Narendra Modi govt showing considerable clarity in policy making: A Vellayan

The Narendra Modi-led NDA government has barely completed 10 days in office but kudos have already started coming from India Inc about its quality of governance.

"I see considerable clarity in the policy making process of the new government," said A. Vellayan, Chairman of the Rs 24,000 crore Chennai-based Murugappa group. He added that there were signs of liquidity of the economy improving and consumer confidence returning. These factors coupled with a good budget should trigger an overall improvement in consumption thereby reviving the economy, he felt. "The next 10 years should be good for the economy," he added.

He was speaking at the annual press conference of the Murugappa group to announce its performance for the year 2013-14. Vellayan, it should be recalled, was an outspoken critic of the policy paralysis that had come to plague the previous Congress-led UPA government.

The paralysis that he criticised had a direct impact on the performance of his diversified group that is into fertilisers, sugar, engineering products and financial services.

During the 2013/14 fiscal year the Murugappa group posted 8 per cent growth with a revenue of Rs 24,350 crore compared to Rs 22,466 crore in the previous year. The group's EBITDA grew marginally to Rs 2,627 crore (Rs 2,507 crore last year) and profit before tax was almost flat at Rs 1,415 crore (Rs 1,489 crore in 2012/13).

"High inflation, high interest rates, slowing economy and depressed demand affected our performance," Vellayan said. This performance, according to N. Srinivasan, the group's director - finance, was the worst the conglomerate has posted in the last seven years.

The economic uncertainty had a direct bearing on the group's capital spending. With an average capacity utilisation of 75 per cent and no sign of any revival, the group cut back its capital expenditure during 2013/14 to just Rs 166 crore (that too mostly on maintenance work) as against Rs 1,650 crore in the previous fiscal year. It also eschewed making any acquisitions.

Vellayan was cautious but optimistic about the timing of the recovery. He said the group's companies will meet soon after the Union Budget to gauge the market and determine the extent of capital expenditure and investment for the current fiscal and later. "Since the outlook in April was negative, we did not arrive at any investment numbers and decided to wait for the electoral outcome," he explained. He expects the group to soon regain growth levels which as a thumb rule is three times the GDP growth.

Some of the highlights of the group performance in 2013-14 were: its flagship company Coromandel International crossed Rs 10,000 crore revenue mark for the first time and the financial services arm Cholamandalam Investment and Finance company's asset under management crossed Rs 25,000 crore in March 2014.

Vellayan said the future thrust of the group will be in farm automation where the group has entered into joint venture with two Japanese majors Mitsui & Co and Yanmar & Co. and in nutraceuticals business where it acquired a company in Chile to backward integrate its operations.