The Panaji-based Caculo family has made the transition to a big business group pretty smoothly. Smart choices in dealerships of automobile and earth moving equipment were made when the economy was booming and demand was at its peak, and this means that the Caculo group is considered financially stable among local business houses. Here, Manoj Caculo, chairman and managing director, talks to SHOMA PATNAIK on a range of topics including performance and prospects. He is cheery on retail and is sure that multi-brand malls will work very well in Goa
The Caculo Group is in the forefront only recently, it seems like a new generation group.
On the contrary, we are among one of the oldest families of Goa and both my brother Suraj Caculo and myself are the fourth generation in business. The family was always in commerce but like all local businesses we too grew faster post liberalization. I joined the company in 1991 after passing out engineering. The Ford dealership was my first contribution in 1998 followed by dealership of Honda in 2000. The mall came about in 2010 and that has adding to our visibility in recent years. Thanks to the mall, the group interests include apparels, food and now a venue to party and the family entertainment zone on the third floor. Currently we are focused in three key areas of dealerships of automobiles, JCB earth moving machines and retail. Earlier we were into construction but building and real estate is deliberately been sliced off from our core business activities.
How was the group performance in 2013-14?
Taking each business, in automobiles the industry is in recession. All India growth rate is negative in car sales and scene in Goa is the same. But fortunately for us both the brands that we are in viz Honda and Ford are spared of the fall in volumes perhaps because of new models launched by the companies. The market response to new launches was very good. We clocked 1,500 more vehicle sales in 2013-14. In case of the JCB equipment division, it primarily caters to the construction industry, building of roads, trenches, etc, and since there are no infrastructure projects happening in Goa because of the paucity of funds and mining closed, the business was slow. Also, the regional plan has put a stop to new projects. Thus, on the equipments front we witnessed a drop in business with sales of 110 machines in 2013-14 about 15 per cent lower than the previous year. On the other hand, the mall division held up satisfactorily. The year 2013-14 saw higher number of footfalls as a result of which growth was 20 per cent (includes apparel and food sales.) Perhaps because people cannot spend big money on real estate, house or cars they are spending on garments and food. The fashion industry is also booming reflected in more clothes going off the rack in our outlets.
The mall is quite a success story despite earlier doubts of its viability.
Yes and I feel quite vindicated about it. It is my idea and totally owned by our family. When it was ready for launch I discovered that none of the big names wanted to come to Goa. Normally, shops in most malls run on a lease model, viz brands pay rent every month to the mall owner. However, with the rent that I was quoting there were no takers. So as an inducement I offered free floor space with a deal of operating on ‘revenue sharing model’ which they readily agreed thinking that this man does not know what he is doing and will go into terrible loss. However, within a year the store owners are paying three times more than what I was asking as rent. I made a real bargain in the deal. None of the stores were confident of sales although I knew that it was a concept that was just ready for takeoff.
At that point of time it was considered a risk?
People felt that the mall would never succeed. It was a big risk because the valuation of real estate investment was huge and of over Rs 200 crore. Everybody was sure that I was stretching myself too much and too thin, and the diversion into retail would never pay. I have no complaints on the revenue that the mall is generating. But if there was no mining closure and the economy did not slow down we certainly would have fared better.
Do you see any revival in the auto market?
Now since April 2014 we are seeing a little improvement. The market sentiment is not as negative as before. In Goa people are reconciled to the fact that mining will take its time to get started and life has to go on.
2013-14 was a tough year for two of your divisions – auto and equipment. How did you manage?
I believe in making the coat as per the size of the cloth. When the market is down you have to optimize resources. We have 700 staff but did not do any retrenchments. Upward curves and down troughs are normal way of life in business and one has to cope with it. The year was tough because cash flow was an issue and there was not enough money flowing in the market. It impacted us in several ways. The equipment business for instance comprises small contractors whose bills were held up because of not getting payment in time. Purchases of spare parts and replacements were a problem for them. We had to continue selling to keep the supply-production chain going. A lot of capital was tied up in receivables. Our average credit that was about six to eight lakh Rupees a month shot up to Rs 40 lakh.
But the slowdown would have been offset by cash flow in retail. All our businesses are run separately like individual profit centres. Each of them has to be profitable and self-sustaining on its own.
The group has professionalized considerably in recent years. Did you hand over the job to consultants?
I am no believer in consultants. If consultants were all that great they would have been running their own businesses. As a businessman I work on intuition, although consultants are taken for technical knowhow, like architects, etc.
Family run businesses closely monitor day-to-day running. What is your management style?
My management credo is the complete opposite. I absolutely depend on my managers and business leaders for day-to-day running and believe in giving total freedom via delegation. My philosophy is hiring the right and good people and empowering them for correct decision making. There is a professional team in place in all our companies headed by the vice-presidents and general managers. Cash decisions are the preserve of these heads and I do not interfere in their domains whatsoever. In fact, the business runs best without my meddling. However, on strategic and key issues such as introducing a new model, future areas of expansion, etc, the last word is mine.
Where do you the Goan economy is headed?
I think the Goan economy is just waiting to explode. It has got a lot of latent potential through direction from the current government which has firm plans for growth. Of course, we should not count for the last two years which we had to go through extraordinary circumstances and would have been difficult for any government. The central government of the NDA in New Delhi and the good relations between the state and the centre is another point in favour of the Goan economy. At the same time it must be stressed that what is needed is the aggressive development on the infrastructure front by way of availability of power, water, etc. Even the decision on Mopa needs to be spelt out clearly and fast. Dabolim is highly congested and we have to think ahead 25 years from now. Mopa is very much the need of the hour for a progressive Goa. Goa’s potential to be a major player should not be dashed to the ground because of petty politics that says “scrap the Mopa airport”.
Infrastructure will surely grow in future. Why did you get out of construction industry?
Because my heart is not in it and I am not interested in furthering prospects in an industry where there is lot of dependence on government. Policy is outside our hand and key issues are outside our control. Decision making in the industry is from out and I thought it was best to withdraw from it.
Which are the areas where Goa should invite investment?
Tourism in a mega manner, IT software and retail, according to me, are the top three sectors where government must go all out to grab investment. All three are growth areas and will remain so in future. In tourism, Goa is ready for a water park. It is something which I believe would do very well if an investor comes in with a project. A marina is also necessary as berthing facilities are a must for luxury boats, water sports and yachts. Marinas are good and necessary and must not be driven out by protestors. It will attract up-market tourists and very high spending individuals. IT software is another industry to attract although for large companies to come in we need to upgrade infrastructure in housing. Education is an area where the government is keen. But I feel that we do not have the captive market for large institutes. Only residential campuses will succeed.
What about retail where you are upbeat consistently.
The growth story in retail is really exciting. There is this population of over billion people and growing who all need chappals, shoes, dresses, eating out, etc, and it is the retail and services sectors which will supply all that. What connects with retail is logistics, warehousing, cold storage, etc. They will grow as the retail market continues to expand. Every week we have two truckloads of goods coming in for Westside side alone. Professional warehousing is definitely an area which needs to be developed side-by-side with retail.
What are your future areas of investment?
For the moment, I would like to consolidate as far as possible in automobiles and existing businesses. In the mall division, however, we want to grow and perhaps set up another mall. It is a project which is on the drawing board as of now. It could be in south Goa and we are seriously scouting for good, viable and feasible spaces. The modality of the project whether it is in partnership or full ownership like the present is being worked out.
What about the entertainment industry where you are producing films?
It just too new an area and the final success of the project must be ascertained before expanding. Then again, we will not be doing Konkani cinema but focusing on regional cinema like Marathi movies where the market is huge. Unfortunately for Konkani films the viewership is too small.
Last, as an industrialist what kind of support are you looking at from government?
Industry actually does not require much of support or freebies and as a businessman I have never gone around asking. We just want proper policies and the freedom to work in peace. The Caculo Mall is perhaps the highest tax payer to the CCP, paying out Rs 42 – 45 lakh of tax annually but the amount of harassment we face in collection of garbage is unbelievable. We are putting up our own garbage treatment plant to plug this problem. Also, speed and competency from the government departments are lacking and must be improved ASAP. If these things are in place, Goa will undoubtedly see more industrialists setting up projects, which will ultimately benefit the state.