The Godrej Group, a renowned conglomerate with a legacy that dates back to pre-Independence India, is currently in the advanced stages of negotiations to formalize the division of its multifaceted businesses. This conglomerate, which began its industrial journey over five decades ago by selling locks in a crime-prone Bombay, has evolved into a diverse entity with a staggering valuation of ₹1.76 lakh crore.
Family Dynamics and Business Diversification
The division of the Godrej Group’s business empire will mark the culmination of discussions between two distinct factions within the family. One faction, led by Adi Godrej and his brother Nadir, oversees Godrej Industries & Associates. On the other side, cousins Jamshyd Godrej and Smitha Godrej Crishna are at the helm of Godrej & Boyce Manufacturing Company (G&B). These negotiations encompass a wide array of business verticals, including engineering, appliances, security solutions, agricultural products, real estate, and consumer goods.
Key Points of Discussion
The pivotal discussions within the family council revolve around two crucial aspects. Firstly, the usage of the Godrej brand name after the split, which may entail possible royalty payments. Secondly, land valuations held by G&B, a complex issue due to tax implications that pose a considerable challenge. The equitable resolution of land valuation discrepancies has emerged as a central point of conflict in the negotiations.
Harmonious Resolution Amidst Private Deliberations
Despite the complexity of these discussions, insiders reveal that the Godrej family has approached the negotiations with an amicable spirit, with the best interests of all stakeholders in mind, including consumers. Importantly, it is emphasized that the impending split will not adversely affect any of the operating companies under the conglomerate’s umbrella.
Notable Advisors and Future Goals
High-profile advisors have been enlisted to guide both sides in these discussions. On one side, top investment banker Nimesh Kampani and noted corporate lawyer Zia Mody are reportedly advising Jamshyd Godrej. On the opposing side, Asia’s richest banker Uday Kotak, alongside legal firm Cyril Amarchand Mangaldas led by Cyril Shroff, have been at the forefront of discussions representing Adi Godrej’s interests. Additionally, Pirojsha Godrej, Adi Godrej’s son and chairman of Godrej Properties, is directly involved in the negotiations.
The overarching objective of this division is to establish a streamlined shareholding and business structure that will ultimately enhance shareholder value in the future. Queries sent to the Godrej Group and advisors for both family branches remain unanswered as of the time of this report.
Cross-Holdings and Philanthropy
Apart from the division of business interests, the Godrej family is associated with philanthropic endeavors. Various family branches hold significant stakes in G&B, with the Pirojsha Godrej Foundation focusing on investments in the environment, health, and education sectors. Dividends from the conglomerate’s group companies are directed towards supporting these philanthropic goals.
G&B’s Diverse Portfolio and Land Assets
Godrej & Boyce Manufacturing Company (G&B), a privately held entity, operates across diverse sectors such as appliances, construction, precision engineering, furniture retailing, and aerospace. In FY22, G&B reported impressive revenues of Rs 12,345 crore, with a net profit of Rs 472 crore. Furthermore, the company holds substantial stakes in Godrej Consumer and Godrej Properties, with a combined valuation of Rs 9,089 crore as of the latest available data.
G&B also possesses a significant freehold land bank in Vikhroli, Mumbai, encompassing approximately 1,000 acres of developable land.
The Godrej Group’s Listed Firms
The Godrej Group comprises five listed companies: Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet, and Astec LifeSciences. As of the last trading day in September, these five companies collectively boasted a market capitalization of Rs 1.76 lakh crore. In FY23, the group’s listed firms reported revenues of nearly Rs 42,172 crore, with profits totaling Rs 4,065 crore.
The Role of Godrej Industries
Godrej Industries, a holding company within the conglomerate, has interests spanning consumer goods, agriculture, real estate, chemicals, and financial services. It also serves as an incubator for new business ventures. The company holds significant stakes in Godrej Agrovet, Godrej Consumer, and Godrej Properties. Notably, the promoter holding of Godrej Industries is distributed among 28 family members, with Rishad Naoroji, Jamshyd Naoroji Godrej, and Nyrika Holkar being some of the prominent stakeholders. Over the past three years, promoters have increased their stake in Godrej Industries by nearly 3%.
The Significance of Godrej Consumer Products
Among the listed firms, Godrej Consumer Products stands out as the largest, with a market capitalization of Rs 1.01 lakh crore. In addition to Godrej Industries and G&B, Godrej Seeds and Genetics holds a substantial stake in Godrej Consumer. This privately held company features directors such as Tanya Arvind Dubash, Smita Godrej Crishna, and Nisaba Godrej.
The forthcoming division of the Godrej Group’s diverse business ventures represents a significant chapter in the conglomerate’s storied history, as it seeks to ensure the continued success and growth of its various entities while adhering to the interests of its family stakeholders.
