Godrej Split: What It Means For The Stakeholders? | NDTV Profit
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00:00 Prabal Basu Roy, board member and advisor to the board chairpersons now joins us.
00:06 Good morning Mr. Roy, thank you very much for joining in.
00:09 Mr. Roy, a 127 year old family finally gets realigned.
00:15 The split from the way we know it is going to be where Adi and Nadir Kotej will control the listed companies
00:20 while cousin Jim Sheth gets control of unlisted entities and the land bank.
00:26 What did you make of this? This was amicable, there was a process, it was complex but solution was found.
00:32 I guess this has become the blueprint of future realignments of families that we may see come our way.
00:39 Good morning Samina, good morning.
00:42 See there are multiple aspects to this, you know, like this was obviously done for succession planning at the group level,
00:48 responsibility to stakeholders and social responsibility.
00:53 I think they took all these three into consideration while designing this package to make sure that such large groups,
00:59 when they split, things can go horribly wrong, like this massive value destruction.
01:07 Like say in the case of Reliance and El Ambani site, which is all the coppers for that matter.
01:11 So I think due care was taken and the thing which I liked, as you rightly said, and I expected no less from the house of Goodrich,
01:20 was that it was done very quietly and professionally over the last four years.
01:24 And most importantly, in a respectful manner in which it was achieved and therefore the spirit in which it was done.
01:31 That is very important. But having said that, Samina, if you have a minute, I would like to touch upon another aspect,
01:37 which is the larger aspect, actually. If you have time, I can talk about that.
01:42 Yes, please.
01:44 See, that aspect is, you know, and I'm writing about this, like it or not, in our part of the world,
01:54 family control will remain and promoter driven entities, the matter of succession will come up with every generation or transition or two
02:04 in terms of distribution of assets. Now, this is very different from what is there in the West,
02:10 where most family groups, you know, retain shareholding, a significant shareholding,
02:17 but the management control has migrated to institutional shareholders, back to management, professional management.
02:24 And the reason for that is massive size and massive complexity. I'll give you an example.
02:31 I'll give you a few examples. Let's take Fortune 500 companies. The Dalton family controls Walmart in terms of shareholding,
02:41 but not in terms of management. The same is the story with Ford Motors, Hawk Industries, Cargill, Hearst Corporation.
02:50 In Germany, it is the Kwan family which controls BMW through shareholding, but not management.
02:55 Henkel, Mark, Bosch, many of them. In Sweden, Ericsson, Electrolux, KBB, Volvo, they're all controlled by the Wallenbergs,
03:04 but they don't have any say in the management. Now, here, by splitting these assets, in most cases,
03:12 we are by definition restricting the size from getting bigger, from getting really massive and world scale.
03:18 And so it's a governance thing. And over the next maybe 100 years or so, who knows, this could happen in India too,
03:25 when family members realize that they may not be willing or competent to manage these enterprises on such a large scale.
03:34 The Ambanians, for example, at the moment, will be a very good, interesting case study in the next three decades,
03:40 despite the current patriarch having taken extreme care and caution in handling the succession.
03:47 Same goes for Wipro, same goes for Etsail. So we are in very interesting times because India is now growing,
03:53 the enterprise sizes are growing, and yet it's not fully there in terms of creating mega corporations which can dominate the world.
04:01 So that's the larger picture.
04:03 Mr. Roy, it's all about succession planning, family constitution, being custodians of the significant wealth that some of these promoters have amassed.
04:11 But one quick question, and I want to talk to you about minority shareholders, because you said that these companies were run by institutions.
04:17 They are enterprises in their own sense. These are not family run businesses, even though that's what the foundation is.
04:24 Will this split have any impact on minority shareholders, in your opinion?
04:29 No, I would say that depends in the Indian context. That depends totally on the quality of the promoter.
04:35 I've written about this multiple times. In governance, you can bring any number of rules you want and laws you want,
04:41 but unless the promoter believes in minority shareholder rights being aligned to the majority shareholders, it will not work.
04:50 And there are enough loopholes to make sure it doesn't, most of it being in board governance, et cetera.
04:57 Now, as far as the house of gold is concerned, I have full confidence, given the past track record, that minority shareholders will not be shortchanged in this entire split.
05:10 And they will continue to benefit. And the size in which gold ranges by actually splitting the private company out and keeping the public company separate.
05:20 And there is huge value unlocking, which is definitely possible, which has probably driven this thing,
05:27 because the private company over time can obviously list itself and go its own direction and so on and so forth.
05:35 So, yes, as far as the house of gold is concerned, I'm personally very confident about the minority shareholder split.
05:43 Very last quick question, Mr. Roy, they've said that, of course, the realignment will be implemented after the necessary regulatory approvals.
05:50 What sort of timeline do you anticipate this to take historically? How long does stuff like this usually take for clearances?
06:00 There are three aspects to a merger or a demerger of the sides or a split of the side.
06:07 One is the legal side, which is, you know, essentially with the authorities, you get into issues like the differences in valuation and therefore stamp duty and registration and so forth.
06:22 The other is the financial side, which I think has been agreed between those two sides and they should not be a problem.
06:28 And third is purely regulatory, which is the question of approval.
06:32 So between the legal and regulatory side, I think. Because especially because that huge land parcel is involved in the crony.
06:41 I would think anything between two years or thereabouts, it will take provided there is no bickering inside the family, which which won't happen in this case.
06:52 It won't happen. So about two years, let's say about two years. Right.
06:58 Thank you, Mr. Roy. Great getting perspective from you to understand what this means for the Godrej family, what this means for India Inc.
07:06 and other founder led companies. It's all about governance, succession planning, family constitution.
07:11 And this could really be a blueprint for future realignments of companies and corporates.
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