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A file photo of Naveen Jindal. Photo: Mint
A file photo of Naveen Jindal. Photo: Mint

Jindals to unwind complex cross-holdings

The four brothers have jointly mandated global consultants EY to create a transparent and tax-friendly structure

Mumbai: A process to try and simplify the cross-holdings between different firms promoted by the Jindal family has been initiated, but could take at least 18 months due to the complexity of the task, said two persons familiar with the development.

The four brothers have jointly mandated global consultants EY to create a transparent and tax-friendly structure.

“It is a long and complex process. It is likely to take at least 18 months," said the first person cited above, on condition of anonymity.

The Economic Times had on Tuesday published a report suggesting that the Jindal brothers are moving to implement a plan to unwind the complex cross-holdings in their companies owing to the dictates of the market, governance and transparency.

Once implemented, this would be the second major restructuring of the Jindal family businesses. The group was initially reorganized between the four brothers after the death of their father O.P. Jindal in a helicopter crash in 2005.

The brothers, Prithviraj, Sajjan, Ratan and Naveen, took over the management responsibilities of various businesses. Sajjan took control of JSW Steel Ltd and JSW Energy Ltd, Prithviraj took charge of Jindal Saw Ltd, Ratan took the reins at Jindal Stainless Ltd and Naveen took charge of Jindal Steel and Power Ltd.

While management control of individual companies was split, the companies continue to hold shares in other group firms. Mother Savitri Jindal and each of the four brothers owns shares in all the listed entities.

The plan now is to clean up these complex cross-holdings between companies. Each brother will buy out the stakes of others in the companies they control in phases.

“There was always a proposal to clean up the books but it never happened. Now, the brothers have taken a joint decision and given the mandate to EY," the second person cited above said, also on condition that he not be named.

EY did not offer any comment on the story.

According to independent consultant Kunal Bhakta, the death of founder O.P. Jindal had left the group’s businesses in a position where ownership and management was not completely aligned.

While EY had been appointed in 2005 too to restructure the company, the exercise could not be taken to its logical conclusion, he pointed out.

“Sajjan Jindal who has been the most enterprising and aggressive of the family has already carved out his JSW Group for pursuing various new ventures such as power, logistics, etc., with ownership and management aligned from inception. But the remaining entities remain inter-linked to the group’s investment holding companies," Bhakta said.

He believes that this time around, it will be a lot easier for the Jindals to achieve the desired objective as it may not require the direct involvement of the group’s three listed investment holding companies—Nalwa Sons Investments, JSW Holdings and Hexa Tradex.

According to records available with the Registrar of Companies, the group has incorporated four new investment holding companies in January 2014. These companies include Danta Enterprises Pvt. Ltd, OPJ Trading Pvt. Ltd, Sahyog Tradcorp Pvt. Ltd and Virtuous Tradecorp Pvt. Ltd.

“Towards the end of March 2014, these four entities received shares valued at 17.3 billion as a gift from a couple of subsidiary companies of the listed Nalwa Sons and other unlisted investment holding companies, which had indirect ownership interests in all the three listed entities. In lieu of these transfers, the three listed entities received minority ownership in the new investment holding companies," Bhakta explained.

The Jindal family is not the only Indian business conglomerate with complex cross-holdings.

A number of Tata Group companies hold significant investments in other group companies and in Tata Sons Ltd, the promoter company.

“The book value of these investments is minuscule; however, their current market value is equal to 1-135% of the market capitalization of investor companies," said IIFL, a financial services firm, in an August 2014 report.

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