DS Group to pump in Rs. 2,500 cr : MD

The Rs. 1,600 crore Dharampal Satyapal Group (DS Group) has rapidly grown into a multi diversified conglomerate with strong presence in various segments including FMCG, hospitality, mouth fresheners, tobacco, packaging and rubber thread. The group has recently ventured into infrastructure sector. In a freewheeling interview with ET’s Anuradha Hi matsingka, DS Group vice-chairman & managing director Rajiv Kumar spoke about the group’s plans and future growth strategies. Excerpts:

At a time when companies are becoming more focused and prefer to concentrate on few businesses, the group, has been diversifying into various sectors. What is the rationale behind diversifying?
We started diversifying nearly five years ago in infrastructure, hospitality. Some diversifications like packaging business were undertaken by the group more as backward integration. We have diversified more in the north and the north-east. We are also focusing on expansion of our existing portfolio, especially the FMCG business, where we have not only enhanced our product portfolio but also expanded our distribution network.

Does the group plans to rationalize its business and concentrate only on profitable ones? Is the group planning to foray into another sector ?
We intended to concentrate on our existing business and the new ones, most of which have a gestation period of three-to-five years. As of now, we have no plans to diversify further. In case we see an opportunity, we will evaluate the synergies it has with the group’s existing portfolio.

What is the group’s investment plans over the next two-three years? Please elaborate and give us details on the future plans of the group.
In the next three-to-five years, we would be investing approximately Rs. 2,500 crore in various businesses, We intend to set up a 240 mw thermal power plant for a total outlay of approximately Rs. 1,200 crore. Another Rs. 540 crore will has been set aside for our proposed one-metric tonne cement plant in Meghalaya and Rs. 500-600 crore for hospitality business. In the hospitality segment, we are coming up with a five-star hotel in Guwahati, a business hotel in Jaipur and a resort at Jim Corbett.

How serious is the group about inorganic growth prospects? Or does it intend to focus on organic growth only ?
As of now, we have not acquired any businesses. Most of our new projects are Greenfield projects. Our focus will now be to enhance our existing businesses and to focus on fructification of our diversification that we have already undertaken. In future, if we find an exciting offer that has synergies with our business strategy, we could look at acquiring brands and businesses.

Does DS Group have the management bandwidth to take on MNCs? How does the group compares itself to its competitors in terms of profile and performance?
For our premium business properties, we intend to enter into management contracts with international groups who would initially run the properties under their brand name. In most of our existing business, we offer premium products and are considered to be leaders in the segment. Our brands, including Catch, Baba, Tulsi, Pass Pass and Rajnigandha are well known for quality and innovation in products as well as packaging and our businesses has been growing steadily. We have been importing technologies from world over for our various plants. Hence, our quality is the best and we are, therefore, fully equipped to take on the competition.

Is the group aspiring to play in both high-end products and low-end products ?
We do not have any low-end products. Catch is one of the most premium brands in the F&B sector. We are the first spring water brand in the country. Catch salt and pepper and other table-top products actually revolutionized commodity to the dining table placement. Even in mouth fresheners, we make the most premium mouth fresheners.

During the economy slowdown, which businesses were  affected most and why? How is the group planning to improve the profitability of business?
Because of liquidity shortage during the slowdown, inventory got built. This, however, got normalized over the next three-to-six months. Sale of our businesses did not really get affected. FMCG did not really witness much slowdown. Our turnover has also steadily grown in the last few years.

What lessons has the group learnt from the recession? Is the group planning to change its business strategy so that theses businesses remain largely unaffected if the country gets hit by another recession ?
Though recession did not really affect us, we did embark on cost effective strategies in all areas of business operations. A lot of internal auditing was done and cost effectiveness was introduced in all operations. We have been constantly upgrading our systems and process to make all aspects of business cost effective. In the area of purchase, which has to be closely monitored during lean time, we have created a Vendor Managed Inventory (VMI) system to help minimize inventory cost, put in place a risk and crisis management strategy as well as a monitoring and feedback system. The group has a fully-equipped system and process department, which assists the businesses to make the processed cost effective by continuous value addition and value engineering processes. The new machines & technologies were also installed to ensure better production and reduce wastage.