The move aims to simplify succession planning and avoid inheritance tax in case it is reintroduced
Godrej Industries has undergone a significant reduction in overall promoter holding in the past 18 months
Members of the Godrej family have transferred part of their ownership in the 122-year-old group’s flagship Godrej Industries Ltd into trusts, a move aimed at simplifying succession planning and avoiding inheritance tax if it is reintroduced in India.
As part of the restructuring, the Godrej family’s combined direct promoter shareholding in the consumer goods-to-property conglomerate Godrej Industries has also reduced over the past 18 months.
Between December 2018 and now, the overall holding of Godrej family trusts in Godrej Industries has shot up 40.57%. Most of these trusts are run by the children of Adi Godrej, Nadir Godrej, Jamshyd Godrej and his sister Smita Crishna Godrej.
The move is in line with the trend that has become popular among most family-owned corporate groups in India since early this year. Anand Mahindra of Mahindra and Mahindra Ltd, Analjit Singh of Max Group, Anil Rai Gupta of Havells India Ltd, and G. Mallikarjuna Rao of GMR Infrastructure Ltd are among businessmen who have moved their shareholdings to family trusts.
On 5 March, Mint reported that promoters of Indian companies have been transferring their personal and family stakes to trusts, a move that has as much to do with succession planning as with avoiding estate tax and fending off hostile takeovers.
A Mint analysis of internal deals at Godrej Industries shows that since March last year, members of the Godrej family conducted about 60 transactions under which stakes were transferred to family trusts.
The holdings of Smita Crishna Godrej’s daughters Freyan Crishna Bieri and Nyrika Holkar in Godrej Industries, which was 0.12% each in December, have been transferred entirely to trusts run by her children. Navroze Jamshyd Godrej, son of Godrej and Boyce chairman Jamshyd Godrej, has transferred 1.6% of his 1.9% stake in December to his family trusts. Pheroza Godrej, wife of Jamshyd Godrej, has shifted transferred her entire 3.34% stake in the September quarter to family trusts run by her children and their families.
Nisaba Godrej and Tanya Arvind Dubash, daughters of Adi Godrej, have transferred 0.51% each of their holdings (out of 0.73% in December) to their family trusts. Pirojsha Adi Godrej, son of Adi Godrej, too has done the same.
While the direct ownership of the fourth generation of the Godrej family has come down, the holdings of the trusts run by the Godrej family members, including the fourth generation, have increased. For instance, the stake of Raika Lineage Trust, run by Jamshyd Godrej’s family members, increased from nil in March this year to 4.64% at the end of September. The stake of JNG Family Trust has gone up from zero to 2.72%. Navroze Lineage Trust’s holding has gone up from nil in March to 4.64% now. Holdings of FVC Family Trust and NVC Family Trust—both run by Smita Crishna’s family members—have gone up to 3.79% from nil at the end of March.
The stakes of BNG Family Trust, HNG Family Trust, SNG Family Trust, NBG Family Trust—all run by Nadir Godrej’s family members—have all gone up since March-end. BNG’s stake has gone up from nil to 1.63%, HNG’s stake has jumped to 1.91% from nil, SNG’s holding has risen from nil to 1.75% and NBG’s control has shot up from nil to 3.42% between March-end and now.
Similarly, NG Family Trust, PG Family Trust, TAD Family Trust—all run by Adi Godrej’s family members—have increased their stakes since March-end. All these trusts, which had nil stakes in Godrej Industries until March-end, now hold 2.8% each in the Godrej flagship now.
Godrej Industries has also undergone a significant reduction in overall promoter holding in the past 18 months. The Godrej family’s total promoter holding in the company reduced to 61.38% at the end of September from 74.72% at the end of December 2018. At the end of September, the holdings of Adi and Nadir Godrej’s families were 12.66% each compared to 19.18% each at the end of March 2018. The combined holding of Jamshyd and Smita Crishna has fallen from 36.34% to 23.36% now.
The reduction in promoter holding happened after Vora Soaps Ltd, the erstwhile holding company of Godrej Industries, was amalgamated with Godrej Industries earlier this year. Vora Soaps owned 57.66% in Godrej Industries till January.
A Godrej Industries spokesperson said the company is the holding company of Godrej Agrovet Ltd (GAVL) and Godrej Properties Ltd (GPL).
A Godrej Industries spokesperson said Vora Soaps was amalgamated with Godrej Industries earlier this year due to changes in the Companies Act, which mandates that a holding firm cannot have more than two layers of subsidiaries. This is to check misuse of multiple layers of subsidiaries and ensure minority investor protection.
“This amendment had resulted in significant inflexibility for GAVL and GPL to conduct their business. Hence, it was imperative to eliminate one layer (Vora Soaps) so that GPL and GAVL could operate through their subsidiaries… Post Vora Soaps amalgamation, the promoter family and Godrej Foundation directly got shares in Godrej Industries in proportion to their holding in Vora Soaps," said the spokesperson in an emailed response.
Apart from the change in promoter holding structure at Godrej Industries, the holding structure in Godrej Properties has undergone a significant change. Godrej Properties had 23 promoters at the end of March last year. Since then, 100 new entities have been added to the Godrej Properties’ promoter group, many of which are trusts controlled by the family.