The Battle for Family Pride

Updated: Oct 7 2007, 04:23am hrs
At Bajaj Autos annual general meeting in Pune two years ago, Rahul Bajaj, chairman, hoped the Ambani brothers would sort out their rift amicably. As it turned out, barely seven months after Reliance Industries chairman Mukesh Ambani publicly admitted that there were certain ownership issues within the private domain of the Ambani family, a settlement plan was chalked out between him and his younger brother, Anil.

The settlement plan drew the curtains on a murky feud between the two brothers that dented their public image and took a toll on the groups performance in the stock markets. It came in the form of a statement from their mother and widow of Dhirubhai Ambani, Kokilaben. The June 18, 2005 settlement, reportedly put together by KV Kamath, MD and CEO of ICICI Bank and a close family friend of the Ambanis, said the RIL board was being asked to work out the details of a reorganisation of Reliances businesses.

Now, the Ambani feud seemingly settled, theres another raging, albeit for quite a few years now, and getting quite acrimonious, in the Bajaj household. The Mirchandani brothers are reportedly fighting it out at Mirc Electronics, made famous by the Onida brand of TVs. The New Delhi-based Rai family, which owns Group Usha, is slugging it out over a property worth crores of rupees. This follows famous, or rather infamous, business family feuds that have hit corporate India in the past few decades think Modis, Birlas and the Mafatlals.

But is a split necessarily a bad thing No, says business historian and author Gita Piramal. I once did a 10-year study of family splits and found that splits are a favour. Normally, businesses improve after a split.

Analysts point at the Reliance example. In her statement at the time of the split, Kokilaben Ambani had said, With the blessings of Srinathji, I have amicably resolved the issues between my two sons keeping in mind the proud legacy of my husband. I am confident that Mukesh and Anil will uphold the values of their father and work towards protecting and enhancing value of over 3 million shareholders of the Reliance group.

It added that Mukesh Ambani would have responsibility for RIL and Indian Petrochemicals Corporation Ltd (IPCL), while Anil Ambani would handle Reliance Infocomm, Reliance Energy and Reliance Capital. Following this announcement, Anil Ambani tendered his resignation as vice chairman and managing director of RIL.

In just a couple of years into the split, the two Ambani brothers have done exactly what was expected of them by their mother, the boards of the respective companies they headed, and millions of investors. They embarked on an aggressive expansion plan, not only in their existing businesses, but also ventured into new vistas, in the process, taking the combined worth of the various companies under them to dizzying heights. On Friday, September 21, 2007 Mukesh Ambani-led companies Reliance Petroleum and Reliance Industrial Infrastructure gained over 10% each, taking the groups market capitalisation to a whopping Rs 3.8 lakh crore. The next trading session, on Monday, September 24, saw Anil Ambani-controlled Reliance ADA Groups market capitalisation crossing Rs 200,000 crore or the $50 billion mark. The group also became the third Indian corporate to cross the $50 billion market cap mark. The group companies Reliance Capital (RCAP), Reliance Energy (REL), RNRL and Reliance Communication (RCOM) hit a new lifetime high on September 24.

The stigma, says Piramal, that splits are bad for business is, therefore, an artificial one. Both the Reliance groups have done very well and the sheer number of projects they have announced are extraordinary, she adds.

Having said that, Piramal points out that though India has a 2000-year-old history of business and trade, Indian business families havent really been able to hold on to the business for generations, unlike the European houses (think Rothschild to name just one). We are rather primitive but of late, Indian business families have been closely looking at structures like the Family Office or mechanisms like the Family Conclave to run the family business professionally.

Then again, there are feuds which, by their very nature a difficult will etc can play out in a bitter, sometimes dramatic, long-drawn battle, like the Priyamvada Birla case. On July 12, 2004, three generations of the Birla family had gathered at KK Birlas bungalow for what most of them had expected would be a short non-event. Priyamvada Birla, wife of the late MP Birla had expired only nine days back, and her adviser Rajendra Singh Lodha, the only non-Birla in that gathering, was to read out her will to family members.

By the time Lodha, the managing partner in one of Indias most famous chartered accountancy firms, finished reading out the will, the Birlas couldnt believe their ears. The purported will, as the Birlas choose to call it even to this day, had cut out all the Birla family members from the MP Birla empire and bequeathed everything to Lodha.

Lodha and Priyamvada were known to be very close. He was her confidant, her adviser, and her travel companion, besides being co-chairman on the boards of some of her companies like Birla Corp and Universal Cables. Yet, at the same time it is a well-known fact that Priyamvada had tried assessing different members of her family as possible inheritors. Almost a decade and a half back, when Gajanans son Ashok died in an air crash Madho Prasad and Priyamvada had taken Ashoks son Yashovardhan under their wing. Madho Prasad died soon after and Priyamvada took charge of his businesses. During those years, Priyamvada seconded many of her key executives to help Yashovardhan manage his affairs. But over the last few years, Yashovardhan and his grand aunt Priyamvada drifted apart. And that perhaps explains why Yashovardhan wasnt mentioned in the will. Priyamvada was also very close to her nieces, KKs three daughters: Nopany, Jyotsna Poddar and Shobhana Bhartia. But, the fact of the matter remained that she chose to ignore the entire Birla clan in her will.

The stunned Birlas asked for a copy of the will but Lodha apparently told them that hell think about it. The Birlas and Lodha are engaged in a fierce legal battle the Birlas have engaged a battery of family loyalists to fight it out, riddling Lodha with a barrage of legal suits, but one of Indias best known chartered accountants continues to hold his ground. When will the Birlas be able to retrieve the family silver

Analysts are also watching how the Bajaj feud plays out. At the Bajaj house, history is repeating itself and how the entry of a new generation has led to a fresh round of conflict. When Rahul Bajaj joined Bajaj Auto in the late 60s, the Bajaj family and the Firodia family were close, having built the company together. But the entry of young Rahul changed that. Friends became foes and both families fought it out. Bajaj took control of Bajaj Auto and the Firodias were left with Bajaj Tempo. Till date, the bitterness has not gone despite both families having holdings in each others companies. This decades turmoil started with the entry of Rahul Bajajs sons, Rajiv and Sanjiv, into the company. All these years, Rahuls brother, Shishir, and cousins, Shekhar, Madhur and Niraj, were content managing the smaller businesses or having smaller roles, leaving Rahul Bajaj to hold the fort. Unlike, Shishir, his son Kushagra was ambitious and wanted to build his own business and run it independently. He did not take kindly to his cousins, Rajiv and Sanjiv, running the show at Bajaj Auto. Kushagra took the fight to the senior Bajaj. The problem was that he and his father did not have total control over their sugar empire, Bajaj Hindusthan, and wanted a split in the empire.

Since then, the family dispute has reached the Company Law Board and courts and the brothers have been estranged, something Rahul Bajaj never imagined would happen in his lifetime. Uncle and nephew have not been able to come to an understanding about going their separate way. Mediation by close family friend Sharad Pawar and the agreement worked out by S Gurumurthy and D S Mehta have come to nought. The December 2003 agreement was about transfer of shares at the agreed price. The Shishir Bajaj family was to transfer Bajaj Auto shares to Rahul Bajaj at Rs 400 and the holdings in Bajaj Hindusthan was to be bought at Rs 67 and the difference was to be made good as part of the compensation deal. But now with the agreement being junked, the family is back to feuding, each faction blaming the other for the failure. The family settlement is unlikely any time soon and the parting has got even messier. Analysts admit that such power fights between the second and third generations only point the need for succession planning and a professional management set-up. With most of Indias valued companies being family run, and with every new generation likely to throw up an entrepreneur or two, this is no longer an internal matter of companies.

MG Arun and Papiya De in Mumbai, Geeta Nair in Pune


BROTHERS IN ARMS

While spilling the beans in public has been a way of life for most infighting business families in India, there have been those that have consciously tried to avoid the same. Even in the absence of a comprehensive succession planning or at least public knowledge of it some families have divided responsibilities and sometimes assets amicably. FE picks out some for you

* The sudden and unexpected demise of OP Jindal, chairman, Jindal group, in a chopper crash, saw the patriarchs wife, Savitri Jindal, propelled to the forefront as she was made chairman of all group companies. The $8 billion group is now steered by the four brothers. All four brothers have well-demarcated businesses. The eldest, Prithvi Raj, handles Jindal Saw Limited, Naveen is responsible for Jindal Steel & Power Limited, Jindal Stainless is Ratans baby and currently, the groups fastest growing company JSW Steel is led by Sajjan. That the family is still a very close-knit one becomes evident as you walk down the Jindal Vijaynagar Steel plant. Almost every corner has a plaque cherishing the presence of family members!

* Responsibilities have been divided between brothers Harsh and Sanjeev too at the Rs 11,500 crore RPG Enterprises. While chairman Harsh operates from Mumbai and is more focussed on tyres, transmission and IT, younger brother Sanjeev is involved with entertainment, CESC (power generation and distribution) and the retail venture. Harsh is more involved in streamlining the groups processes and strategies.

* Even at the Mumbai-based Piramal group, responsibilities have been divided without a great deal of hullabaloo. Urvi Piramals (chairman Ajay Piramals elder brothers wife) two older sons, Harsh and Rajeev, have been placed in the textile and real estate businesses respectively. The third son is undergoing training in retail. Swatis and Ajay Piramals daughter, Nandini, did her internship at the companys bulk drug business. Their son, industry watchers believe, is likely to be inducted in Nicholas Piramal.

* B K Modi, chairman, MCorpGlobal, who had delisted all his companies, did not wait to plan the succession chart for his children. He spelt out everything in writing for them. As a result, Dilip (32, and with telecom), Ritika (34, with paper) and Divya (24, with real estate) have each been given Rs 50 crore in cash and assets.

* The Apollo group had witnessed some unpleasant incidents when Onkar Singh Kanwar, son of founder Raunaq Singh, took over. However this time on, breaking with tradition, Apollo Tyres chairman Onkar Singh Kanwar has positioned his younger son Neeraj as his heir apparent, while elder son Raaja runs the groups new ventures.

* Bhai Mohan Singh allocated his assets to his three sons, late Parvinder Singh, Manjit Singh and Analjit Singh in 1990. Eldest son Parvinder managed to walk away with Ranbaxy Labs. Manjit got Montari Industries, a company that has run up huge debts. Youngest son Analjit got Max India, which tried its hand in telecom, but is now in the healthcare and insurance business. Apparently, when the division happened, the valuations of the assets of the three brothers were equal. That has changed considerably in the last 17 years. As of now, Parvinders son Malvinder is the one to run the flagship Ranbaxy Labs, while Shivinder will manage the groups other businesses.

Papiya De