Farm Stress, Demand Revival Top Priority | Emami Group's Mohan Goenka To ET NOW

🎥 Jul 01, 2019 📺 ET Now ⏱ 10m 👁 427 views

How is the FMCG landscape looking? Has it recovered from Q4FY19? Is rural India in extreme stress? Should it be the govt's priority to help it recover? Watch Mohan Goenka, Director of Emami Group talk about rural distress hurting FMCG & how should FM tackle slowdown scare. Subscribe To ET Now For Latest Updates On Stocks, Business, Trading | ► https://goo.gl/SEjvK3 Subscribe Now To Our Network Channels :- Times Now : http://goo.gl/U9ibPb The NewsHour Debate : http://goo.gl/LfNgFF To Stay Updated Download the Times Now App :- Android Google Play : https://goo.gl/zJhWjC Apple App Store : h...

Watch on YouTube

Transcript (21 segments)

Interviewer0:00

Mohan Goenka, director at Emami Group. Thanks for joining in. Firstly, I want you to address the big elephant in the room: the consumption slowdown. How is the landscape looking now purely from the FMCG side of the business? Have you seen any signs of a recovery, and what can an event like the budget, or what can the government do at this juncture to try and instill and pump up some sort of growth and revival?

Mohan Goenka0:33

Definitely, the FMCG industry is seeing some slowdown over the last two or three quarters. We expect some stimulus from the government; if FMCG has to grow, the rural has to bounce back. Unfortunately, the last few months have been a little poor for the markets, but very recently as the monsoon is picking up, we have seen some upside from June onwards. Firstly, it was the election mode, and now we are seeing some trends where rural liquidity has improved slightly. Hopefully, if the momentum continues, I'm confident that the next few quarters are going to be good. The budget is a big one. We expect, particularly on the rural side, if MSP or job creation, the government has to give some stimulus. We are very hopeful. So one thing is rural demand should come back. Will it come back? Whether it is MSP, inflation, or government spending, the sense is that rural demand is not going to come back because there is a problem in job creation and MSP. So have we in for 6-12 months of low rural demand? As of now, as I said, monsoon is picking up, so hopefully that should put some pressure off the government. But yes, MSP prices have to go up, job creation in the rural sector, particularly the real estate sector, has to go up. So there has to be a lot to be done as far as the government or the budget is concerned.

Interviewer2:36

I think I'm going to ask you a tough one now, and I hope you'll appreciate my curiosity because I'm simply trying to address the concerns which are there in the market right now. The fact that promoters have sold their family silver, which is their promoter ownership in the listed company which is the FMCG business. Markets are wondering how big is the debt issue for the promoter at the group level after a substantial stake sale in Emami Limited. Do you have enough and more cash to take care of all your promoter group companies, and can you service the debt, or you could be forced to do some more strategic stake sales?

Mohan Goenka3:13

We have very clearly demonstrated that we have to pay our lenders at the right time, and that's why we diluted almost 20% stake in Emami Limited. I don't see any further reduction as far as Emami Limited is concerned. But we have a debt of almost about 2,200 crores. We have taken a call that we want to reduce our debt to almost zero levels. So for that, if we need any strategic dilution in some of our other matured assets, we would be doing that. Emami is a diversified group; we have a very big land bank, we have interest in many other sectors. So as and when there are opportunities of some dilution, we would do that to reduce our debt.

Interviewer4:07

Talks with any strategic investors, because the market chatter throws up one new name every day?

Mohan Goenka4:16

Not really. Not that we are talking to any individual. We have mandated for some of our assets, so as time comes, you will come to know who would be the strategic buyers.

Interviewer4:32

Is the debt which needs to be serviced at the promoter group? Because we have a fair deal of understanding of your listed entity because we get information in the public, but the fact that you've reduced your ownership in the FMCG business, I would imagine that the debt is high. And before you answer that, I think it's a great move you're doing. We've been supportive of promoters who are trying to reduce debt and sell stake in order to get out of this hole. Full marks to you. But now the tough part: how big is the problem?

Mohan Goenka5:05

The problem is that significantly, I don't think that we have to take any such call immediately. We have enough time now. We can take the call in the next 8 to 10 months. So let's just wait for the right opportunity.

Interviewer5:26

I think in Emami Limited, the pledge is at the promoter level. I'm sorry I'm asking you tough questions, but you'll appreciate my curiosity. So the pledge levels in Emami Limited is presently at about 45% or so. Would you be looking at unpledging this stake, or would you be right now looking at reducing the debt at the promoter level? What would you do first?

Mohan Goenka5:54

Definitely, as we reduce our debt, there would be unpledging. We want to bring it down to zero, that is our first choice. And I'm very hopeful that in the next 6, 8, or 10 months, we would be able to bring it down to almost zero levels.

Interviewer6:14

You are very confident of bringing down your debt levels; you've taken all these steps in that endeavor. Mr. Goenka, what about your plans on the cement business front? Because you have spoken about your plans to reduce debt. So what is the level of group debt that you can just tell us where the talks have reached with respect to cement?

Mohan Goenka6:37

So cement is also, we are also looking at some strategic partner as far as cement is concerned. As far as the group level debt is concerned, that is being serviced by the individual companies, so there we don't have an issue. The issue has been the promoter debt mostly; the investments went into the real estate, and we all know that real estate has seen some downward trends. So hopefully, if we dilute some strategic in cement or in some of our other assets, that should take care of our entire 2,200 crores of debt. As far as the promoter debt is concerned, we are more concerned about the promoter debt.

Interviewer7:16

Any plans to take any of your companies public? I mean, because you can tap the capital market and raise capital. Are you looking at exiting any of your subsidiaries completely and just sell that piece of the promoter business completely? Are these areas which you are exploring?

Mohan Goenka7:34

As I said, the larger issue is the 2,200 crore of promoter debt. So for that, whatever steps need to be taken, whether it is partial dilution or complete dilution, that we are still looking at the options. As and when time comes, we would get back to you. Again, a very direct question here, but presently debt has to be reduced; that is the need of the hour.

Interviewer7:56

Okay, I understand. You've given me, you've given us rather, a time, a number that you want to bring the debt down to zero. Could that happen in this fiscal year, or is this an ongoing process, and by the time you reach a debt level of zero, it could take more than 12 months, more than 18 months?

Mohan Goenka8:21

Again, it's very difficult to give timelines because we have to look for strategic partners. But we have mandated, and we are getting interest in some of our assets. I don't think it would go beyond this fiscal year.

Interviewer8:40

It's great to hear that. Let's talk about Emami Limited. A company where when the promoters wanted to sell, the minute they decided, I've been told the brokers were able to find a suitable buyer within seconds. That's the good part of the FMCG business. Now my understanding of FMCG of Emami Limited is that it's an FMCG company with very strong rural brands and very strong rural focus. Will you stick to the strategy, or given the way the rural economy has suffered in the last 2 or 3 years, you would be forced to have a semi-urban or semi-rural focus?

Mohan Goenka9:14

Not really. Emami has been a mass brand, and almost 54-55% of our business comes from rural areas. Just because one or two quarters of distress in rural, we can't change strategies. We would always remain for the masses. And as I said, the month of June has been quite encouraging. If the momentum continues, then I am hopeful that demand should bounce back.

Interviewer9:45

You are hopeful of that. When can we see double-digit growth returning for the company?

Mohan Goenka9:53

Our targets are definitely double-digit, and hopefully, let's see in the next two to three quarters, we must expect double-digit growth from Emami.

Interviewer10:05

And on that positive note, we would like to take a time out to thank you for joining in, Mr. Goenka. It's been a pleasure chatting with you. Thanks for giving us an all-round view on what's going on with the debt, the expectations from the sector, as well as the outlook for the budget.