore). Major Keyline brands include Adorn (hair spray), Aapri (skin care), Cuticura (talcum powder), Erasmic (shaving products) and Nulon (hand creams). Sunil Sapre, executive vice-president (finance & commercial), says, "Although exports account for a minuscule 3 per cent of the business, at present, we see a big opportunity in South East Asia and Africa." Analysts see exports growing to 20 per cent of the total business, including the Keyline brands. SEGMENT SENSE: The company is the leader in hair colorants with 40 per cent market share. It witnessed a 22 per cent growth in this business in FY06. It is setting up a new facility in Sikkim with a capex of Rs 10 crore (Rs 100 million). An analyst at HDFC Securities expects the company to maintain its market share, even as modern day evils like pollution are likely to create more users. The fashion segment in hair colours would be another driver. Sapre says, "Our focus would be on converting non-users into users, especially in the hair colour business." The soaps business of Godrej, which accounts for 63 per cent of its revenues, posted a 17.5 per cent growth in FY06, compared with the industry growth of 3.2 per cent. The company sees good growth potential in the business and stable vegetable oil prices (the chief raw material). With a 9 per cent market share in this segment, it stands second, though way behind the market leader Hindustan Lever which has about 45 per cent share.

Godrej aims to increase its share by 1 per cent every year with focus on freebies, which, however, could lead to some margin loss. Analysts feel that the high total fatty matter in Godrej's soaps at 76 per cent, vis-a-vis 6070 per cent in most other soaps, is a positive. In liquid detergents, the company is a market leader with its Ezee brand at over 80 per cent market share. But this segment may see limited growth, according to analysts. In the shaving cream category, the company is trying to grow with higher-end products and improved advertising, while its talcum powder business, where it banks on freebies, is likely to remain stagnant, according to them. COMPETITON: The company operates amid stiff competition. HLL is in a resurgent mode and ITC has plans to enter the soap business. There is competition from regional players as well. To fight competition, Godrej has been introducing new variants and brands. It recently launched its age control soap - Evita. Group chairman Adi Godrej says, "We plan to enter one new category of personal care segment every year, provided we are able to differentiate our products." In hair colorants, the company has products at all price points, from the Rs 7 powdered hair colour to the higher-end Renew and Coloursoft. Price wars in FMCG will remain and exert pressure on margins. But, Godrej hopes to maintain margins relying on certain internal economies. For example, it manufactures fatty acids, used in soaps, in-house and enjoys economies of scale in buying vegetable oils. Vegetable oil prices are likely to remain soft this year. TAX BENEFITS: The company will get 100 per cent excise exemption for 10 years in the north-east and Himachal and 100 per cent income tax exemption for five years and 30 per cent for another five years. Sapre says the extent of actual benefit from tax exemption will depend on sales. Analysts add that some states also offer transport/ power subsidies. To expand existing facilities and set up new ones, Godrej has earmarked a capex of about Rs 105 crore (Rs 1.05 billion) this year.

SECTOR STORY: The FMCG sector has been moving faster. The sheer size of the market in India provides good opportunities, despite competition and possible cost pressures if international raw material prices fluctuate. The sector is expected to grow to Rs 50,000 crore (Rs 500 billion) by 2010. Adi Godrej recently said, "Rising demand with higher disposable incomes, implementation of VAT in more states and tax-free zones would drive growth." VALUATION AND FINANCIALS: For FY06, the company posted 17 per cent growth in net sales to Rs 657.32 crore (Rs 6.57 billion), while the operating profit rose 36.8 per cent. The analyst at HDFC Securities says, "We expect the operating profit margin to grow to 21 per cent and 21.9 per cent, and net profit to rise 48 per cent and 34 per cent in FY07 and FY08 respectively." On trailing 12-month earnings, the stock trades in line with its peers. While Godrej trades at 25.5x, the competitors trade at - HLL: 28.62x, ITC: 24.7x, Colgate: 30.98x, and Nestle 29.30x. CONCLUSION: Adi Godrej has been a successful entrepreneur and his persistent efforts led to the restructuring of many company policies for meeting challenges of globalisation and liberalization. In 2000, the Group successfully completed the 10 year long restructuring process and formed a stand-alone company for each of its businesses.