Godrej & Boyce: The Lesser-Known Holding Company Of Locks To Almirahs

Jamshyd Godrej is set to take ownership of Godrej & Boyce Mfg. Co., a privately held company that is not as well-known as other group companies. Despite its relatively low profile, the oldest operating company in the Godrej Group has presence spanning 14 business divisions, categorised under two broad segments: consumer products and industrial divisions.

By virtue of its established presence in the consumer appliances and locks business, the 'Godrej' brand has become a household name. Its consumer products division also includes furniture and interiors, security and storage solutions, vending machines; while its industrial divisions include process plant and equipment, material handling equipment, precision engineering, aerospace and tooling, electrical and electronics, and electric motors.

In financial year 2023, the company reported revenue of Rs 14,796 crore and achieved a net profit of Rs 117 crore. According to provisional data for fiscal 2024, its revenue stood at Rs 16,182 crore. The company had investments of Rs 8,596 crore and a cash of Rs 561 crore as of March 31, 2023.

G&B derived 68% of its total revenues from its consumer products division, with the balance generated by the industrial divisions (26%), followed by the leasing and construction businesses (4%) and other income.

G&B's consumer and industrial product segments include:

• Godrej Security Solutions

• Godrej Locks & Architectural Fittings and Systems

• Godrej Interio

• Godrej Appliances

• Godrej Process Equipment

• Godrej Material Handling

• Godrej Aerospace

• Godrej Koerber

• Godrej Electricals & Electronics

• Godrej Lawkim Motors

• Godrej Vending

• Godrej Precision Engineering

• Godrej Tooling

• Godrej Construction

• Godrej Storage Solutions

"G&B, as part of the Godrej Group, enjoys a strong financial flexibility further augmented by the significant market value of its listed investments in group entities, valued at Rs 9,626 crore as of July 2023 as well as its land and real estate holdings at Vikhroli in Mumbai," according to ICRA.

Apart from its monetisation potential, the latter also provides a steady lease rental income flow to the company.

G&B’s largest division, appliances, reported negative contribution margins in fiscal 2023 following input-cost inflation and supply-chain disruptions, mainly semiconductor chip shortages, the brokerage said. Despite some recovery in contribution margins in the current fiscal on the back of easing inflationary pressures, the same remains marginal at 1% and much lower than historic levels of 6–7%. In line with G&B's plans to enhance its focus on the premium offerings within the appliances division, the divisional margins are expected to further improve over the medium term.

G&B continues to face intense competition in the consumer appliances, and furniture and interiors divisions, limiting its pricing power and margins in these divisions, which account for close to half of its revenues. Competitive intensity also remains quite high in the furniture and interiors business on account of competition from both organised and unorganised players. However, the increased thrust on improving market penetration and reach by expanding its distribution network, and focus on premium offerings, are expected to drive the performance of these sectors over the medium term, ICRA said. The brokerage said that the company derives around 25–30% of its revenue from the consumer appliances business.

G&B currently has a 7.3% stake in Godrej Consumer and 3.8% in Godrej Properties valued at Rs. 9,626 crore as of July 2023. However, the cousins, Jamshyd and Smita, are most likely to transfer their shares to Adi and Nadi.

ICRA expects G&B's cash flow from operations of Rs 700–800 crore and its existing liquidity to remain sufficient to fund its capital expenditure of Rs 600–700 crore and debt-repayment obligations of Rs 390 crore, including Rs 132 crore of public fixed deposits that are renewable, in fiscal 2024.