Rediff On The Net Business News: The Business Interview/Adi Godrej


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May 1, 1996

'Any government can come in and reverse the reforms'

Five years down the road of economic reform India has risen from dismal fiscal isolation to being reckoned as a major force representative of enormous potential. As chairman of one of the country's premier business houses, Adi Godrej, talks to Rediff On The NeTFeature Writer Archana Masih about his assesment of liberalisation, his vision for the Rs 12 billion Godrej group of companies and the numerous factors India needs to incorporate to become an economic superpower.

With the process of liberalisation taking off, what changes has Godrej witnessed in the last few years? How easy or difficult has it been for your managers to adapt to the ambience of change? What have you done internally to assist your managers to cope with change?

The main change is that the Indian economy has globalised. The restrictions on business have been eliminated. Freedom to operate has increased considerably. Freedom to restructure has been instituted for the first time in India.

The managers at Godrej have adapted very well to this change. I don't think it is a very difficult transformation to adapt to. It is something that everybody wished for all along. I think our people have done very well and our policies have also changed to permit people to adapt to the change. For example, prior to the change we were a private company, we had no joint ventures. We have changed that considerably because under liberalisation we have been allowed to price our shares as we wish which has enabled two of our companies to go public.

Earlier, we were not allowed joint ventures under the regulations then prevailing. Now that we are allowed (to do so) we have taken some of our companies into joint ventures. We had restrictions on what we could do internationally, now we have increased what we are able to do internationally. All these restrictions being removed have helped us change and expand.

Keeping pace with the impulse of growth Godrej has struck strategic alliances with powerful companies. Godrej Soaps's joint venture with Procter & Gamble, for instance, or Godrej & Boyce's venture with General Electric. These alliances have sometimes been interpreted as Godrej selling out to the MNCs rather than fighting them. Would you agree with such a criticism?

No, not at all. I think it is very important that we understand our strategic positioning in each industry. What is in the interest of our business in the long term. We already have multinational competitors in India. It will be foolhardy for us to try and fight more and more multinational competitors without strengthening our own base. So strategic alliances help us compete better.

It is certainly not a sellout because in all our strategic alliances, all our joint ventures, we have majority shareholding. In some cases we manage the joint ventures. In our General Electric joint venture we have 60 per cent shareholding and we continue to manage (the company). With P&G we have a strategic alliance; P&G has no shareholding at all in Godrej Soaps. We control the business.

How successful have these alliances been for Godrej? Are you satisfied with what has been achieved? In an alliance where the MNC is involved in the distribution network, isin't this indicative of lesser responsibility with the MNC, making it easier for it to abandon the relationship if the product collapses? Doesn't it endanger the local company?

By and large I am satisfied by the alliances.

I think local companies should think of all these points before getting into such alliances. They should clearly define what the options are, what the changes could be. There will be some which will not succeed, there will be others that will succeed. It is part of business life.

Adi Godrej continued ,

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