Godsoaps 20101026

Godrej Industries Ltd. (GIL) CMP: Rs. 219.
15
Management Interaction Note October 26, 2010

HDFCSec Recommended
Scrip ID Industry CMP Action Averaging Band Target Time Horizon
Gradual buy at CMP
GODINDEQNR Diversified Rs. 219.15 and add at dips Rs. 196 – Rs. 205 Rs. 265 1-2 quarters
An integrated player in the Agri chain that could benefit from rural growth*
Agri Inputs
(pesticides, Other
Sold for other Raw
plant plants/crops
growth Material Cattle Feed
promoters
etc)
Processed
Poultry
Residue Animal Aqua Feed
Feed
Oil Palm
fruit bunch
Poultry Poultry
Crude Palm Sold Feed
Oil
Oleo Value
Chemicals added
Chemicals
Veg Oils
FMCG Retail Food &

products (Natures Beverages
Basket)
Existing Integration (not necessarily captively used) Possibility of Integration
*Apart from holding large stakes in Godrej Consumer Products Ltd (GCPL) and Godrej Properties Ltd (GPL)
Company Background
The Godrej group, a multi-billion dollar conglomerate largely owned by the Godrej family, established Godrej Industries Ltd
(GIL). It was called Godrej Soaps until March 2001 where after the consumer products division was demerged to form Godrej
Consumer Products Ltd (GCPL) while the residual business was named Godrej Industries. GIL has a diversified business
model with presence in chemicals, animal feed, agri inputs, oil palm, packaged foods, consumer products, confectionery items,
niche food retail, and real estate management, either directly or through its subsidiaries. Its achievements include being the
leader in the oleochemicals and surfactants, animal feed, oil palm plantation, soymilk and processed chicken businesses and
being the third largest sugar confectioner in the country.
It holds stake in two listed group entities – 23.4% in Godrej Consumer Products Ltd and 69.4% in Godrej Properties Ltd.
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Business Structure
GIL’s business structure can be described in the following manner:
GIL
Own business Stake in other

Chemicals, Estate Mgmt, Companies (%)
Finance & Investments
Godrej Agrovet Godrej Godrej Hershey Godrej Natures Basket Other

75.2% Consumer 43.4% Properties 100% Investments
23.4% 69.4%
Godrej Nutrine Various SPVs

Household Confectionery
Products Ltd. 100%
Keyline,
Rapidol, Godrej
Hygeine etc.
Golden Feed Godrej Oil Palm Cauvery Oil JVs

Products 90% Palm Godrej Tyson Foods
100% 90% ACI Godrej Agrovert
Godrej IJM Palm Oil
Godrej Goldcoin
Aquafeed
Shareholding Pattern
Particulars No of Shares (In lakhs) % Holding

30/09/2010 30/09/2010 30/06/2010 31/03/2010 31/12/2009 30/09/2009
Promoters 2512.3 79.1 79.1 79.1 79.1 79.1
Foreign Institutions & Individuals 84.6 3.9 2.7 2.6 2.7 2.4
Indian Institutions 138.0 4.1 4.4 4.3 4.5 4.7
Non Promoter Corporate Holding 124.9 3.8 3.9 3.7 3.9 3.7
Public & Others 316.4 9.1 10.0 10.3 9.9 10.2
Total 3176.3 100.0 100.0 100.0 100.0 100.0
Among institutions, State Bank of India Equity holds 2.51% as on September 30, 2010 down from 4.32% as on September 30,
2009 and IL&FS Trust Company Ltd holds 3.15% as on September 30, 2010 up from 3.14% as on September 30, 2009. FIIs
hold 3.61% stake in the company.
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Businesses
Chemicals:
Value Chain of Oleochemical Industry –
Crude RBD Palm

Palm Oil Oil
Crushers/ Refiners
Millers
Fatty Acids, Specialty
Palm Fruit Fatty Alcohols, Fats
Esters, Glycerine
Specialty Fats
Basic
Oil Palm Oleochemicals
Plantation
Soaps, Soap
Cosmetics, Noodles,
Pharma, Esters,
Rubber, Methyl
Plastic, Food Stearates
additives,
Confectionary
Downstream
Oleochemicals
End User
RBD= Refined, bleached and deodorized
Value Chain for GIL –
Sold
Sold externally Sold
externally externally
Used Fatty Used

Fatty Alcohols /
Oils, Fats and Surfactants
Acids Alpha
Chemicals
Captive Olefin Captive
Alpha Olefin
purchased
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Production & Turnover –
Production & Turnover FY09 FY10

Value Value
Unit Installed Cap Production Cap Util Qty Sold (Rs. Cr) Installed Cap Production Cap Util Qty Sold (Rs. Cr)
Fatty Acids MT 73300 50969 69.5% 51352 275.54 73300 59488 81.2% 58888 316.24
Glycerin MT 8280 8663 104.6% 8904 48.32 8280 9230 111.5% 9120 31.92
Alpha Olefin & precursors MT 65000 47154 72.5% 47959 322.48 65000 49696 76.5% 49598 289.43
Refined Oils & Vanaspati MT 38700 9189 23.7% - - 38700 6354 16.4% - -
Synthetic Detergents/Surfactants MT 29250 22738 77.7% 15137 109.88 29250 23126 79.1% 19089 134.40
Medical Diagnostic Products 1.60 0.00
Others 58.41 44.38
Total 816.24 816.37
(Source: Company Reports, HDFC Sec Research)
Background – GIL is considered the pioneer and is the leading manufacturer of Oleo Chemicals and Alpha Olefin Sulphonate
(AOS). It is a major player in many industrial chemicals in India such as Fatty Alcohols, Fatty Acids, Glycerin (by product) and
surfactants such as Sodium Lauryl Sulphate and Sodium Lauryl Ether Sulphate. Close to 60% of the chemicals produced are
sold in India while the rest are exported to 62 countries across 6 continents.
Fatty acids, fatty alcohols and surfactants contribute ~40%, ~35% and ~20% of the Chemical business revenue respectively.
Fatty acids comprise stearic acid, oleic acid and specialty fatty acids. The segment grew 9% in value terms and 8% in volume
terms in FY10. Fatty alcohols grew 3% in volume but fall in commodity prices resulted in 11% fall in revenue in FY10. Just-in-
time supply to Europe helped improve the cost structure in FY10. Surfactants experienced a 41% value growth in FY10 due to
higher amount of forward integration. Glycerin contributed 4% of the division turnover in FY10 but revenues fell 36% from the
previous year due to value de-growth. Q1FY11 saw a ~21.7% increase in revenue and ~38% increase in PBIT from the
chemical business.
International prices and demand have shown recent improvement and the competitive advantage of the company producing
higher chain alcohols should shield it from the threat of oversupply in the market. International penetration continues via R&D
approvals from multinationals.
FY10 Revenue Distribution FY10 Domestic vs Export Sales
17%
42% 38%
62%
37%
4%
Fatty Acids Glycerin

Alpha Olefin & precursors Synthetic Detergents/Surfactants Exports Domestic
Source: Company Reports, HDFC Sec Research Source: Company Reports, HDFC Sec Research
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Major raw materials used are vegetable oils, their derivatives (palm oil derivatives) and Alpha Olefin (mostly imported from
Southeast Asia).
Raw Material FY09 FY10

Value Unit cost Value Unit cost
Quantity (Rs. Cr) (Rs.) Quantity (Rs. Cr) (Rs.)
Oils & Fats (MT) 103421 398.94 38574.37 127646 397.32 31126.71
Chemicals, Catalysts (MT) 22412 102.08 45547.03 22540 95.12 42200.53
Packaging & other 36.92 37.87
Uses – Fatty Acids are commonly used in cosmetics (shaving cream, facial cream etc), rubber processing (tyre) and PVC
processing. C16-C18 alcohols are used in cosmetics and industrial applications, C12-C14 in personal care and detergents and
C22 in personal care and other specialty products. Glycerin is commonly used in humectants, cosmetics and pharmaceuticals
and surfactants are used in detergents, oil drilling, shampoo, cosmetics and toothpaste. The products provided by the
company are commonly used in cosmetics, tyres, detergents, pharmaceuticals, cigarettes and toothpaste among the broad
variety of their applications.
Clientele – Major clients include large FMCG MNCs and specialty chemical manufacturers. More than half the sales are made
to OEMs and the remaining through distributors. GIL has distributors in key areas to cater to the needs of the smaller
customers on a pan India basis.
Industry –
• The global oleochemical industry is witnessing a migration of global capacity from developed countries to developing
countries. This rapidly growing oleochemical industry in East and South Asia faces potential trade barriers to end product
exports as a result of tariff and non-tariff barriers in importing countries.
• In recent years, global fatty acid consumption has approached 5 million tonnes per annum, fatty alcohol consumption has
approached around 2 million tonnes, and glycerin consumption is closer to 1 million tonnes.
• Geographically, consumption is still dominated by the developed countries, whereas output is increasingly dominated by
Asia, in particular Southeast Asia.
• Glycerin, though, is an exception, because the large bio-diesel industry has kept Europe as the largest region for glycerin
production resulting in the fall in glycerin prices around the world, even as bio diesel production is ramped up.
Plants –
• Presently, fatty acids, glycerin and surfactants are manufactured at two plants (Vikhroli and Valia) and fatty alcohol is
manufactured only at Valia.
• A new oleo chemical plant is under construction at Ambernath at a cost of ~ Rs. 230 cr and is expected to be operational
by FY13. The new plant will not manufacture fatty alcohols and will increase oleo chemical capacity by ~80,000 tonnes.
• The company is also in the process of adding manufacturing capacities for specialty fatty acids at Valia.
• The uptrend in international prices and demand provide a bright future along with the increasing profitability of specialty
derivative products of fatty acids and alcohols due to change in product mix.
Competition –
• GIL’s competitors include VVF Ltd and Jocil Ltd, however their magnitudes of operation are not comparable. VVF reported
net income, operating profit and net profit of Rs. 1317.6 cr, Rs. 21.4 cr and -146.7 cr respectively in FY09. Jocil reported
net income, operating profit and net profit of Rs. 296.35 cr, Rs. 37.73 cr and Rs. 21.37 cr respectively in FY10 and Rs.
186.02 cr Rs. 20.78 cr and Rs. 9.69 cr respectively in FY09.
• VVF and Jocil’s product profiles include (in addition to fatty acids and its derivative products) personal care products and
contract manufacturing for other FMCG companies, which is different from that of GIL’s chemical segment.
• GIL dominates the industry with ~35-40% domestic market share of fatty acids, ~8-10% global market share of fatty
alcohols and are the pioneers of surfactants in India. Most of the fatty alcohol produced is exported due to better prices
and large global demand.
• GIL’s positioning and presence across a wide range of products and markets forms the backbone of the chemicals
business while its focus on specialty acids and alcohols, improving relationships with MNC clients to be their global
supplier and improvement in domestic and international demand will lead the growth over the next few years.
Triggers –
1. Recovery in International Chemical prices: Chemical prices, after taking a severe hit through FY09 and H1FY10, are on
their way up. Unit values for all products in FY10 were relatively flat with a negative bias. The continued recovery in prices
in FY11 will improve realizations and revenue. One other reason for this is that a lot of plants globally are shutdown due to
technical reasons, low prices seen in FY09, fire etc and could take time to resume production.
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2. New plant at Ambernath: The Company is in the process of building a new oleochemical plant at Ambernath,
Maharashtra. The ~Rs. 230 cr investment will have a capacity of ~80,000 MT, the split of which will be decided later. The
plant should be operational by FY13. Additionally GIL is in the process of adding capacity for specialty fatty acids at Valia,
which should be completed within a year. Our valuation of the chemical business does not account for the increase in
capacities due to the uncertainty of the time frame and hence any preponement could only add value to the firm.
3. Concentration on specialty derivative alcohols to improve profitability: Fatty alcohols have shown an exciting increase in
price internationally, especially for higher derivatives. GIL invests intensively in R&D and now has numerous specialty
derivative products under its belt. Focusing on these products will lead to greater realizations and profit margins. Prices of
some fatty alcohols have reached record highs on escalating feedstock prices and supply is not catching up with demand.
Fatty alcohols are used in a variety of industrial applications including detergents/surfactants, and to form ethoxylators to
manufacture alcohol ethoxylates used in a variety of lubricating/cleaning industries. Some of the buyers may consider
using synthetic alcohols, as well as other chemical alternatives, such as linear alkyl benzene sulfonic (LABS) acid to
replace palm oil-based fatty alcohols in the detergents and surfactants industry but prices of these are also buoyant.
Source: ICIS Pricing
4. Increasing popularity of Fatty Alcohols: High petroleum prices and growing supply of Asian palm oil has driven the
replacement of petrochemical-based alcohols with oleochemical-derived ones for several years. Alcohol is a major raw
material for surfactant manufacture. Oleo alcohols accounted for 60% of the global detergent alcohols market five years
ago however today it is almost 70% and the trend continues with planned investments in oleo alcohol production capacity.
Continued long supply of lauryl, cetyl and stearyl alcohols is also driving their increased use in personal care formulations.
Concerns –
1. Highly commoditized business increases volatility in realization and margins: Chemicals, like any other commodity, have
high volatility in prices due to cyclicality.
2. New competition in specialty derivatives could impact margins: Other chemical firms could observe the advantages of
specialty derivatives and start manufacturing some of them to surf the wave of high prices resulting in increased
competition for GIL.
3. Declining Glycerin prices: Glycerin prices fell ~33% from Rs. 54,269/MT in FY09 to Rs. 35,003/MT in FY10 and continue
to fall in FY11. This resulted in a drop in Glycerin contribution to the company from Rs. 48.3 cr to Rs. 31.9 cr. However,
glycerin is a byproduct in GIL chemical manufacturing process and any income from it is supplementary. Since the
company does not actively manufacture the product, it does not monitor or hedge against price changes.
Segment Result –
(All Values in Rs. Cr)
Consolidated Yearly Segmental Chemicals
FY09 FY10 FY11 (E) FY12 (E)
Revenues
External Sales 778.0 781.3 840.0 895.0
Intersegment Sales 0.2 0.0 0.0 0.0
Total Sales 778.2 781.3 840.0 895.0
Less:Intersegment Sales -0.2 0.0 0.0 0.0
Total Revenue 778.0 781.3 840.0 895.0
Results
Segmental Operating Cost 775.6 708.1 741.0 788.0
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EBITDA 2.4 73.2 99.0 107.0
EBITDA % 0.3% 9.4% 11.8% 12.0%
PBIT -18.5 52.4 82.0 89.0
PBIT% -2.4% 6.7% 9.8% 9.9%
Interest 15.2 16.1 14.5 14.7
PBT -33.7 36.3 67.5 74.3
Taxes 0.0 7.6 14.9 16.3
PAT -33.7 28.7 52.7 58.0
EPS -1.1 0.9 1.7 1.8
(Company Reports, HDFC Sec Research)

Consolidated Quarterly
Segmental Chemicals
Q1FY11 Q1FY10 Q4FY10 Q4FY09 Q3FY10 Q3FY09 Q2FY10 Q2FY09
Revenues
External Sales 217.9 179.1 209.9 161.7 194.8 172.0 197.6 231.6
Intersegment Sales 0.0 0.0 0.0 0.2 0.0 0.0 0.0 0.0
Total Sales 217.9 179.1 209.9 161.8 194.8 172.0 197.6 231.6
Less:Intersegment Sales 0.0 0.0 0.0 -0.2 0.0 0.0 0.0 0.0
Total Revenue 217.9 179.1 209.9 161.7 194.8 172.0 197.6 231.6
Results
PBIT 19.6 14.1 16.2 -7.2 6.3 -24.4 15.7 3.7
PBIT % 9.0% 7.9% 7.7% -4.5% 3.2% -14.2% 8.0% 1.6%
(Company Reports, HDFC Sec Research)
Estate Management:
Background – GIL’s real estate management can broadly be split into rent income and development income. GIL currently
operates on land taken on rent from Godrej & Boyce. Close to 3500 acre land bank is owned by Godrej and Boyce
Manufacturing Company Ltd (GBMCL) at Vikhroli, a central suburb of Mumbai. ~2000 acres of this massive property is
covered with mangroves but the remaining ~1500 acres has tremendous development potential and is currently used as
factories/under development/commercial premises/vacant. Over the years we expect GIL to shift it’s manufacturing facilities
from Vikhroli to extended suburbs of the city and use the land taken on lease from Godrej & Boyce for further development.
This will unlock further value going ahead, but the timing thereof is uncertain. Vikhroli is well connected to all parts of the city
and is witnessing heightened activity on both, the commercial and residential fronts. Vikhroli property value is expected to
further appreciate with developments such as the airport at Navi Mumbai. The chemical division of GIL, offices of GIL, offices
of its subsidiaries are currently located on the land at Vikhroli.
On a standalone basis GIL also leases part of the commercial offices built by it on Vikhroli land to major corporations for
commercial use. ~0.4 mn sq ft commercial land at Vikhroli has been leased to various companies including CapGemini and
Accenture.
JV with GPL –
• The silver lining in GIL’s Estate Management business is its recent 40:60 joint venture with Godrej Properties Ltd (GPL) to
develop ~36 acres of its enormous Vikhroli land bank. The JV will pay GBMCL nominal rent (as the industrial land is
owned by GBMCL) and will sell residential properties and receive rent from the end users of retail/commercial premises.
• The 40:60 LLP will provide GIL with 81.6% of the profits (40% directly through the LLP and 41.6% indirectly through its
69.4% shareholding in GPL) while all capital investment will be done solely by GPL.
• The JV has tentative plans to construct ~3 mn sq ft for commercial, residential and retail & hospitality purposes on its
allotted ~36 acres of land. ~50% (~1.5 mn sq ft) will be used for high-end commercial purposes, ~20% (~0.6 mn sq ft) for
residential purposes and ~30% (~0.9 mn sq ft) for retail and hospitality purposes. Of the 1.5 mn sq ft commercial space,
the company has engaged ~0.3 mn sq ft for the use of Godrej Group companies while the remaining will be leased to third
parties.
Wadala property –
• GIL has recently renewed its 30-year lease with the Mumbai Port Trust (MPT) for land (~7 acres) that currently is being
used for its Wadala vegetable oils processing unit.
• Wadala is a centrally located Mumbai suburb with prime property value in the commercial and residential spaces.
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• GIL is in the process of obtaining state and central approvals to develop this land. Even though this process could take
time, we believe it has immense value and will contribute to the estate business generously.
• The processing facility (which currently runs at a loss due to high cost and low capacity utilization) could be relocated or
discontinued altogether.
Godrej Properties Ltd (GPL) – GIL holds 69.4% stake in Godrej Properties Ltd since it’s listing in December 2009 for a cost of
Rs. 185.3 cr.
• On a consolidated basis, GIL’s Estate Management segment includes revenues generated through its 69.4%
shareholding in GPL. GPL is the real estate arm of the Godrej Group established in 1990 in Mumbai. It is one amongst 16
founding projects of the Climate Positive Development Program, a Clinton Climate Initiative (CCI) program that will
support the development of large-scale urban projects that demonstrate cities can grow in ways that are “Climate
Positive.”
• With projects in 11 cities across the country the planned upcoming development presently stands at ~83.5 mn sq ft.
• The company has its presence in Mumbai, Pune, Bangaluru, Kolkata and Hyderabad and is at various stages of
development at Mangalore, Chennai, Ahmedabad, Chandigarh, Kochi and Greater Noida. GPL usually enters into JDAs
with landowners or Godrej Group companies to acquire development rights in exchange for revenue/profits. It then enters
into outsourcing arrangements with top-of-the-line service providers such as L&T and Gammon, ensuring quality and
timeliness.
• GPL’s current project pipeline consists of ~79% residential and 21% commercial development projects. Residential
projects include Godrej Woodman Estate (Bangaluru), Godrej Avalon (Mangalore), Godrej Pine (Thane), Godrej Riverside
(Kalyan), Godrej Edenwoods (Thane), Godrej Prakriti (Kolkata) and Godrej Garden City (Ahmedabad). The recent JV with
Front Home Development for a 9-acre plot in Gurgaon’s sector 80 with salable area of 1.05 mn sq ft has forayed GPL’s
entry into the National Capital Region (NCR). Commercial projects include Godrej Waterside (Kolkata), Godrej Eternia
(Chandigarh), Godrej Coliseum (Mumbai), Godrej Eternia (Pune) and Godrej Genesis (Kolkata).
Industry – The domestic real estate market in India is estimated at $15 bn with Mumbai, NCR, Pune, Hyderabad, Bangaluru,
Kolkata and Chennai accounting for over 65% of the pan-India demand over 2010-2012 with aggregate demand of ~550 mn
sq ft. The residential, commercial, retail and hospitality segments account for 60%, 23%, 9% and 8% of the aggregate
demand.
Pan-India Demand Projection Demand Projection for 7 Major Cities
250 200
200
150
(mn sq ft)
(mn sq ft)
150
100
100
50
50
0 0
CY10E CY11E CY12E CY10E CY11E CY12E
Commercial Residential Retail Hospitality Commercial Residential Retail Hospitality
Source: Cushman & Wakefield
Triggers –
1. Easy access to land: GBMCL, the holding company for GIL, has ~3500 acres of land in Vikhroli (Mumbai). Even though all
related party transactions are done at arms length, the industrial land can be taken on lease at fairly cheap prices by GIL.
Currently 36 acres of land taken on lease from GBML by GIL is being considered for development in JV with Godrej
Properties. The vast land has enormous potential for development in the residential, commercial and retail & hospitality
segments. Moreover, GIL has its own land or direct leases such as that with the MPT for the Wadala facility. GPL too has
a land bank of ~82 mn sq ft and being a group company can obtain and develop the GBMCL land with greater ease.
2. 40:60 JV with GPL to generate significant cash flows: The GIL-GPL 40:60 JV at Vikhroli to develop ~36 acres will benefit
GIL in 2 ways, first, it will get 40% of the profits through the JV and second, it will earn indirect profits from its 69.4%
holding in GPL. Totally GIL will earn ~81.6% of the profits of the development. We expect returns to start from FY13.
Assigning more land for commercial purposes increases the expected revenue.
3. GPL’s MOU with Godrej Agrovet Ltd (GAVL) to positively influence GIL: GPL and GAVL have signed a MoU to develop
~100 acres of land near Bangalore. The land, currently owned by GAVL, will be transformed to a plush residential
property. With a stake in both, GAVL and GPL, GIL is a derived beneficiary of the deal.
4. GPL trigger – GPL is the flagship property development company of the Godrej group and is the natural choice to
undertake development activity on lands owned/leased by the group. Revenue visibility is enormous, group reputation
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helps in sales and risk is limited. The dexterous JDA model approach by GPL proves to be very efficient as risk is
distributed among the financial investors. Its JVs with GIL, HDFC PMS (49% in Godrej Estate Developers Pvt Ltd and
Godrej Sea View Properties Pvt Ltd), etc show the firm’s interest in reducing financial exposure. There is an upside
potential possible on account of its shareholding in GPL. The current market price of GPL (Rs. 722.55) is based on
known/announced development projects and does not take into account future probable announcements.
5. Resurgence of the real estate industry: Recent demand in the residential segment has outrun the supply. The housing
shortage was recorded at 19.8 mn units in 2005 making housing the largest segment of the real estate industry in India.
Improving economy, rapid urbanization, rising disposable income, increasing size of middle class, nuclearization,
availability of housing loans, government incentives and sense of ownership are a few factors influencing the high
residential demand. Banking, financial services and insurance (BFSI) and IT companies account for majority of the
commercial space demand. These industries are on an upmove and require further space to expand operations. Rising
disposable income is the key factor influencing the increase in retail land demand. ~330 malls are expected to be
constructed in the next 2-3 years in tier I and tier II cities amounting to ~100 mn sq ft. Organized retail has grown
significantly over the past decade and is expected to grow further.
Growth in Organized Retail
250000 8%
200000 6%
(Rs Cr)
150000
4%
100000
50000 2%
0 0%
FY08 FY10 (E) FY13 (E)
Organized Retail % of total retail

Source: Industry, HDFC Sec Research
Concerns –
1. Cyclical nature of Real Estate: The real estate industry is highly sensitive to the economy of the country. During booms
prices skyrocket due to the availability of funds amongst buyers and low interest rates offered by banks. In periods of
recession prices plummet due to conservation of funds for greater priorities. The Indian economy has outperformed the
global economy in the past year and a positive outlook of the future has increased real estate investment, so much so that
oversupply could now be a hindrance in realizations. This cyclical nature of the industry not only affects GPL and the
development contracts of GIL but also the rent received as lower valued land demands lower rent.
2. Dependence on third party companies/contractors: GPL follows the JDA model for most of its projects making it
dependable on an outside source. The company also outsources its construction work on a contract exposing it to time,
quality and cost risk.
3. Vikhroli land development to slowly diminish rent income earned by GIL currently: The development JV for Vikhroli will
require relocation of numerous businesses that currently rent office space from GIL. The development will also cause
property value in the area to rise, increasing rent, thereby forcing current tenants to move to cheaper locations instead of
renewing their leases. This could impact the rent income of GIL, but the revenues from the JV will more than compensate
this.
4. Regulations/approvals/oversupply: Delays/denial in approvals/adverse change in regulations could impact revenues and
profits. All the development at Vikhroli could also lead to oversupply in the area resulting in drop of realizations/difficulty to
market beyond a point.
Segment Result –
Yearly Segment Result Estate & Property Development
Standalone Consolidated
FY09 FY10 FY09 FY10
Revenues
External Sales 31.5 27.8 320.2 480.1
Intersegment Sales 0.0 0.0 5.5 3.1
Total Sales 31.5 27.8 325.7 483.2
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Less:Intersegment Sales 0.0 0.0 -5.5 -3.1
Total Revenue 31.5 27.8 320.2 480.1
Results
Segmental Operating Cost N/A N/A 144.9 230.6
EBITDA N/A N/A 175.3 249.5
EBITDA % N/A N/A 54.7% 52.0%
PBIT 21.8 18.2 173.5 245.9
PBIT% 69.1% 65.5% 54.2% 51.2%
Segment Assets 55.7 79.4 1488.6 1733.7
Segment Liabilities 13.4 18.3 546.3 186.8

Quarterly Segment Result Estate & Property Development
Standalone
Revenues
External Sales 6.9 7.4 6.8 7.7 6.8 8.0 6.8 8.0
Total Revenue 6.9 7.4 6.8 7.7 6.8 8.0 6.8 8.0
Results
PBIT 4.4 5.1 3.8 4.7 4.5 5.8 4.8 5.5
PBIT % 63.8% 68.9% 55.4% 60.5% 67.0% 73.2% 70.7% 68.7%
Consolidated
Revenues
External Sales 80.4 26.3 297.8 141.5 52.2 46.7 103.9 69.8
Total Sales 80.4 26.3 300.9 147.0 52.2 46.7 103.9 69.8
Less:Intersegment Sales 0.0 0.0 -3.1 -5.5 0.0 0.0 0.0 0.0
Total Revenue 80.4 26.3 297.8 141.5 52.2 46.7 103.9 69.8
Results
PBIT 36.6 10.7 142.3 74.6 26.0 9.4 66.9 43.3
PBIT % 45.6% 40.8% 47.8% 52.7% 49.8% 20.2% 64.4% 62.0%
Finance & Investments:
The Company earns healthy dividend and realizes robust capital gains every year from its investments. GIL is the holding
company for numerous successful businesses including but not limited to Godrej Agrovet Ltd, Godrej Properties Ltd and
Godrej Consumer Products Ltd. GIL acquired 100% stake in Nature’s Basket, the company’s retail grocery store and sold its
entire stake in Compass BPO Ltd in FY10. The company also holds 100% stake in Godrej International Ltd and Ensemble
Holdings and Finance Ltd. Godrej Hygiene Care Ltd (GHCL), formerly a 100% subsidiary of GIL was merged with GCPL in
FY10. Mergers, acquisitions and restructuring are an ongoing process through GIL and its subsidiaries. With its active
investment moderation and optimum efficiency utilization by restructuring and regrouping its companies, GIL increases the
value of its investments every year.
Some large Standalone Investments Face Value FY09 FY10 CMP Current Value
Quantity Value Quantity Value (26/10/10)
Trade Investments Rs. Cr Rs. Cr Rs. Rs. Cr
Wadala Commodities Ltd
(8% redeemable cumulative preference, 2012 10.0 440000 4.5 440000 4.5
Other Investments
Equity Shares:
Quoted:
Godrej Consumer Products Ltd 1.0 55369989 492.2 72444620 513.7 404.7 2931.8
Retail Research 10
Unquoted:
Avesthagen Ltd (likely to get listed soon) 10.0 195577 11.4 202203 12.4
Godrej Hershey Ltd 10.0 32587046 177.4 32587046 177.4
Common Stock/Membership Units:
Quoted:
Cbay Systems Holdings Ltd., BVI $0.1 8182148 38.1 8182148 38.1 140 GBX 80.2*
Investment in Subsidiaries
Equity Shares:
Quoted:
Godrej Properties Ltd 10.0 48495209 185.3 48495209 185.3 722.6 3504.0
Unquoted:
Ensemble Holdings & Finance Ltd 10.0 3774160 13.2 3774160 13.2
Godrej Agrovet Ltd 10.0 9112956 163.2 9112956 163.2
Godrej International Ltd 1.0 GBP 2355000 16.5 2355000 16.5
Natures Basket Ltd 10.0 0 0.0 7050000 5.0
*Taking 1 GBP = Rs. 70.0 (Source: Company Reports, HDFC Sec Research)
Godrej Consumer Products Ltd (GCPL)

GIL holds 23.4% stake in Godrej Consumer Products Ltd at a cost of Rs. 513.7 cr.
Background – GCPL (an associate of GIL) is one of the largest players in the Indian FMCG market with a huge portfolio of
products in the form of personal, hair, and household & fabric care segments manufactured at state-of-the-art facilities at
Malanpur (Madhya Pradesh), Guwahati (Assam) and Thana (Himachal Pradesh), Katha (Himachal Pradesh) and Sikkim. Its
major brands include include Cinthol, No. 1, Expert and Ezee, common names in many Indian households. With the
acquisition of Keyline Brands in the United Kingdom, Rapidol and Kinky Group, South Africa and Godrej Global Mideast FZE
GCPL now owns international brands and trademarks in Europe, Australia, Canada, Africa and the Middle East. With its recent
acquisition of the remaining 51% of Godrej Sara Lee (now known as Godrej Household Products Ltd (GHPL)), the Godrej
group is now the largest homegrown Home and Personal Care business India and second largest Household Insecticides
business in Asia. GHPL manufactures popular brands such as Good Knight, HIT, Jet, Ambipur, Brylcreem and Kiwi with
dominant presence in the air care, shoe care and male hair care markets. Godrej Hygiene Care Ltd and GHPL are wholly
owned subsidiaries of GCPL. The company has entered agreements to acquire 100% stakes in the Issue Group (leaders in
hair color market in Peru, Uruguay, Paraguay, Argentina and emerging in Brazil) and Argenos SA (an Argentine hair care
company). 29% of the consolidated business comes from international operations.
Sales Mix (Standalone)
Liquid Detergents By-products

4% 2%
Toiletries
7%
Hair Colour
22%
Soaps
65%
Source: Company Reports, HDFC Sec Research
Triggers –
1. Soaps continue to remain the largest contributor to the domestic business: The segment has reported a CAGR growth of
20.2% over FY07-FY10, thus outperforming the industry growth. With the launch of variants under the segment at
attractive price points, the company has been able to improve the category’s market share consistently from 9.1% in FY07
to 10.3% in FY10.
Retail Research 11
Soaps Market Share Trend Industry vs GCPL brands Value Growth
10.4% 10.3%
30 25.0
10.2%
25 21.0
Percentage (%)
10.0% 19.3 18.5
Market Share (%)
9.7% 20 17.0
9.8% 15.2
9.6% 9.4% 15
9.6 9.0
9.4% 10
9.2% 9.1%
5
9.0%
8.8% 0
8.6% FY07 FY08 FY09 FY10
8.4% Year End
FY07 FY08 FY09 FY10
Year End
Industry GCPL Brands
2. Hair Color segment to perform well with new launches and aggressive advertising: GCPL’s Hair Colour segment accounts
for 22% of the standalone net sales and commands market share of 33.8% (in FY10). The hair colour segment has grown
at a CAGR of 15% over FY07-FY10. GCPL has put aggressive thrust on revitalizing this portfolio. Powder hair dye
accounts for a major portion of segment’s total sales. GCPL’s strategy in this segment is to focus more on the powder
versions.
Hair Color Market Share Trend Industry vs GCPL brands Value Growth
35.5% 35.2% 25
19.4 19.1
35.0% 20
Percentage (%)
Market Share (%)
13.3 12.5 13.0 14.0

34.5% 15
33.9%
34.0% 10
33.5%
33.5% 5
33.0% 0
FY08 FY09 FY10
32.5%
FY08 FY09 FY10 Year End
Year End Industry GCPL Brands
3. Enhancing global presence through strategic acquisitions: Over the last 5 years, GCPL has established a strong global
presence through inorganic route. The company has made six acquisitions since FY05. Despite recession and tough
operating conditions, international business grew 21% in FY10 (in value terms). In October 2005, GCPL acquired 100%
stake in Keyline Brands Ltd, UK for ~Rs. 1 bn. In September 2006, GCPL acquired South African Hair Colour business of
Rapidol for ~Rs 500 mn (100% acquisition). In April 2008, GCPL acquired 100% stake in Kinky Group, engaged in
business of Hair Care and Hair extensions, for $34 mn. With an aim to establish its presence in the Gulf region, in October
2007, GCPL acquired 100% stake in Godrej Global Mid East (GGME) for Rs. 58 mn. In April 2010, GCPL announced the
acquisition of 100% stake in Megasari Group of Indonesia, including its distribution arm, for Rs. 12 bn. In March 2010,
GCPL announced 100% acquisition of Nigerian personal care company Tura. On May 23, 2010, GCPL announced that it
has entered into an agreement to acquire a 100% stake in Laboratoria Cuenca, Consell SA, Issue Uruguay and Issue
Brazil (Collectively referred to as ‘Issue Group’).
4. Expanding rural distribution: GCPL has been expanding its presence in the rural & semi urban markets significantly. The
company’s strategy of increasing advertising in regional media, presence across the price spectrum and introducing new
low-price-unit (LPU) products to tap rural demand is doing well. In FY10, Rural India contributed 25% of GCPL’s sales &
its contribution to its growth in sales (domestic business) was 45%. The Superstockist Sales increased by 30% in FY10,
while the number of Superstockist & Substockist increased by 58.2% & 44.6% over FY09 to 262 & 5161 respectively.
Retail Research 12
Parameters
FY10 Superstockist Sales Rs. 288 cr 30% Growth
No. of Superstockists - March 10 261 96 - Inc over Mar 09
No. of Substockists - March 10 5161 1593 – Inc over Mar 09
Salience as % of Sales Contribution to % growth in Sales
Rural
25%
Rural
45%
Urban
55%
Urban
75%
The company has plans to double its small-town coverage from 4,000 to 8,000 in three years and village coverage from
15,000 at present to 50,000. The company has ramped up the distribution of its products like hair colours, shaving cream,
talcum powders and soaps through saloons (to 50,000 barbers). These measures are expected to drive the volumes
across its product segments, create brand awareness and improve market share across its product categories.
Concerns –
1. High Competition: GCPL faces competition from other established FMCG players like HUL (in Soaps & Shampoos),
Marico (in Hair Care) & Bayer Crop Science (in Household insecticides). In the household category (post the acquisition of
GSLL & Megasari), the company also faces competition from MNC players like S C Johnson & Reckitt Benckiser. The
competition in the soaps segment is increasing due to No 1 soaps player HUL’s right pricing of Breeze, which is a low-
end soap brand. Though GCPL has managed to improve soaps market share over the last two years, intensifying
competition could result in aggressive price war and could impact GCPL’s ability to gain market share in this segment.
Further, the entry of players such as L’oreal and Schwarzkopf have put pressure on GCPL’s hair colour business, which
has resulted in the decline in segment’s share at the top end of the market. In the premium cream hair color category
GCPL’s major brands are Godrej Renew & Color soft. Entry of more foreign players could spoil the situation. To remain in
the competition, GCPL will have to continuously launch new products / variants across the product category to suit the
consumer preferences.
2. Forex Risk: Over the last five years, GCPL’s international exposure has increased significantly with the acquisitions of
Keyline (UK) in FY06, Rapidol (South Africa) in FY07, Godrej Global Mid East in FY08, Kinky Group (South Africa) in
FY09, Tura (Nigeria) in March 2010 and Magasari (Indonesia) in April 2010. These have increased the forex risk of the
company significantly.
3. Raw Material: Increase in the prices of key raw materials like Vegetable Oil (main input for soaps) and chemicals,
perfumes, colours (input for Hair Colour and other toiletries) could impact the margins and reduce earnings growth if
GCPL finds it difficult to pass on input cost increases completely to its consumers, especially in a scenario of high
inflation.
4. Slowdown in consumer spending (rural and/or urban) due to stagnant /falling incomes could impact volume/realisation
growth.
Godrej Hershey Food and Beverages Ltd (GHL)
Background – Formed in 2007, a joint venture between The Hershey Company (USA) and GIL, GHL operates in multiple
categories such as confectionery, beverages and health drinks. In 2006, the Godrej group acquired 100% stake in Nutrine
Confectionary Company Pvt Ltd with brands like Mahalacto, KokoNaka, Nutrine Eclairs, Superstar, Aasai & HoneyFab. Nutrine
is the leader in Confectionery with over 20% market share. With a plant at Chittoor (Andhra Pradesh) for Nutrine and one at
Mandideep (Madhya Pradesh) for its other products, the company produces innovative products with smart packaging to
appeal to the customer. The beverage portfolio consists of Jumpin (fruit drinks), Xs (juices and nectars), and Sofit (soy milk).
The Hershey Chocolate syrup was added to the list in 2008 adding India to Hershey’s eagle-view global presence. GHL is the
exclusive manufacturer/marketer of Hershey products in India however currently Hershey’s Chocolate Syrup is the only
Hershey product launched in the country.
Retail Research 13
The Hershey Company (THC) was started as a small subsidiary of Milton Hershey’s Lancaster Caramel Company. THC is the
largest producer of quality chocolate in North America and a global leader in chocolate and sugar confectionery. Its popular
brands include Hershey’s, Reese’s, Hershey’s Kisses, Kit Kat, Twizzlers, Ice Breakers and Hershey’s Bliss.
While GIL holds 43.4% stake in GHL, THC holds 51% and Mr. A Mahendran (Director – Godrej Hershey and Godrej
Household Products & Managing Director – Godrej Consumer Products Ltd) holds the rest.
Triggers –
1. Possible launch of other Hershey products: THC is the leading global chocolate and sugar confectioner and considers
India a promising market in the future. Despite stiff competition from Cadbury, Nestle and Amul, the company could excel
in the country given the brand recall and superiority perception. THC is currently researching the Indian market and hopes
to launch its chocolates in the coming 1-2 years. Hershey could earn significant premium compared to local players for its
brand image. The launch of its other products will be the turning point in Hershey’s journey in India.
2. Significant market share: Nutrine brands such as Mahalacto, KokoNaka, Nutrine Eclairs, Superstar, Asai and HoneyFab
have penetrated the market to secure comfortable positions in the strong, perennial, competitive and price dependent
market. Nutrine’s 20% market share gives it a smooth sail in an otherwise stormy ocean. Sofit is the market leader in the
nascent soymilk market and will continue growing with the increasing number of health conscious people.
Concerns –
1. Loss making entity: GHL has been a loss making enterprise since its inception. The company had sales of Rs. 177.27 cr
and Rs. 160.64 cr in FY09 and FY10 respectively with a loss before interest and taxes of Rs. 3 cr and Rs. 15.62 cr in
FY09 and FY10 respectively. The company could take time to come into breakeven levels. The launch/success of
Hershey chocolates could be a key determinant of this.
2. Advertising/brand building could lead to significant costs: One of the largest expenses for the company is that of brand
building. The Indian consumer is unfamiliar with the Hershey brand and its products. Chocolate syrup is a new product in
the market and faces resilient competition from chocolate powders commonly used in milk such as Bournvita, Horlicks
and Complan. To embed the advantages/differences of the Hershey syrup significant advertising and marketing is
required. If Hershey chocolates are introduced in the Indian market further outlays of cash might be needed to advertise
them. Even though we expect the chocolates to significantly improve the company’s operating profits, the initial years
could actually be worse on account of brand building.
3. Highly dependent on sugar and milk prices: All GHL products are either dependant on sugar or milk. Even Sofit (soymilk)
and Hershey Chocolate Syrup are dependant on milk prices because the former is a substitute (increase in milk prices
could increase the demand for soymilk) while the latter is a complement (increase in milk prices could decrease the
demand for chocolate syrup). Losses increased five fold in FY10 largely due to the high prices of sugar and milk.
S30 Sugar Prices-Mumbai M30 Sugar Prices
4,500 4,500
4,000 4,000
3,500
(Rs./Quintal)
3,500
3,000
(Rs./Quintal)
3,000 2,500
2,500 2,000
2,000 1,500
1,500 1,000
1,000 500
0
500
Aug-00
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
0
Aug-00
Aug-01
Aug-02
Aug-03
Aug-04
Aug-05
Aug-06
Aug-07
Aug-08
Aug-09
Aug-10
Mumbai Delhi
4. High dependence on low margin oil business: The edible oil industry is a competitive low margin business. GIL’s branded
Godrej Cooklite Oil earns slightly higher margins than unbranded oils however the competition is still stiff. High
dependence on this business hurts the company’s overall margins.
Retail Research 14
Segment Result –
Consolidated Yearly Performance Beverages & Foods
FY09 FY10
Revenues
External Sales 177.3 160.6
Intersegment Sales 1.0 0.9
Total Sales 178.2 161.6
Less:Intersegment Sales -1.0 -0.9
Total Revenue 177.3 160.6
Results
Segmental Operating Cost 177.8 172.9
EBITDA -0.5 -12.3
EBITDA % -0.3% -7.7%
PBIT -3.0 -15.6
PBIT% -1.7% -9.7%
Segment Assets 97.6 90.4
Segment Liabilities 27.3 27.1

Consolidated Qtly Performance Beverages & Foods
Revenues
External Sales 41.1 42.3 42.6 50.3 36.2 42.7 39.6 43.2
Total Sales 41.1 42.3 43.5 51.2 36.2 42.7 39.6 43.2
Total Revenue 41.1 42.3 42.6 50.3 36.2 42.7 39.6 43.2
Results
PBIT -2.5 -2.8 -8.4 0.7 -3.3 -2.3 -1.1 -0.8
PBIT % -6.0% -6.5% -19.7% 1.4% -9.2% -5.3% -2.9% -1.8%
Godrej Agrovet Ltd (GAVL)

Background – GAVL was incorporated in 1971 with a focus on the agricultural sector developing close relationships with
farmers to supply animal feed, oil palm plantations, agrochemicals and poultry. The company has 45 manufacturing facilities
across India and 10,000 rural distributors, dealers and agents with a presence in 21 states. GAVL reported 13% and 130%
growth in revenue and PBIT in Q1FY11 and 8% and 63% growth in revenue and profit in FY10.
Animal Feed:
Background – GAVL is the largest animal feed company in the country producing about 730,000 tonnes of feed every year for
dairy cattle, poultry and aquaculture. The feed has great nutritional value, thereby increasing the output from the animal,
making it more profitable for the farmer. Maize, corn, rice bran, de-oiled rice bran, extractions and fishmeal are the chief raw
materials. Poultry feeds comprise the largest portion of the sales followed by cattle and lastly aqua however, aqua feed sales
are the most profitable followed by poultry and lastly cattle. The animal feed business and Bangladesh JV grew by 9% and
53% respectively in Q1FY11. The Animal Feed business grew 16% and 31% in revenue and profit in FY10. GAVL has a
market share of over 20% (organized) with 5-6% (including unorganized) penetration in the cattle feed sector.
JVs and subsidiaries – The Company has also entered Bangladesh through its JV with the ACI (Advanced Chemical
Industries) group to sell poultry and poultry feed, where it is rapidly gaining market share. Godrej Gold Coin Aquafeed, a 49:51
JV, is expected to improve performance sharply in FY11 and be profitable in FY12. Golden Feed Products Ltd, a wholly owned
Retail Research 15
subsidiary of GAVL, is in the animal feed business too but has negligible operations (Sales of Rs. 0.04 cr and PAT of Rs. 0.02
cr in FY10).
Plants and Capex – Animal feed plants are located across India making distribution relatively easy. Approximately 40 of the
plants are third party producers with whom GAVL has processing arrangements wherein GAVL personnel supervise activity on
a daily basis. GAVL is currently working on new product development of super-premium broiler, layer feed concentrate, and
broiler feed concentrate. ACI Godrej (the Bangladesh JV) is undergoing a distribution expansion at Chittagong for broiler feed
and is launching floating fish feed in Q2 to capture the tilapia market. There could be a capex of ~Rs. 20 cr in FY11 and Rs.
30-50 cr in FY12 to add new plants in currently sparse locations such as Bihar and the Eastern states apart from filling gaps in
the north and west.
Competitors – Key competitors include PT Japfa Comfeed Indonesia, Venky’s (India) Ltd, Amrit Feeds Ltd, Foods India Ltd
and SKM Animal Feed.
Production & Turnover–
Standalone FY09 FY10

MT MT
Installed Capacity 359974 350000
Production 383496 233991
Capacity Utilization 106.5% 66.9%
Third Party Production 442283 494193
Quantity Sold 726724 727790
Value (Rs. Cr) 974.0 1111.1
Unit Value (Rs.) 13402 15267
Triggers –
1. Deep market penetration: GAVL is the leader in the animal feed industry in India with over 20% market share in the
organized sector and ~5-6% market share in the cattle feed business including the unorganized sector.
2. Relatively stable business with low but consistent profit: Profit margins are observed to remain fairly stable over the years.
Any jump/fall in volume/price does not significantly hinder margins making the business very reliable. Further raw material
costs hikes can relatively easily be passed over.
3. Pan India presence: GAVL has ~45 plants around the country making every region easy to access. The management has
planned further plants in sparse regions to add to the presence across the country.
4. Robust demand growth assured:- Livestock rearing (including cattle) is becoming more profitable due to increase in the
prices of milk, poultry products etc. Hence demand growth seems to be reasonably assured.
Concerns –
1. Seasonality: Aqua and poultry feed businesses are seasonal. Aqua has two seasons of harvest while poultry has
downswing during religious times (Shravan and Diwali) and summer season see major drops in chicken sales.
2. Volatile raw material prices: Maize and corn prices are volatile and depend on the monsoons, the crop and demand.
However, this volatility in raw material prices can be passed on the consumers reducing the risk of the company.
Segment Result –
Consolidated Yearly Performance Animal Feed
FY09 FY10
Revenues
Less:Intersegment Sales -25.5 0.0
Results
EBITDA 34.2 42.8
Retail Research 16
EBITDA % 3.5% 3.7%
PBIT 30.1 38.8
PBIT% 3.1% 3.4%
Segment Liabilities 106.9 218.2

Consolidated Qtly Performance Animal Feed
Revenues
External Sales 297.3 273.0 309.9 173.4 291.9 254.9 267.0 303.5
Total Revenue 297.3 273.0 309.9 173.4 291.9 254.9 267.0 303.5
Results
PBIT 11.1 8.9 5.3 15.5 10.0 5.0 5.9 1.7
PBIT % 3.7% 3.3% 1.7% 9.0% 3.4% 1.9% 2.2% 0.6%
(All Values in Rs. Cr) (All Values in Rs. Cr)

ACI Godrej FY09 FY10 Godrej Goldcoin
% Holding 50% 50% AquaFeed FY09 FY10
% Holding 49% 49%
Assets 19.3 11.9
Assets 29.0 29.2
Liabilities 19.3 11.9
Income 46.7 76.9 Income 8.0 11.8
Expense 45.0 74.7 Expense 11.6 14.5
PAT 1.6 2.1 PAT -3.6 -2.8
Note: Figures in the above two tables represent share of GAVL in the JVs
Agri Inputs:
Background – GAVL is a niche player in innovative agrochemicals, with strong market share in plant growth promoters, soil
conditioners, and cotton herbicides. The agrochemicals business focuses on innovative and environmentally sensitive
products. The products can be classified into 3 groups – plant growth promoters and regulators, organic manure mixture and
pesticides. Promoters, manure and pesticides comprise ~50%, ~17% and ~33% of the revenue respectively.
The business grew by 19% and 22% in revenue and profitability in FY10 primarily led by HBR (Homobrassinolide) compounds,
Hitweed, Vikas soil conditioners and Zymegold. HBR has several products including bountea (for tea), combine (for grape) and
double (for vegetables). Hitweed is an inthouse developed weedicide (used mainly for cotton) and is gaining popularity quite
fast. 12 new products are expected to be launched by FY12.
Plants – The Company has 1 plant at Jammu primarily engaged in manufacturing promoters while other products are
outsourced.
Competitors – Some competitors include Rallis India and PI Industries.
Production & Turnover –
Plant growth promoter liquid Plant growth regulator granule

FY09 FY10 FY09 FY10
KL KL MT MT
Installed Capacity 500 500 5000 5000
Production 467 500 3384 4063
Capacity Utilization 93.4% 100.0% 67.7% 81.3%
Third Party Production 0 95 0 0
Retail Research 17
Agri Inputs FY09 FY10
Revenues 106.7 128.4
Triggers –
1. Highly profitable business: The agri inputs business has relatively high profit margins. FY09 and FY10 show consistently
good performance, which is expected to improve going forward.
2. India is an agricultural country at large: India is the second largest country in terms of agricultural output. Agriculture
accounts for over 15% of the country’s GDP and over 50% of the workforce. Even though the sector faces a steady
decline of its share in the GDP, it plays a very important role in the socio-economic development of the country.
3. New Products: Hitweed and HBR have gained tremendous popularity and will lead the growth in FY11. Several new
products are expected in FY12, the success of which will further boost the growth.
Concerns –
1. Volatile raw material prices: Various chemicals are used to make agri inputs. Due to the constant volatility in commodity
prices, raw material prices fluctuate often.
2. Stiff Competition: The fertilizer, pesticide, growth promoter and weedicide businesses face severe competition from the
organized and unorganized sector. Rallis India is the largest competitor with pan India distribution and deep market
penetration.
Segment Result –
Standalone Yearly Performance Agri Inputs
FY09 FY10 Q1FY11
Revenues
External Sales 108.3 129.3 36.0
Intersegment Sales 0.0 0.0 0.0
Total Revenue 108.3 129.3 36.0
Results
PBIT 15.7 19.2 Not Available
PBIT% 14.5% 14.8% N/A
Palm Oil:
Background – GAVL’s subsidiaries Godrej Oil Palm Ltd (90% shareholding) and Cauvery Palm Oil Ltd (90% shareholding) and
its JV, Godrej IJM Palm Oil Ltd (in collaboration with a Malaysian plantation company, IJM) (48.2% shareholding), comprise its
Oil Palm business segment. Godrej Oil Palm is the only company with significant operations however over the coming years
Cauvery Palm Oil and Godrej IJM will start contributing in a larger way. GAVL is the market leader in oil palm plantation with
over 35,000 hectares of cultivation (~13,000 hectares of which already bears fruit) and over 200,000 hectares of permissible
land. The Palm Oil business is looking even more attractive due to the recent rise in crude palm oil prices and the recent
allocation of oil palm territory by the Gujarat Government will increase the company’s growth prospects. GAVL gets its palm oil
price outlook and forecast from Mr. Dorab Mistry, a renowned vegetable oil specialist and director of Godrej International Ltd.
The Oil Palm business has a long payback period primarily due to the 3 year stagnation between planting and cultivation.
However, once past the 3 year hurdle, the plant bears good fruit year after year for ~30 years. It is a highly profitable business
with all applicable agricultural risks such as drought, flood and infestation. Most of GAVL’s plantations are in Andhra Pradesh
followed by Goa, Karnataka and Tamil Nadu. The Andhra Pradesh government, based on crude palm oil spot prices and
average oil yield per tonne of fresh fruit bunches, sets fruit bunch prices every quarter to shield the farmers. This results in
relatively stable profit margins, ceteris paribus. The Oil Palm Act regulates the industry in each state and provides a brief
outline for farmers, crushers and refiners. The pricing mechanism framed by the government provides a fair equilibrium
between the farmers and crushers. The nature of the fruit requires processing within 24 hours for optimal output and quality.
Hence the crushing mills have to be in vicinity of the plantations. The conversion cost is ~ Rs. 350 per tonne.
Palm trees take three years to start fruiting from the time of planting. Educating/Convincing farmers is a difficult process
however, once convinced and converted to palm plantations, it is difficult to shift back out, making revenues fairly visible.
Farmers only convert part of their land to palm at a time from the fear of losing income for 3 years. Each year a small portion is
planted and a certain portion starts fruiting. Hence a gradual increase in acreage is seen every year.
Palm Oil Background – Palm oil is one of the few highly saturated vegetable fats and is semi-solid at room temperature. It is a
common cooking ingredient in the tropical belt of Africa, Southeast Asia and parts of Brazil. Its increasing use in the
Retail Research 18
commercial food industry in other parts of the world is buoyed by its lower cost and the high oxidative stability (saturation) of
the refined product when used for frying.
Plants – Between the 3 companies there are 3 crushing mills, one each in Andhra Pradesh (~40 tonne capacity), Goa (~10
tonne capacity) and Tamil Nadu (~10-20 tonne capacity).
Palm Oil Value Chain –
Crude Palm Oil
Fresh Fruit Seed / Palm Kernel Oil / Animal

Bunches Kernel Palm Kernel Cake Feed
Residue (seed,
empty fruit
bunch) Empty fruit Used in
bunches Cogen plant
Industry – According to Hamburg-based Oil World trade journal, in 2008, global production of oils and fats stood at 160 million
tonnes. Palm oil and palm kernel oil were jointly the largest contributor, accounting for 48 million tonnes or 30% of the total
output. Soybean oil came in second with 37 million tonnes (23%). About 38% of the oils and fats produced in the world were
shipped across oceans. Of the 60.3 million tonnes of oils and fats exported around the world, palm oil and palm kernel oil
make up close to 60%; Malaysia, with 45% of the market share, dominates the palm oil trade. India is one of the largest edible
oil consumers in the world and the largest importer of the same followed closely by China.
Edible Oil Imports Edible Oil Import Value
1000000 300000 50000
(Rs. per tonne)

250000
(Rs. Lakh)
800000 40000
200000 30000
(Tonnes)
600000 150000
100000 20000
400000 50000 10000
200000 0 0
Jul-08
Jul-09
Jan-08
Jan-09
Jan-10
0
Jul-08
Jul-09
Jan-
Jan-
Jan-
08
09
10
Value - LHS Unit Value - RHS

Source: Capitaline, HDFC Sec Research Source: Capitaline, HDFC Sec Research
Source: USDA FAS data, HDFC Sec Research
Retail Research 19
A hectare of oil palm in India can yield between 2.8 to 3.5 tonnes of crude palm oil a year, so going by this assumption, GAVL
has the potential to produce between 28,500 – 32,500 tonnes of crude palm oil (CPO) in FY11 (vs 14,900 tonne in FY10) and
up to 55,000 to 65,000 tonnes of crude palm oil in FY12 generating revenues of Rs. ~100 cr and Rs.200 cr in FY11 and FY12
respectively. Being a commodity, crude palm oil prices are very volatile and evaluating the business based on revenues would
be arduous.
RBD Palm Olein Price-Kakinada
650
600
550
(Rs./10 kg)
500
450
400
350
300
May-05
May-06
May-07
May-08
May-09
May-10
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Source: CSS, HDFC Sec Research
Triggers –
1. Promising Future: GAVL, through its subsidiaries, is the leading palm oil producer in the country with 35,000 hectares of
land cultivated (of which ~13,000 hectares yields fruit) and 200,000 hectares of allotted land. With the remaining ~22,000
hectares bearing fruit over the next 2 years palm oil production will increase significantly. India imports majority of its
edible oil due to the major demand and lack of local supply at comparable prices. Margins are high and demand is
perennial resulting in a foolproof business, per se. The business is expected to grow multiple fold till all allotted land is
cultivated and bears fruit.
2. Improving CPO prices: As seen in the “RBD Palm Olein Price-Kakinada” graph, CPO prices improved from the lows of
2009. Crude palm oil futures were up for the 7th consecutive week resulting in the longest rally since May 2009.
3. Though GAVL is not the owner of the land, it has sole rights to purchase the produce of the land once cultivated with Palm
oil: The cushioning in the relation with the farmers is the fact that they are not permitted by law to sell their fruit to another
processor. Once the government allots specific land to Godrej Oil Palm or Cauvery Palm Oil, if the farmer chooses to
grow palm oil plantations, he is obliged to sell it to Godrej/Cauvery.
4. It’s a volume game – As the prices of FFB of palm are fixed as per formula, the conversion margins for GAVL is more or
less fixed per tonne. The more the quantity of fruit processed, the higher absolute margins can the company earn. With
new cultivated land being added each year, the absolute margins could typically go up year after year.
Concerns –
1. Processing Unit must be in close proximity to the plantation: The palm fruit bunches must be processed within 24 hours to
obtain maximum oil of good quality. This forces the company to set up a processing unit within close proximity of the
plantation.
2. Convincing the farmer: Convincing the farmer to grow palm oil plantations is the responsibility of GAVL. Land allotted by
the government is not necessarily a palm oil plantation and neither is the farmer obliged to change it to one. The
responsibility of explaining the advantages of palm oil plantations (such as high yield, good realization, constant revenue
for 30 years etc) is borne by the company.
3. Commoditized business causes volatility: Like chemicals, CPO is a commodity and trading and speculation cause
fluctuation in the price. This fluctuation can sometimes lead to lower realizations. However the formula fixed by the Govt
typically assures a fixed margin per tonne of oil processed.
4. Other agricultural concerns: Palm oil plantations face all the agricultural constraints that other plantations face such as
drought, flood and infestation. Less rains result in lower yield. Adequate water and fertilizers are the two needs for Palm
cultivation.
5. Regulation in fruit bunch prices: Regulated fruit bunch prices cause a natural flaw to a free economy. While the
government is safeguarding the farmers’ interest, the lack of free pricing model caps the upside potential for crushers.
6. Possibility of increased Government regulation: If the government involvement in Palm oil business grows over the years
to the levels seen in sugarcane cultivation, it could result in heightened uncertainty in the business prospects.
Retail Research 20
Segment Result –
Oil Palm
FY09 FY10 Q1FY11
Revenues
Results
EBITDA 12.0 13.0 Not Available
EBITDA % 16.0% 20.3% N/A
PBIT 11.0 11.0 Not Available
PBIT% 14.7% 17.2% N/A

Godrej IJM Palm Oil FY09 FY10
% Holding 48.2% 48.2%
Assets 7.4 6.7
Liabilities 7.4 6.7
Income 1.7 1.1
Expense 2.1 1.7
PAT -0.3 -0.5
Note: Figures in the above table represents share of GAVL in the JVs
Integrated Poultry:
Background – GAVL has introduced fresh, chilled chicken to Indian consumer over the past decade, and now has a 45%
market share in processed poultry. GAVL sells live poultry while the 49:51 JV with Tyson foods sells packaged and processed
chicken. Its “Real Good” chicken brand is one of the best-known fresh poultry products in India, with a consumer loyalty about
80%. “Yummiez” makes ready-to-eat snacks primarily of chicken and “Real Good” makes processed uncooked chicken”.
Godrej Tyson has relaunched its branding process for “Real Good” with new packaging and return schemes.
Close to 97% of the Indian poultry industry consists of live sales. The market is slowly experiencing a shift toward processed
chicken where institutional buyers currently dominate. The body temperature of a chicken is usually 25-27°C. In the chilling
process, it is brought down to 8-10°C after the feathers are removed. This has a shelf life of three days if kept in the
refrigerator. Frozen chicken is where the temperature is reduced to 4°C kept in a blast freezer before being sent to the retail
outlets. The frozen chicken can last a year. In a live chicken, the yield is only 65 per cent and the rest is waste. The waste is
crushed and used in pet feed.
Triggers –
1. Comfortable split between fresh poultry sales by GAVL and processed poultry sales by Godrej Tyson: Godrej Tyson
accounts for Rs. 77.3 cr and Rs. 91.0 cr while sales of live poultry accounted for Rs. 173 cr and Rs. 232 cr segment sales
in FY09 and FY10 respectively. Fresh poultry sales have small margins but are profitable.
2. Nuclearization of families and increasing force of working women: Nuclear families lead to modern beliefs and working
women, which increases processed chicken sales as a matter of convenience. Other frozen foods from Yummiez gain
popularity too for convenient cooking.
3. Increasing awareness of people: The Indian masses are slowly learning the advantages of chilled chicken. The chicken
has a greater life and the buyer does not pay for the waste.
Concerns –
1. Religious beliefs: Meat is considered an omen among many religions in India resulting in a smaller clientele. Even though
newer generations are more liberal in their thoughts, this restricts sales among many.
2. The scale of the business of the Tyson JV is still small and educating/converting consumers is taking time and money
Retail Research 21
Segment Result –
Standalone Segmental Integrated Poultry
FY09 FY10
Revenues
Less:Intersegment Sales 0.0 15.8
Results
PBIT 0.7 2.6
PBIT% 0.0% 0.0%

Godrej Tyson FY09 FY10
% Holding 49% 49%
Assets 58.0 57.5
Income 77.3 91.0
Expense 85.2 95.1
PAT -8.0 -4.1
Note: Figures in the above table represents share of GAVL in the JVs
Nature’s Basket
Background – Godrej Nature’s Basket is one of India’s finest Gourmet retailers. It brings together authentic world food,
beverages, choicest ingredients and premium and niche food products to satisfy demanding and discerning palates via its 10
stores in premium residential catchments. Nature’s Basket is earning higher realizations on cue of its better waste
management system. The 10 new products offered in the past 6 months provide for 10% of the revenue.
Triggers –
1. Entry in India’s thriving retail market: The Indian retail market is thriving due to the improvement in economy, increase in
disposable incomes, rise in per capita spending and easy accessibility to markets. Nature’s Basket entered the retail
market at a good time, which is reflected in the fact that it has broken even at the store level at all Mumbai stores.
2. Successful new products: The new products introduced in FY10 were very successful, generating ~10% of the revenue.
With unique niche products gaining share, we expect sales to improve going forward.
Concerns –
1. Stiff Competition: Nature’s Basket faces tremendous competition from the unorganised sector like local grocery stores and
vegetable & fruit vendors. Professional grocery stores are a relatively new concept in India and the consumer is unaware
of the advantages of buying from these. However Nature’s Basket’s niche food products such as the authentic world foods
and beverages gives it an edge over the unorganised sector.
2. Business running at losses: Nature’s Basket has broken even at the shop level in all its Mumbai stores but at the
corporate level the company is still running at losses.
Segment Result –
Consolidated Segmental Natures Basket
FY09 FY10 Q1FY11
Revenues
Results
PBIT -7.0 -7.0 Not Available
PBIT% -46.7% -20.6% N/A
Retail Research 22
Vegetable Oils
Background – The Vegetable Oils processing unit at Wadala (Mumbai) and trading activities of Godrej International Ltd (an
international oil trading subsidiary) comprise the Vegetable Oils segment. The Wadala unit is running at losses even as it
processes oil for Godrej Hershey and outsiders. The lease of this property was recently renewed and GIL awaits approval from
the Mumbai Port Trust (MPT) for change of use to develop the land, which could unlock enormous value for the company.
Godrej International, on the other hand, is a profitable entity but due to the nature of the trade, its profit margins are low
(operating margin of ~1.3% in FY10).
The Vegetable Oils business has not been included in our valuation as it runs at minimal profit/loss every year and has no
significant impact on the value of the company.
Triggers –
1. Hidden value of Wadala Property: GIL is in the process of getting government approvals to develop the Wadala property
that is currently leased from the MPT to run its veg oils processing unit. If approved, the ~7 acre property will unlock
tremendous value as Wadala is centrally located and residential and commercial demand is high. We have not taken this
property into consideration in our Estate Management valuation, as the timing is uncertain.
Concerns –
1. Trading Risk: Trading is a risky endeavor, especially in oils. Godrej International had turnover of Rs. 585.8 cr and Rs.
540.0 cr in FY09 and FY10 respectively with operating profits of Rs. 7.1 cr and Rs. 6.9 cr. The risk borne by the company
is high compared to the income due to the volatile market prices.
2. Wadala processing unit running at a loss: The Wadala unit is running at a loss due to underutilization of capacity and old
high costs.
Segment Result –
Consolidated Yearly Segmental Veg Oils
FY09 FY10
Revenues
Less:Intersegment Sales -1.0 -0.7
Results
EBITDA 0.1 1.4
EBITDA % 0.0% 0.2%
PBIT -0.5 0.7
PBIT% -0.1% 0.1%
Consolidated Quarterly Segmental Veg Oils

Revenues
External Sales 214.6 98.1 170.2 90.4 158.7 135.3 149.5 164.0
Total Sales 214.6 98.1 170.9 91.4 158.7 135.3 149.5 164.0
Total Revenue 214.6 98.1 170.2 90.4 158.7 135.3 149.5 164.0
Results
PBIT -0.4 0.3 1.2 0.2 0.0 -1.0 -0.7 1.5
PBIT % -0.2% 0.3% 0.7% 0.2% 0.0% -0.7% -0.5% 0.9%
Retail Research 23
Valuation & Recommendation
Sum of the Parts (SOTP)
Value /
Projected FY11 Share
Segment Valuation mode Parameter (E) Valued at Basis/Rationale (Rs.)
Large size, integrated
Chemical P/E EPS 1.7 12.0 operations 19.9
2 years rent, discounted
DCF Rent at 10% 1.2
Gross margins
Estate discounted at 10%,
based on expected use
GPL JV DCF of land 28.1
GPL 30% Discount to CMP 77.2
Consumer Products GCPL 30% Discount to CMP 64.6
Godrej Peers like Nestle, Dabur
Food & Bev Hershey EV/Sales Sales 190.0 3.0 quote at 4+ EV/sales 7.0
Large size, stable
Animal Feed EPS 0.9 10.0 profitability 8.8
Agri Inputs EPS 0.7 10.0 Profitable operations 6.6
In line with international
oil palm plantation
Palm Oil* EV/hectare Yielding hectares 25000 $11000/hectare companies 37.7
Discounted to peer
Integrated Poultry EV/Sales 260.0 0.3 valuations of 0.5-0.6 1.6
Discounted to peer
Natures Basket Market Cap/Sales 42.0 0.7 valuations based on size 0.9
Cbay Systems CMP 2.5
Other Investments BV 9.0
Total 265.0
*Valued on basis of land holding of all 3 companies without reducing share of partners/minority shareholders, which is assumed to be negligible.
Conclusion
We think that GIL is well placed to exploit the benefits of its growing presence in chemicals, animal feeds, integrated poultry,
palm oil, agri inputs space. Each of its businesses has individual triggers in place and is currently doing well. This apart, its
large holding in group companies and JV in the realty segment offer added upsides. Its palm oil venture (an annuity business
growing year after year) could bring valuation upsides once more land is planted on a regular basis (after convincing farmers)
and planted land starts fruiting over the next few years.
However apart from the individual risks of the businesses, a large part of its valuation is dependent on the market price of
GCPL and GPL. Hence sustained downward moves in these prices could impact the share price of GIL.
We think that GIL could be bought at the CMP and added on dips to the Rs.196-205 band for a target of the SOTP of Rs. 265
over the next 1-2 quarters.
Financials
Annual Profit & Loss Account:

Income Statement Standalone Consolidated
FY09 FY10 FY09 FY10
Net Sales 817.5 816.4 3361.7 3414.2
Other Income 154.0 175.3 251.8 367.1
Total Income 971.5 991.7 3613.4 3781.2
Raw Material Cost 543.2 534.2 2529.4 2697.8
Stock Adjustment 22.5 -17.4 35.8 -16.7
Staff Cost 82.9 105.8 144.6 179.5
Power, Oil & Fuel 68.2 65.6 87.6 85.2
Other Expenses 150.6 134.8 488.3 422.7
Retail Research 24
Total Expenses 867.5 823.1 3285.8 3368.5
Operating Profit 104.0 168.6 327.7 412.8
OPM (%) -6.1 -0.8 2.3 1.3
Interest 61.1 60.2 149.6 149.6
Depreciation 26.5 28.4 47.0 50.2
PBT 16.5 80.0 131.1 213.0
Tax -2.2 -0.9 53.4 44.8
Profit before extraodinary items 18.7 80.9 77.7 168.2
Extraordinary Items 0.3 0.0 21.2 0.0
Prior Period Adjustments -0.9 0.0 -0.9 0.0
Adjusted Net Profit 18.1 80.9 98.1 168.2
Share of Profit in Associates 0.0 0.0 36.2 81.0
Share of Minority Interest 0.0 0.0 -22.8 -46.0
Net Profit 18.1 80.9 111.5 203.2
NPM (%) 2.2 9.9 2.9 4.9
EPS 0.6 2.5 3.1 5.3
P/E 388.6 86.2 71.6 41.5
Balance Sheet:
Standalone Consolidated
FY09 FY10 FY09 FY10
I. SOURCES OF FUNDS
1. Shareholders' Funds:
a) Capital 32.0 31.8 32.0 31.8
b) Reserves & Surplus 995.1 990.9 1375.9 1733.8

1027.1 1022.7 1407.9 1765.6
D:E 0.59 0.54 1.12 0.84
3. Loan Funds:
a) Secured Loans 232.8 204.2 802.6 714.9
b) Unsecured Loans 368.1 343.4 770.8 766.2
601.0 547.6 1573.5 1481.2
4. Minority Interest 0.0 0.0 118.3 315.5
5. Deferred Tax Liability 32.8 32.0 50.2 50.8

Less: Deferred Tax Assets 0.0 0.0 0.0 0.0
32.8 32.0 50.2 50.8
Total 1660.9 1602.3 3149.8 3613.0
II. APPLICATION OF FUNDS

1. Fixed Assets:
a) Gross Block 578.5 615.1 869.1 925.1
b) Less: Depreciation & Impairment 314.7 338.8 418.1 448.4
c) Net Block 263.9 276.3 451.0 476.7
d) Capital WIP 24.8 22.0 24.5 38.6
288.7 298.3 475.5 515.2
2. Goodwill 0.0 0.0 523.5 481.0
Retail Research 25
3. Investments: 1148.1 1147.6 652.7 927.5
4. CA, Loans & Advances:

a) Inventories 93.6 134.8 743.4 1035.8
b) Sundry Debtors 161.0 110.9 875.2 423.1
c) Cash & Bank Balances 28.5 15.1 125.2 147.9
d) Other Current Assets 0.0 0.0 0.2 0.2
e) Loans & Advances 147.9 175.4 777.2 845.0
431.0 436.1 2521.2 2452.0
Less:
5. Current Liabilities & Provisions
a) Liabilities 140.5 210.4 945.3 679.5
b) Provisions 70.3 69.3 82.9 83.1
210.8 279.7 1028.1 762.6
Net Current Assets 220.2 156.4 1493.0 1689.4
6. Miscellaneous Expenses not written off 3.9 0.0 5.2 0.0
Total 1660.9 1602.3 3149.8 3613.0

Quarterly Profit & Loss Account:

Standalone Q1FY11 Q1FY10 % Change Q4FY10 Q3FY10 Q2FY10
Net Sales 226.0 189.2 19.4 216.3 203.7 207.1
Other Operating Income 12.6 13.6 -6.8 11.5 8.9 24.5
Other Income 11.4 3.1 269.2 42.9 38.2 32.8
Total Income 250.0 205.9 21.4 270.7 250.7 264.4
Raw Material Consumed 152.1 117.0 30.0 152.1 126.4 134.7
Stock Adjustment -8.8 -2.3 -274.8 -15.0 7.3 -7.3
Purchase of Finished Goods 0.8 0.6 35.6 0.5 2.1 0.7
Employee Expenses 25.2 20.6 22.3 38.2 23.3 23.8
Provisions & Write Offs 0.0 0.0 0.0 0.0 12.5 0.0
Other Expenses 46.5 45.6 2.0 46.7 45.7 49.9
Total Expenses 215.7 181.4 18.9 222.7 217.2 201.8
Operating Profit 34.3 24.5 39.9 48.0 33.5 62.6
Interest 14.2 16.9 -16.1 14.2 13.5 15.6
Depreciation 7.0 6.9 1.6 7.5 7.1 6.9
PBT 13.1 0.7 17.2 26.3 12.9 40.1
Tax 0.0 0.1 0.0 0.0 -0.2 3.5
Fringe Benefit Tax 0.0 0.0 0.0 0.0 -3.7 0.0
Deferred Tax -0.3 0.0 0.0 -0.8 -0.2 0.2
Reported Profit After Tax 13.4 0.6 2210.3 27.0 16.9 36.4
Extra-ordinary Items 8.0 0.2 4100.0 0.0 23.0 27.1
Adjusted Profit After Extra-ordinary item 5.4 0.4 1289.7 27.0 -6.1 9.3
(Source: Capitaline, HDFC Sec Research)

Consolidated Q1FY11 Q1FY10 % Change Q4FY10 Q3FY10 Q2FY10
Net Sales 962.4 755.4 27.4 967.6 852.5 831.0
Other Operating Income 2.6 20.0 -87.1 7.3 13.5 60.5
Retail Research 26
Other Income 73.0 20.3 259.7 216.0 64.5 54.9
Total Income 1038.0 795.7 30.4 1190.9 930.5 946.4
Raw Material Consumed 690.7 506.2 36.4 702.0 598.8 575.8
Stock Adjustment 2.7 23.8 -88.5 -72.2 31.1 0.6
Purchase of Finished Goods 31.4 31.1 1.2 16.4 25.2 42.2
Employee Expenses 46.8 43.5 7.5 70.4 43.9 42.3
Provisions & Write Offs 0.0 0.0 0.0 0.0 12.5 0.0
Other Expenses 162.6 132.7 22.6 256.9 135.5 149.7
Total Expenditure 934.3 737.3 26.7 973.5 847.0 810.7
Operating Profit 103.7 58.4 77.5 217.4 83.5 135.7
Interest 19.7 24.2 -18.9 83.1 22.5 21.1
Depreciation 12.9 12.5 3.1 13.0 12.4 12.2
PBT 71.1 21.7 2.3 121.4 48.6 102.4
Tax 11.0 3.9 184.7 16.0 2.5 21.5
Deferred Tax 0.0 0.5 -102.2 2.7 -6.0 3.8
Reported Profit After Tax 60.2 17.4 246.9 102.7 52.0 77.2
Minority Interest After NP 11.4 1.0 1055.6 26.3 8.2 10.5
Net Profit after Minority Interest 48.7 16.4 197.9 76.4 43.8 66.7
Extra-ordinary Items 6.8 0.2 3463.2 0.0 22.0 22.5
Adjusted Profit After Extra-ordinary item 42.0 16.2 159.6 76.4 21.8 44.2
(Source: Capitaline, HDFC Sec Research)
Analyst: Kushal Sanghrajka (kushal.sanghrajka@hdfcsec.com)
RETAIL RESEARCH Fax: (022) 30753435

Corporate Office: HDFC Securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station,
Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042
Phone: (022) 30753435
Website: www.hdfcsec.com
Email: hdfcsecretailresearch@hdfcsec.com
Disclaimer: This document has been prepared by HDFC Securities Limited and is meant for sole use by the recipient and not for circulation.
This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a
solicitation to buy any security. The information contained herein is from sources believed reliable. We do not represent that it is accurate or
complete and it should not be relied upon as such. We may have from time to time positions or options on, and buy and sell securities referred
to herein. We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this
document. This report is intended for Retail Clients only and not for any other category of clients, including, but not limited to, Institutional
Clients
Retail Research 27

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Godrej Industries Ltd. (GIL) CMP: Rs. 219.

Management Interaction Note October 26, 2010

FMCG Retail Food &

Existing Integration (not necessarily captively used) Possibility of Integration

GIL’s business structure can be described in the following manner:

Own business Stake in other

Godrej Agrovet Godrej Godrej Hershey Godrej Natures Basket Other

Godrej Nutrine Various SPVs

Golden Feed Godrej Oil Palm Cauvery Oil JVs

Particulars No of Shares (In lakhs) % Holding

Value Chain of Oleochemical Industry –

Crude RBD Palm

RBD= Refined, bleached and deodorized

Value Chain for GIL –

Used Fatty Used

Production & Turnover FY09 FY10

FY10 Revenue Distribution FY10 Domestic vs Export Sales

Fatty Acids Glycerin

Raw Material FY09 FY10

Source: ICIS Pricing

(All Values in Rs. Cr)

Pan-India Demand Projection Demand Projection for 7 Major Cities

Commercial Residential Retail Hospitality Commercial Residential Retail Hospitality

Source: Cushman & Wakefield

Growth in Organized Retail

Organized Retail % of total retail

(All Values in Rs. Cr)

Finance & Investments:

Godrej Consumer Products Ltd (GCPL)

Sales Mix (Standalone)

Liquid Detergents By-products

Source: Company Reports, HDFC Sec Research

13.3 12.5 13.0 14.0

Year End Industry GCPL Brands

Salience as % of Sales Contribution to % growth in Sales

Godrej Hershey Food and Beverages Ltd (GHL)

S30 Sugar Prices-Mumbai M30 Sugar Prices

(All Values in Rs. Cr)

Godrej Agrovet Ltd (GAVL)

Production & Turnover–

Standalone FY09 FY10

(All Values in Rs. Cr)

(All Values in Rs. Cr) (All Values in Rs. Cr)

Competitors – Some competitors include Rallis India and PI Industries.

Production & Turnover –

Plant growth promoter liquid Plant growth regulator granule

Palm Oil Value Chain –

Crude Palm Oil

Fresh Fruit Seed / Palm Kernel Oil / Animal

Edible Oil Imports Edible Oil Import Value

1000000 300000 50000

(Rs. per tonne)

Value - LHS Unit Value - RHS

Source: USDA FAS data, HDFC Sec Research

RBD Palm Olein Price-Kakinada

(All Values in Rs. Cr)

(All Values in Rs. Cr)

(All Values in Rs. Cr)

Consolidated Quarterly Segmental Veg Oils

Sum of the Parts (SOTP)

Annual Profit & Loss Account:

b) Reserves & Surplus 995.1 990.9 1375.9 1733.8