Godrej Consumer board was unaware of CEO’s exit plans, chairperson says

Mumbai: The board of Godrej Consumer Products Ltd (GCPL) had not discussed the leadership transition when it granted its outgoing chief executive officer (CEO) a fresh five-year term, its chairperson Nisaba Godrej told investors during a call on Tuesday evening, hours after the company announced Sudhir Sitapati’s sudden and immediate exit from the company.

While neither the outgoing CEO nor the company have disclosed the reason for the exit, the public commentary from both Nisaba Godrej and Sitapati hint at underlying discord.

Asked to evaluate Sitapati’s tenure on Tuesday’s investor call, Godrej called him one of the smartest people she’s worked with and highlighted various achievements during his tenure. But she was also candid in pointing out what she thought were the company’s shortcomings during the past five years.

“Sometimes we want to say very fancy things on these calls of what we're going to do. But it's basically can we roll up our sleeves and get things done with more candour and pace? And I feel that that layer in GCPL is not as strong as I would like it,” she said. “So that's what I'm hoping that Aasif will bring with him while continuing all the good things that were built in the last five years.”

Aasif Malbari, the former global chief financial officer of GCPL was appointed as the new managing director and CEO effective 11 August.

In his resignation letter, Sitapati included metrics underscoring his performance, an unusual move for a departing executive that further hinted at discord over his performance. “On a monthly average, from 7 May 2021—the day my appointment was announced—through 9 August, GCPL's total shareholder return has been around 10%, compared with around 8% for the Nifty FMCG index. Today, 97% of analysts rate the stock a buy or hold, among the highest ratings in the sector,” he wrote. “I feel that the task I had set for myself here is done and this is the right time to move on.”

Godrej Consumer Products did not respond to Mint’s request for comment. Messages to Sitapati went unanswered.

A sudden exit

Nisaba Godrej tackled head-on questions about the unusual timing of Sitapati’s exit, just three days after being granted a second five-year term. The leadership transition was discussed neither when Sitapati’s reappointment was approved by the board on 6 May, nor when the shareholders were sent the notice for the annual general meeting on 16 July, she said. Sitapati then insisted on ending his term with immediate effect, she said.

“My preference is always to take, you know, a longer period… but it was his request. And since we had a ready successor plan with Asif within GCPL, we agreed,” she said.

Tuesday’s comments were no anomaly—public candour has long defined Nisaba Godrej’s leadership style. In GCPL’s latest annual report, she noted that while the company navigated a tough FMCG environment over the last five years, it had yet to realize its full potential. “So, if I’m being candid, as an FMCG company we are probably operating at the 80th or 90th percentile when it comes to the classic playbook: big SKUs (stock-keeping units), general trade distribution and television-led media. But we are probably closer to the 50th percentile when it comes to e-commerce, digital marketing and understanding the disruption AI is going to create,” she wrote.

Monish Chatrath, managing partner at consulting firm MGC Global Risk Advisory said that from a risk management and governance perspective, leadership transitions are best viewed through the prism of institutional resilience rather than individual circumstances. “From the outside, one can seldom have visibility into the full constellation of considerations that inform such decisions. It is therefore more useful to focus on the governance architecture within which such transitions are effected,” he said.

Investors rattled, shares tank

CEOs at major firms typically plan gradual exits, serving out notice periods to ensure a smooth transition. Sitapati’s abrupt departure rattled investors, triggering a selloff that sent GCPL shares tumbling 10.55% to ₹910.6 on Wednesday, vastly underperforming the benchmark Sensex, which dipped just 0.24%.

To reassure investors, management said that there won’t be any sudden changes at the company. The company’s next layer of leadership, which heads country clusters and categories, remains the same, Godrej said. The incoming CEO said that he has already worked with the company’s leadership team and is familiar with them. “I think step one would be not to make any large changes overnight,” Malbari said on Tuesday’s investor call.

Management stopped short of outlining their exact plans for the company going forward, but mentioned that the company will return to having a separate India CEO, a role that Sitapati subsumed when he took over in 2022.

Neethi Lisa Rojan in Mumbai contributed to this story.