New Delhi: Billionaire Bhupendra Kumar Modi, flush with funds from selling his stake in Spice Communications Ltd to Idea Cellular Ltd for Rs2,720 crore, is undertaking a major restructuring of his businesses, and plans to infuse up to Rs1,250 crore into four businesses, set aside Rs250 crore for philanthropic activities, and give his children a clearly defined and more active role in running his business empire.
In a statement on Tuesday evening, the group said it was consolidating its businesses under four verticals—televentures, finance and capital market services, entertainment and technology—and Modi would continue to lead as global chairman and mentor.
RESTRUCTURING SPICE GROUP (Graphic)
According to a senior executive of M Corp Global Pvt. Ltd, who asked not to be quoted, the four new holding companies that will come under M Corp., are: Spice Investment and Finance Advisors Ltd, Spice Entertainment Pvt. Ltd, Spice Televentures Pvt. Ltd and Spice Technology Pvt. Ltd.
All current group companies will become subsidiaries of one of these four holding firms.
The restructuring will also see Modi’s children taking on a more active role in the group’s business and philanthropic activities. The finance business will be headed by 26-year-old Divya Modi, who, according to the group’s website, holds a postgraduate degree in accounting from University of southern California, US.
The televentures business will be handled by 30-year-old Dilip Modi, who, the same website says, holds an MBA from Imperial College, London. Eldest daughter, 36-year-old Ritika Rungta, will take a more active role in the activities of the Spice Foundation.
The holding companies will each have a separate board with Modi chairing all of them. Each board will have a remuneration committee, an audit committee and a strategy and brand committee, the executive said. Four senior executives from the group’s businesses have been identified to spearhead each business line. They include: Ashok Goel for finance, Preeti Malhotra for entertainment, S.K. Jain for televentures and Atul Prakash for technology. O.P. Dami will be the top-ranking manager for the Spice Foundation. They will be designated executive directors.
“The restructuring is being done to focus on the growth areas in the field of telecom, entertainment, finance and technology. The Spice Foundation will now provide enhanced support to the group’s activities in health, education and the arts,” the executive said.
All international businesses will be under Spice Global, which is headquartered in Singapore, while philanthropic activities will be under Spice Foundation, which will get Rs250 crore, or 10% of the Rs2,500 crore Modi received, after tax, from the Spice stake sale.
The executive said that eventually the equity base of the finance, entertainment and televentures units will expand by about Rs400 crore each, while the technology business will receive Rs50 crore, the remaining Rs1,000 crore will be held by M Corp for future expansion activities, he said.
The holding companies will remain privately held for now but, the executive said that some subsidiaries will be taken public. The group has already filed the draft red herring prospectus to list Cellebrum Technologies Ltd with capital market regulator the Securities and Exchange Board of India on 26 June. It provides so-called value-added services in telecommunications.
Omnia BPO Services and electronics retailer Hotspot Retail Pvt. Ltd will eventually get listed as well, the executive said. Two group companies—phone manufacturer Spice Mobiles Ltd, and non-banking finance company Twenty First Century India Ltd—are already listed.
The Modi family rose to prominence through a series of joint ventures with global firms through the 1970s and 1980s.
“It was an excellent strategy in the pre-liberalization era,” says one business historian who didn’t want to be named. “But, the strategy foundered in the post-liberalization era due to a variety of reasons. B.K. was perhaps the only one to say in the mid-’90s that ‘I need to stand on my own’ and reorganized his business into what he then called a Rs1,000 crore business. Periodic reorganizing of his business seems to have worked for him.”