A family feud, forged in the past

Two powerful officials were there at the request of the eminent industrialist Neelkanth Kalyani of Pune, the founder of Bharat Forge. His wife Sulochana Kalyani and his eldest son Babasaheb Neelkanth Kalyani, popularly known as Baba Kalyani, joined him.

Nadkarni and Waghul were invited to witness a family settlement. Next, he drew up a document detailing what had been discussed and agreed upon, and had witnesses sign the document, which was duly notarized.

What transpired in this meeting and the validity of the document is now at the center of a bitter internal battle that has erupted between billionaire industrialist and Bharat Forge chairman Baba Kalyani and his sister Sugandha Hiremath over some equity shares. 1,300 crore (as of this week) in a publicly traded specialty chemical company called Hikal, owned by both the families.

In March, Sugandha Hiremath approached the Bombay High Court, saying her elder brother had violated a family agreement under which their father had directed that the equity shares in Hikal, owned by the Kalyani family, would eventually be transferred to her. . Baba Kalyani in his response has strongly refuted the contention, presented a different version of what transpired in the meeting and argued that he was never a party to the agreement nor had he signed it.

Apart from Kalyani, who is 74, and Vaghul, who is 87, the others who attended that meeting 29 years ago are no more.

A spokesperson for Kalyani said he had nothing to add to what he had said in the court in response to the petition. Vaghul could not be reached.

‘Sweat and Blood’

In his first media interaction after filing the petition, Hiremath said he was determined to fight for his rights.

Hikal was made with the “sweat and blood” of her husband, Jaidev Hiremath. “I have to fight for my rights, and what my father wants for me,” she said.

“In India, women initially get nothing, and I represent all women who are denied their rights.” At the center of the controversy is the Kalyani Group’s 34% stake, worth around Rs. 1,261 crores. According to her, it was her parents’ wish that she get the Hikal stake owned by the Kalyani Group.

The Hiremath family owns 34.84% of Hikal, while the Kalyani Group owns 34.01% through its investment companies, with the rest owned by the public. The company, which is in the business of active pharmaceutical ingredients (APIs) and crop-protection chemicals, is controlled by the Hiremuth family. Sugandha’s husband Jaidev is the executive chairman and her son Sameer is the managing director. Along with Baba Kalyani, his son Amit Kalyani is also on the board.

Hiremath, now 71, is younger in person but his illustrious brother Baba Kalyani is well known in the industry. “I went to court not only to protect my interests but also to protect the interests of my family,” she said.

There is a technical complication in the dispute that the equity shares under dispute are not owned by Baba Kalyani, but by investment holding companies of the publicly listed Kalyani Group.

“Neither the said defendant (investment companies of the Kalyani Group) is a party to any such arrangement/agreement, nor can its assets be said to be the assets of defendant No.1 (Baba Kalyani), so as to transfer may be warranted. In terms of the said arrangement/agreement to the plaintiff,” the Kalyanis said in response to the petition in the court.

Sugandha understands the complexity and says that her father had envisioned this obstacle and he also had the solution. That the Kalyani family would buy the stake at market value and gift it to him. As per her father’s plan, the gift tax was also to be paid by the Kalyani Trusts.

‘Benefit of tailwinds’

Before becoming an entrepreneur, Hiremath, who was on a brief visit to India from the UK, had a meeting with T. Thomas, the then chairman of FMCG giant Hindustan Lever (now Hindustan Unilever).

Thomas, impressed by the young Hiremuth, asked him to stay back and join the Lever office “from tomorrow”. Hiremuth was doing well at a fast-growing consumer goods company when his father-in-law’s persuasion finally inspired him to start his own. Enterprise.

Jaydev Hiremath, Sugandha’s husband and the current non-executive chairman of Hikal, founded the company in 1988 and built it from the ground up on the persuasion of his father-in-law (NA Kalyani) who wanted his son-in-law. To take up “some entrepreneurship” instead of working for someone else. NA Kalyani arranged initial seed capital from Surajmukhi Investments, a 100% subsidiary of Kalyani Steels.

“Jaidev built the business and the Hikal brand is now known worldwide,” said Sugandha, recalling with amusement how Baba Kalyani used to call Hikal a tinpot company, given its relatively small scale of operations.

In response to the petition, Kalyani disputed that characterization and said she played a key role in the company’s initial days. “In addition to material financial contributions, Plaintiffs regularly consulted with me on all aspects of Hikal’s activities and operations. In addition to board and shareholding meetings, I regularly attended review meetings at Hikal to monitor Hikal’s activities and progress.” I used to participate. I was the chairman of the company at that time.”

Either way, Hikal is enjoying a favorable business environment today.

“Taylwinds are driving gains in the context of global supply chain disruptions and new opportunities arising from the China Plus One strategy as the company receives fresh inquiries from global innovator companies in the CDMO (Pharma) business segment. BP Equities said in a June 2022 research report that management expects the segment to be a key growth driver over the next few years.

Founder’s Will

Sugandha says that her father called the June 1994 meeting in the presence of senior bankers to ensure that her position was explained in their presence.

She recounts those events for Mint. “Many differences arose between BNK (Baba Kalyani) on the one hand and NA Kalyani/Sulochana NK on the other. Consequently, a handwritten memorandum of understanding was signed by both NA Kalyani and Baba Kalyani on 30 October 1993, which provided for the transfer of Hikal’s shares to the Hiremath family. “Hikal will go to Sugandha and Jaya,” his father understood. Her father would refer to his son-in-law Jaydev as Jaya.

Kalyani does not contradict this memorandum, but says that it became invalid because her father did not follow it himself.

“I am aware of a memorandum dated October 30, 1993, under which it is stated that Hikal will go to the plaintiffs … Specifically, NAK itself has violated the terms of the memorandum … in so far as it has (BFL), shares which were otherwise expressly agreed to be transferred to me… Thus, the memorandum dated 30 October 1993 was disallowed and abandoned.

The meeting later took place at the Taj Mahal Hotel in the presence of eminent bankers. While Sugandha says she has documents to show that her father had clearly instructed that the Kalyani family’s stake would eventually go to her and even prescribed the manner in which this would be done. Baba Kalyani in his reply has said that it was prepared unilaterally. His father and he never signed it. They also say that the document incorrectly reflects the essence of their discussion.

“As such, I deny that there was any agreement regarding transfer of shares to the plaintiff in Hikal on June 19, 1994, as alleged. I deny the contents of the documents… as it is in Hikal does not accurately reflect the understanding of the parties with respect to the shares. This document was prepared by NAK unilaterally and while it purports to record our discussions at the meeting held on 19th June 1994, it correctly does not do.”

Sugandha says that the gist of the understanding was that all the Hikal shares held by the Kalyani family were to be transferred to Hiremath after the demise of NA Kalyani and Sulochana Kalyani (i.e. both the parents).

counter claim

The ownership dispute, which had been going on till now, reached its peak after the demise of his mother earlier this year. Hikal notified the stock exchanges of the family dispute late last month when he received a letter from the Kalyani group of companies seeking permission to increase his stake in Hikal by another 5%. It came as a shock, Sugandha said. “Here we were looking to hand over the stake to my brother, but instead, we got notice that they intend to increase their stake.”

He said that increasing its stake in Hikal by the Kalyani Group would be unfair to other shareholders, including minority shareholders. Hickle has several future projects that the board is aware of that the public shareholders are not aware of, he clarified.

Kalyani is also using the same argument in her defence. They argue that their stake in Hikal is held by a separate legal entity- Kalyani Investment Company with over 16,479 public shareholders. “Any relief would have the effect of depriving thousands of shareholders of the property owned by respondent no.2 (Kalyani Investments). They have, by virtue of their wealth, traded in the shares of respondent No. 2 for more than a decade and no such act should be permitted which adversely affects such shareholders,” he submitted before the Bombay High Court. requested.

At one point in our conversation, Sugandha fought back tears, and with a voice full of emotion, said that the sudden turn of events initiated by her brother had not given her the opportunity to mourn the passing away of her mother, whom she loved dearly. Was very close. “I always saw my brother as the eldest in the family after my father passed away.”

elder brother

Baba Kalyani’s mian is often considered no-nonsense and even an egotist, which doesn’t always go down well with his interlocutors. But in a long career, he has carved a niche among India’s industrialists as a world-class institution builder. Bharat Forge, founded by his father, who went into business after matriculation, has become the world’s second largest forging maker after Germany’s Thyssenkrupp. Kalyani credits its success in building an industrial conglomerate with interests in power, steel, oil and gas, aerospace components and defence, which includes world-leading names such as DaimlerChrysler and Alstom among customers and partners. Most of the heavy duty trucks that run along US expressways are supplied by Bharat Forge.

A trained engineer from the Massachusetts Institute of Technology, Kalyani is in her element when it comes to engineering and manufacturing practice. During a brief conversation at the Hannover Messe, one of the world’s largest industrial trade fairs, he once told this writer not to waste time in the Indian pavilion. Look at what European companies are doing in their pavilion, he said.

A succession dispute had plagued the family for years. Kalyani said in an interview to Business Today in 1998 that there were differences over succession but they did not affect the functioning of the companies.

The magazine reported in a special issue on the family, “In fact, the differences between father Neelkanth and son Baba came to a head when the founder divided the family’s stake in Bharat Forge between his two sons, Baba and Gaurishankar, and their daughter Sugandha.” Tried to share.” Business, dated January 1998.

His mother went to the court alleging property grab against the younger son Gaurishankar. Gaurishankar’s daughter also went to court against Baba Kalyani demanding a share in the property.

As for the current controversy over Hikal, the rancor is the exact opposite of the unity that once prevailed—the company’s name was derived from the first few letters of the names Hiremath and Kalyani.