Supreme Court lawyer HP Ranina asserts: The split benefits both the Godrej family and stakeholders. If conducted appropriately, which I believe it will be, all parties will undoubtedly profit. Crawford Bayley’s Sanjay Asher expresses confidence that they have structured it to prevent future conflicts.
HP Ranina, Lawyer from the Supreme Court, and Sanjay Asher of Crawford Bayley & Co discuss the Godrej conglomerate split on ET Now. The Godrej family announced a restructuring of shareholding on Tuesday. Jamshyd Godrej, Nyrika Holkar, and their families will oversee Godrej Enterprises Group (GEG), including Godrej & Boyce and its affiliates. Nadir Godrej will chair Godrej Industries Group (GIG), encompassing Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet, and Astec Lifesciences. Adi Godrej, Nadir Godrej, and their immediate families will manage the group. GEG will be overseen by siblings Jamshyd Godrej and Smita Godrej Crishna, whose daughter is Nyrika Holkar.
How will this impact stakeholders regarding long-term value creation?
HP Ranina states that typically, a split leads to shareholder value enhancement. Therefore, it’s presumed that the split occurred to improve financial prospects for each group, benefiting stakeholders and listed companies. This expectation of increased value is a common rationale for splits. The anticipated outcome is improved valuations and operational autonomy for each entity, fostering consensus decision-making and long-term benefits. Ranina believes the split benefits both the Godrej family and stakeholders, provided it is executed properly, ensuring gains for all involved.
Navigating Regulatory Approvals and Family Dynamics in the Godrej Conglomerate Split:
Adi and Nadir Godrej retain Godrej Industries with nearly five listed companies, while Jamshyd and Smita receive unlisted Godrej & Boyce, its affiliates, and a Mumbai land bank. What regulatory approvals are required for this realignment to proceed?
HP Ranina explains that regulatory approvals are necessary for property transfers during the split, involving stamp duty and registration implications. Costs, both legal and financial, are expected and factored into the process. Disputes may arise regarding valuations, potentially leading to litigation, a common occurrence in such splits.
Sanjay, the Godrej family has finalized the agreement to peacefully divide the 127-year-old conglomerate. With the family terming it as an ownership realignment, how will the split effectively align ownership considering the varying visions among family members?
Sanjay Asher emphasizes that the alignment aims to prevent future disputes by considering complexities in securities and tax laws. It ensures minimal disruption among family members, operations, and third parties. As long as the majority shareholder can pass resolutions, especially in unlisted entities where the other party holds less than 25%, future conflicts should be avoided.
Evaluating Strategic Implications and Investor Sentiment in Godrej Industries’ Branding Transition:
Mr. Ranina noted that splits typically aim to unlock value and streamline processes amid potential conflicting visions between families. It’s also mentioned that the company will introduce new brand names. What are your thoughts on this? How might investors respond, given the significance of the Godrej Industries brand name?
Sanjay Asher affirms that six years provides ample time to establish new brand names for any upcoming ventures, ensuring a smooth transition. Legal documentation is comprehensive, minimizing challenges. Business-wise, the timeframe allows for the development of suitable names for new endeavors.
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