Mumbai: The Mansukhani family, co-promoters of Mirc Electronics Ltd which owns consumer durables brand Onida, has created a trust, Tamarind Family Private Trust to consolidate the holdings of family members in the company in a legacy-planning exercise.
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On 3 January, Mirc Electronics informed the Bombay Stock Exchange (BSE) that Tamarind Family Private Trust had acquired 5.87% or 8.32 million equity shares in the company. The shares came from Marissa Mansukhani.
“This is a long-term benefit for the family members,” said Anoop Pillai, company secretary at Mirc. The Mansukhani family cumulatively owns around 17% in Mirc, he said. Other (Mansukhani) family members would soon transfer their shares to the trust, he added.
Vijay Mansukhani, managing director of the company, confirmed that the others would soon transfer their holdings to the trust.
The 61-year-old Mansukhani, who has two children aged 26 and 28, added: “As we grow older we realize the need to create a trust for the benefit of our children.”
A trust can ensure that the shareholding continues “in the hands of the family”, said Jayant Thakur, a chartered accountant at Mumbai-based Jayant M Thakur and Co.
Mirc’s founder G. Mirchandani, also the chairman of the company, said he would not be creating a trust for his two children because they already own around a 9% stake each in the company.
Family trusts provide a framework for protection of a family’s wealth over generations, said Adrish Ghosh, head of wealth advisory in India for Barclays Wealth. “We are currently working with over two dozen families who are interested in creating such trusts, roughly 20% of which are families with listed entities,” he added.
Ghosh said that over the past two years he has seen an increasing trend among Indian families to create such trusts.
In 2009, Gharda Chemicals Ltd’s founder and chairman and managing director Keki H. Gharda announced plans to divest his stake in the company to a family trust, Aban and Keki Gharda Memorial Foundation, which would pursue research-oriented projects.
Gharda’s model for a trust to fund research-based activities is similar to the Burroughs Wellcome Fund, an independent foundation set up by William Creasy, the head of Burroughs Wellcome’s US subsidiary, to advance biomedical sciences by supporting research and other scientific and educational activities.
“In contrast to the Indian scenario, the creation of trusts is more popular with families overseas as tax planning considerations are also a key driver there in addition to succession,” said Ghosh.
In India, there is no particular tax advantage a promoter gets through the creation of these trusts, said Thakur.
Such family trusts are different from charitable trusts, which are created for philanthropic purposes.
Shares of Mirc, which declared a net profit of Rs18.37 crore for fiscal year ending 31 March, rose 3.45% to close at Rs25.50 on BSE on Tuesday.