Godrej Goes Solo: How the Family Business Split Will Change Everything

A conglomerate with a rich 127-year-old history, Godrej Group will be dissected in two parts as part of a family settlement. It is a sweet word for “batwara” in the business sector, where the assets are divided among heirs.

Godrej Group has been divided into Godrej Industries & Associates and Godrej & Boyce. Both portions are being handled by sibling pairs Adi & Nadir Godrej and Jamshyd & Smita Crishna Godrej, respectively. With this division, both sides have agreed to sell their ownership stakes in each other's companies.  

It is a big task to untangle cross holdings in both portions of the $2.55 trillion (around ₹211.6 lakh crore) conglomerate. A few managerial changes could also occur along with the structural changes.

Let’s discuss those changes and how they may affect your portfolio. After all, Godrej Group has 7 listed companies and multiple unlisted companies under it.

History of Godrej Group’s Birth

The story begins in 1897 with Ardeshir Godrej, a lawyer who turned entrepreneur. Driven by the Swadeshi Movement, Ardeshir established a small lock company in a period when India relied on imported locks. The locks came as a key to opening gates to success for Ardeshir. How cool is that? 😲

Then, Ardeshir slowly expanded in different areas as Godrej introduced India's first lever-technology lock in 1897 and its first indigenous safe lock in 1902. This was just the beginning of many firsts for the Godrej Group.

In 1918, Godrej Soaps Ltd. was incorporated, making a unique vegetable-oil-based soap called "Chavi". This soap was made without animal fat, aligning with the principles of ahimsa.

Godrej's commitment to diversification continued. They ventured into areas like furniture, appliances, agriculture, and real estate. Godrej Properties, established in 1988, is a prominent subsidiary today.

That's not all! The conglomerate also contributed to creating the future of India by manufacturing ballot boxes for India's first elections in 1951. They then diversified into manufacturing soaps with popular brands like Cinthol, refrigerators, mosquito repellent brands like Good Knight & Hit, and more.

The group transcended geographical boundaries as it entered the real estate business and agricultural sector. Its engines now power many of India's space missions, showcasing its technological prowess.

Godrej's conglomerate was founded on the basis of core values and ideologies on which our nation prides itself. This can be expressed through the praise Godrej Group received from prominent personalities like Mahatma Gandhi, Annie Besant and Rabindranath Tagore.

The Brief Explanation of the Godrej Group Division

The good part about this settlement is that it is taking place amicably. This means the complete transformation would take place minus all the family drama, fights, and plotting that usual family wealth distribution sees. 

The Godrej family business is split into two main groups:

1. Godrej Industries Group (GIG): This group, led by Nadir & Adi Godrej, controls listed companies like Godrej Industries, Godrej Consumer Products, Godrej Properties, and Godrej Agrovet.

2. Godrej Enterprises Group (GEG): Headed by Jamshyd Godrej and his family, this group comprises unlisted entities such as Godrej & Boyce Manufacturing Company and Godrej Infotech.

The division ensures a clear separation of control and leadership for each branch of the family. As for the question of who gets what with the Godrej Group restructuring, here’s a simplified explanation:

a. Nadir Godrej:

73-year-old Nadir Godrej will chair the Godrej Industries Group (GIG). This group includes companies you might know, such as Godrej Soaps, Godrej Furniture, Godrej Consumer Products and Godrej Properties, and more.

b. Adi Godrej:

83-year-old Adi Godrej stepped down from the position of chairman of Godrej Industries in August 2021. He then handed the responsibilities to his younger brother, Nadir Godrej. Now, Adi's son, Pirojsha Godrej, is set to take over as chairman of GIG in August 2026, outlining a clear succession plan.

c. Jamshyd Godrej:

Jamshyd Godrej is the Chairman and Managing Director of Godrej Enterprises Group (GEG) and handles unlisted entities like Godrej & Boyce (founded in 1897, where Jamshyd previously held the top positions).

Nyrika Holkar, daughter of Jamshyd's sister Smita, will join GEG as Executive Director. This family-controlled group will hold valuable assets, including a vast land bank, including 3,400 acres of prime Mumbai real estate.

How will the Restructuring Take Place?

The Godrej family has started restructuring holdings in the listed companies between the Adi/Nadir and Jamshyd/Smita families. The acquisition is to be completed four days from 30 April 2024 after receiving approval from the Competition Commission of India (CCI) & by the family settlement agreement.

The Adi/Nadir family plans to acquire an additional 20.84% of shares in Godrej Industries Limited from the Jamshyd/Smita family. They will also retire certain members of the Godrej family from their partnership with Anamudi Real Estates LLP. This is an intermediate holding entity and promoter group that has 0.57% shares of GIL.

The Adi/Nadir family plans to buy another 12.65% of GIL separately from RKN Enterprises, another promoter group entity. Rishad Naoroji, a director of RKN Enterprises and a cousin of Adi/Nadir, will retire from Anamudi Real Estates.

Post-transaction, Adi Godrej's stake will remain constant at 0.18%, while his three children - Tanya Dubash, Nisaba, and Pirojsha - will see their stakes rise from 0.22% to 4.11% each. Only the Adi Godrej family will remain partners in Anamudi Retirals.

Nadir Godrej is acquiring a larger stake in the company, increasing his stake from 0.18% to 13.12%. The shares are being bought from Jamshyd Godrej, Navroze Godrej, Raika Godrej, Smita Godrej Crishna, and Nyrika Holkar. Godrej Industries holds a majority stake in Godrej Agrovet, Godrej Consumer Products, and Godrej Properties.

Possible Impacts on the Group

 The restructuring and division could result in multiple changes from both investor's and promoters’ ends.

a. Potential for sharper focus: Each group can concentrate their resources and strategies on specific business areas.

b. Transparency and accountability: Listed entities within GIG might benefit from increased transparency as they operate under public scrutiny.

c. Continuity and Stability: The established leadership structure within each group can provide stability for the associated businesses.

This also raises the question of whether both sides compete against each other. Keeping this particular possibility in mind, both GIG and GEG have signed a six-year non-compete agreement. Executives stated that both firms will deter from directly competing against each other even after the six-year duration.  

The Bottom Line

Today, the Godrej Group is a household name in India, known for its quality products and ethical practices. With a presence across various sectors and a global reach, it continues to be a significant contributor to India's industrial growth.

We agree that the property and asset division between both the cousin sides would keep things simple in terms of settlement. Plus, the complete procedure has been amicable so far and is most probably going to be the same.

But, the restructuring that’s going to take place of such a massive conglomerate could have certain impacts in multiple scenarios.

This division streamlines leadership and potentially allows for a sharper focus on unlisted businesses within the Godrej family. Only time will tell how this new structure impacts the future trajectory of the group & its associated companies.