Godrej Consumer’s getting picky about its portfolio
Godrej Consumer Products Ltd (GCPL) may see better-than-peers earnings growth ahead, under chief executive officer Sudhir Sitapati’s leadership. The company is taking the right steps to improve the overseas and India portfolio. It plans to bolster the financial position of the GAUM (Godrej Africa, USA, and Middle East) segment, which formed over 24% of GCPL’s consolidated revenue in the nine months ended December (9MFY24).
For this, it is reorganizing its business model in eastern Africa. It recently announced the divestment of its stake in the wholly-owned subsidiary—Godrej East Africa Holdings Ltd, Mauritius along with its step-down subsidiaries. Note that there was negative sales growth and lower profitability in the eastern Africa business.
The process is expected to dent revenue to the tune of ₹500 crore per year or about 4% of GCPL’s FY23 consolidated revenue. However, the net profit would increase by ₹50 crore a year. The deal is expected to be completed between March quarter (Q4FY24) and Q1FY25.
Further, GCPL aims to improve profitability in the USA and western Africa businesses. But currency headwinds are a roadblock. In the southern Africa and GAUM export geographies, GCPL plans to sustain the robust performance.
As a result, GCPL aims to clock Ebitda (earnings before interest, tax, depreciation and amortization) margin of over 15% in the next two years in GAUM versus the 9% levels seen historically. However, the restructuring in east Africa and the currency headwinds would mean that the revenue share of this segment would drop to less than 20% in FY25. Another GCPL international business segment—Indonesia is on the mend.
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