New Delhi: The Godrej family late Tuesday evening announced it had finalised a deal to divide the family business into two broad companies, a rare instance of a business conglomerate splitting without any acrimony or drama. The two entities — Godrej Industries and Godrej Enterprises — will be run by different branches of the Godrej family.
“The Godrej family today announced an ownership realignment of their shareholdings in the Godrej Companies,” the family said in a statement submitted to stock exchanges Tuesday. “The realignment has been arrived at in a respectful and mindful way to maintain harmony and to better align ownership in acknowledgement of the differing visions of the Godrej family members.”
This decision, the statement added, would help maximise strategic direction, focus and agility, and accelerate the process of creating long-term value for shareholders and all other stakeholders. The effective date of the split will be decided after the companies in question receive all their approvals, including from the Competition Commission of India.
The amicable nature of the Godrej split is unusual in India, which has more often seen infighting within its industrial families. The split in the Reliance Group, for example, between founder Dhirubhai Ambani’s sons Mukesh and Anil Ambani, was famously acrimonious, with the brothers’ mother having to step in to mediate and divide the company.
Similarly, India’s biggest law firm at the time, Amarchand Mangaldas & Suresh Shroff and Company, was split between feuding brothers Cyril Shroff and Shardul Shroff in 2015. There are several other examples of such bitter splits, ranging from the Wadia Group, the Kirloskar Group, and even the Bajaj Group, to name a few.
ThePrint examines what the Godrej split will look like, and how they managed to keep things peaceful.
Also Read: India Inc-Modi govt friendship is cracking. Lack of level-playing field just one reason
What are the branches of the Godrej family?
The Godrej Group was founded in 1897 by lawyer Ardeshir Godrej, who gave up his practice to manufacture locks. Having no children of his own, the company then passed on to the four children of Ardeshir’s younger brother, Pirojsha.
Pirojsha had four children — Sohrab, Dosa, Burjor, and Naval. The Godrej Group as we know it now is controlled by the children of the latter two, since Sohrab had no children and Dosa’s son, Rishad Naoroji, also has no children and is not involved in running the businesses.
Burjor Godrej had two sons — Adi Godrej, who is chairman emeritus of the Godrej Group, and Nadir Godrej, the chairman and managing director of Godrej Industries and other group companies such as Godrej Agrovet and Astec Lifesciences.
Naval Godrej had two children — Jamshyd Godrej, the chairman of Godrej & Boyce Manufacturing, and Smita Godrej Crishna.
It is along these two branches — the children of Adi Godrej and Nadir Godrej along one branch, and the children of Jamshyd Godrej and Smita Godrej Crishna along the other — that the Godrej Group is to be split.
How and why will the Godrej Group be split?
According to the family’s statement, the Adi-Nadir branch will hold the management and control of Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet, Godrej Seeds and Genetics, Innovia Multiventures and Astec Lifesciences, and all of their subsidiaries and joint ventures (collectively the Godrej Industries group).
The management and control of Godrej & Boyce Manufacturing Company, Godrej Holdings and Godrej Infotech and all their subsidiaries and joint ventures (collectively the Godrej Enterprises group) will go to the second branch under Jamshyd Godrej and Smita Godrej Crishna and their respective children.
According to the family, the split was necessitated due to the differing views the family members had regarding the direction the group should take. Such a difference of opinion, natural in a large family with multiple generations, became all the more important due to the diverse nature of the Godrej Group’s business interests.
Currently, (prior to the split), the Godrej Group has businesses in 15 different sectors. These include appliances, furniture, locks and security solutions, real estate, chemicals, general engineering, home and personal care, heavy engineering, logistics, power and energy, aerospace, infrastructure, food and agriculture, information technology, and financial services.
“The third and fourth generations of the family branches have diverse interests, and varying perceptions as to, amongst others, the strategic direction, growth and governance of the Godrej Group entities,” the family statement said. “The family branches are desirous of ensuring harmony in the future amongst the succeeding generations of the Godrej family.”
How does the agreement ensure a peaceful split?
The family said that in order to manage the diverse strategic directions desired by the different family members, each branch head negotiated with the other, on behalf of themselves and the members of their respective branches, to arrive at the family settlement arrangement (FSA).
Further, the branches of the family have also entered into a brand and non-compete agreement “to record their understanding in respect of delineation of the rights for adoption, use, ownership and registration of the Godrej brand as well as non-compete obligations”.
This agreement, the family said, was arrived at by taking into account the businesses that will go to each branch, and the future endeavours and aspirations of each family group.
The brand and non-compete agreement is a lengthy and detailed document, but its focus is threefold.
The first is that the existing businesses carried out by each of the family groups and the businesses of strategic importance to them are protected and can be carried on smoothly.
The second aim of the agreement is more consumer-focused, seeking to ensure that there is no confusion for customers on the source of products and services.
The third aim is to ensure that the “integrity of the ‘Godrej’ brand is preserved”.
“The recognition of [the] Godrej mark as a well-known mark is attributable to the common heritage and usage of the brand by all the entities forming part of the Godrej Group and it is the intention of the Parties that the Godrej well-known trademark is equally owned and shared by both Family Groups,” the text of the non-compete agreement reads.
Godrej & Boyce Manufacturing Company chairman and managing director Jamshyd Godrej also issued a statement saying that Godrej Construction — a subsidiary of Godrej & Boyce Manufacturing — would continue to work with Godrej Properties (to be part of the other branch after the split) to develop the former’s land in the Mumbai suburb of Vikhroli.
How valuable is the Godrej brand?
The Godrej group has five listed companies — Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet and Astec Lifesciences. The combined market capitalisation of these five companies is more than Rs 2.4 lakh crore.
Of these, Godrej Industries had the highest full-year revenue, of Rs 17,762 crore, in 2022-23, with a profit of Rs 1,421 crore. Godrej Consumer Products was the most profitable of the five companies that year, with revenue of Rs 13,484 crore and profit of Rs 1,702 crore.
Godrej Properties had revenue of Rs 3,039 crore and profit of Rs 621 crore, while Godrej Agrovet earned revenue of Rs 2,354 crore and Rs 83 crore as profit. Astec Lifesciences earned revenue of Rs 641 crore and profit of Rs 26 crore.
(Edited by Nida Fatima Siddiqui)
Also Read: Businesses battered, but ‘aayega toh Modi hi’ — why Kanpur’s small business owners still back BJP