Godrej Division

Godrej is one of the leading industrial and consumer product group, and recently the company announced the family is splitting the group. The 35,000 Cr Godrej group, spanning from soaps and home appliances to real estate is headed for split between brothers, citing external advice the family has sought for an amicable division of the 124 years old conglomerate.

At present, the group is led by veteran industrialist Adi Godrej (79), who is its chairman. His brother Nadir Godrej is the chairman of Godrej Industries as well as Godrej Agrovet. Their cousin Jamshyd N Godrej is the chairman of Godrej & Boyce Manufacturing Company Ltd, which is also the flagship firm of the conglomerate, one of India’s oldest business houses.It was founded in 1897 by lawyer-turned-serial entrepreneur Ardeshir Godrej, who after a few failed ventures met success with the locks business.

There will be two way division, one group led by Adi and Nadir, and the other by Jamshyd and his sister Smitha Godrej Crishna.

Among the major companies of the group are the flagship unlisted engineering firm Godrej & Boyce Mfg Co Ltd and listed entities such as Godrej Consumer Products Ltd, Godrej Agrovet, Godrej Properties and Godrej Industries Ltd.

While there are cross holdings in each of the companies by the family members, the side of Adi and Nadir run the listed entities such as Godrej Consumer Products Ltd, Godrej Agrovet, Godrej Properties and Godrej Industries Ltd. On the other hand, Godrej & Boyce Mfg Co Ltd comes under Jamshyd.

As Adi Godrej is growing old, his children have taken various responsibilities in the group .His eldest daughter Tanya Dubash is executive director and chief brand officer for the group. Youngest daughter Nisaba Godrej is currently executive chairperson of Godrej Consumer Products Ltd, while son Pirojsha is the chairman of Godrej Properties. Earlier in August, Adi had announced stepping down as chairman as well as from the board of directors of Godrej Industries Ltd, passing on the baton to his younger brother Nadir.

While Jamshyd’s sister Smitha has not played an active role in the business, her husband Vijay Crishna is a non-executive director of Godrej & Boyce, besides being director of Godrej Industries and Godrej Agrovet.

The Godrej group owns around 3400 acres of land located between Ghatkopar and Vikhroli, the eastern suburbs of Mumbai, out of which 1750 acres are mangroves which are part of the Soonabai Pirojsha Godrej Foundation. Few years ago, when talk of separation began between the two families-real estate was a moot point which brought to the fore questions about how the assets will be divided.

While the probability of apportioning land through a separate vehicle was discussed, it was difficult to execute it as it would attract a huge stamp duty payment based on ready reckoner value of the land, the 5% stamp duty would kick even if land were to be transferred from one  group company to other. It was decided then that Godrej and Boyce (G&B) which owns the real estate will retain it as well.

The decision to vest the land in G&B will in turn boost the valuations of the company, it would make the family business separation an expensive proposition for Jamshyd Godrej’s side. Turnover wise the unlisted G&B (Rs 11,400 Cr  in 2019-20) is half the size of Godrej Industries & associate companies (around Rs 21,000 Cr). It is still not clear whether Godrej Properties, which is part of Godrej Industries and associate  companies, would continue to benefit by developing properties on the land owned by G&B following the family separation

Over and above the 3400 acre land which belongs to G&B, there is a separate land parcel on which Godrej group has been in dispute with the state govt since 1973 over who controls land. The state claims the land belongs to it and had filed a suit against G&G in that year. The dispute is pending before the Bombay High Court.

Family in a joint statement said “ The Godrej family has been working on long term strategic plan for the group for the last few years to ensure best value for its shareholders. As part of exercise, we have also sought advice from external partners. These discussions between the family remain ongoing.”

Kudos to Godrej family for resolving the separation issue amicably.

Waiting, for your views on this blog.

Anil Malik

Mumbai, India

10^th November 2021