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Kirloskar group reworks family control structure

Kirloskar group reworks family control structure

Mumbai: Sanjay Kirloskar will take a firmer grip on Kirloskar Brothers Ltd (KBL), one of the two main companies of the $2.4 billion (Rs11,520 crore), Pune-based Kirloskar group, as part of a restructuring that took place with the transfer of shares last week on the Bombay Stock Exchange (BSE).

The so-called inter se share transfer, which involves stock changing hands among co-promoters, is part of a family arrangement on the ownership and control of group companies, said a senior lawyer who advises clients on such transaction. This will allow Sanjay Kirloskar to take independent decisions on areas such as fund raising and diversification, the lawyer said. Neither he nor his firm can be named for reasons of client confidentiality.

Sanjay’s brothers Atul and Rahul Kirloskar will likewise have a greater say in Kirloskar Oil Engines Ltd (KOEL) the other key Kirloskar group company, following the share transfers.

The ultimate plan is to merge all the investments companies into one and create a larger investment company in future, said an investment banker familiar with the development, who spoke on condition of anonymity as he is not authorized to speak to the media.

Sanjay Kirloskar, the fourth generation of the family that established the group in 1920, and his wife Pratima Kirloskar will be the largest shareholders of KBL, which makes water pumps and executes water supply and irrigation contracts. KBL was earlier held through Better Value Holdings Pvt. Ltd (BVHPL), an unlisted family-owned holding company.

The husband and wife will jointly own 36.45% of KBL, while the remaining stake of the promoters will be held by family members including Arti A. Kirloskar and Sanjay’s brothers Atul and Rahul Kirloskar, each owning less than 3%.

On 19 September, KBL informed BSE that BVHPL had sold its 60.13% stake (53,207,342, shares) through inter se transfers to the promoters and that it had ceased to be the holding company of the group.

Atul Kirloskar, chairman and managing director of KOEL, didn’t comment on the development. KOEL includes the auto-related businesses of the group, holding stakes in the unlisted joint ventures with Toyota Motor Corp., according to a March 2008 research report by Umesh Karne of Reliance Money.

KBL’s company secretary G.P. Kulkarni said there will be no change in the promoters’ 62.32% shareholding following the transfer of shares from the holding company to the individuals. He said he can’t comment further on the development.

Another Kirloskar family member said there were no divisions within the family.

BVHPL “has been our holding company for nearly a decade and it is only an inter se transfer of shares to individual names. There is no split between the brothers. We are working very closely between the brothers and management and ownership has always been insulated," he said, asking not to be named as it was a family matter.

The 6.28% stake held by BVHPL in KOEL has been transferred mainly to Atul and Rahul Kirloskar. The company, which makes engine valves and diesel gensets, is run by Atul Kirloskar. The promoters’ stake in the firm is 62.01%.

The transfer is aimed at converting the holding company into an investment company in the way that non-manufacturing investments in KBL and KOEL have been turned into separate firms. BVHPL has investments in non-Kirloskar companies as well but the value of these are not known as it’s not listed.

For the fiscal year ended March 2008, KBL—India’s largest manufacturer and exporter of pumps and the largest infrastructure pumping project contractor in Asia—reported investments of Rs1,278 crore in its listed and unlisted companies. These include Rs293 crore of investments in unlisted subsidiary companies such as Kirloskar Silk Industries Ltd and Kirloskar Constructions and Engineers Ltd.

Once completed, shareholders will get a chance to own shares worth their current investment in both the manufacturing firm and investment company, Kulkarni told Mint on 23 June, when the paper reported KBL’s plan to hive off its non-manufacturing investments into a separate firm.

The Kirloskar group spearheaded by the late Shantanurao Kirloskar split in 2000 when the eldest family member Vijay Kirloskar broke away, taking Kirloskar Electric Ltd and Kirloskar Batteries Ltd.

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