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Weekly Insights #25- Thoughts on Promoter Disputes

I recently read that most Indian families are unable to go beyond 3rd generation without having disputes with respect to family business & assets. In the listed market we have had many examples of disputes within the promoter group with the most recent one being the Murugappa Group.

If history is of any evidence, such disputes emerge primarily because of operational say in the business rather than the actual ownership (which itself is most cases is already distributed equally beforehand). And that that such family disputes never get resolved and the relations never heal, and the only way to settle the same is to have a total separation wherein each member goes their own way without any influence/say of other member in their business.

Having read about multiple past such instances and seeing some play out we believe that one can segregate such disputes in two different buckets from of the perspective of eventual resolution of dispute.

First bucket is that of larger corporate houses and second is of smaller corporate houses.

In case of larger corporate houses, the disputes are relatively easy to resolve primarily because of multiple business lines that such larger business groups have. As & when a dispute arises, various businesses are split across members such that no-one has any say or influence over each other’s business and thus dispute is resolved. Some good past examples here are that of Reliance and Bajaj Group, wherein various businesses wherein split between family members.

But in case of smaller corporate houses, the situation is quite different because such families mostly have a single business that accounts for the entire value of the family. And when dispute arises, it is not possible to split the single business without hampering the performance of the business.

A good recent example of this is what is happening with Lux Industries. Promoter disputes in Lux is a common knowledge and the word on the ground level is that both the brothers have now divided various brands of the business among themselves and are also appointing separate distributors for their respective brands. And this is causing the existing distributors of the company jittery.

Vadilal is another good example wherein when the 1st dispute arose in 1990s, the brothers split the business in terms of geography which led to a situation wherein the listed Vadilal Industries has not been able to realize its full potential as it cannot operate in certain states. And now with another dispute within the remaining brothers (who controls the listed Vadilal Industries) coming into the fold, things have become quite complex as now there is no scope to further divide the geography. The only option left is to sell out the business altogether, which again is a challenge given that they don’t own the rights of the Vadilal brand in its entirety, they are sharing it with the other brother who operates in the remaining states.

Recently we have also seen that the promoters of Solar Industries have also settled their disputes; the press release talks about splitting of ownership in the company. But as highlighted earlier, such disputes are primarily a result of operational say & influence, which is not resolved in this case as the brothers continue to engage in the same business and that continues to posses an ongoing risk for future disputes.

In summary, at its core, promoter disputes are a result of operational say/influence & vision and do not get resolved unless there is a clear separation at both ownership & operational level. And families with multiple business lines are better placed to resolve such disputes vs families with a single line of business.

That’s it for this week, new insight coming up next week. So stayed tuned!


Surge Capital is a trade/brand name used by Ankush Agrawal (Individual SEBI Registered Research Analyst INH000008941) to provide equity research services in the Indian Equity Markets.

“Registration granted by SEBI, and certification from NISM in no way guarantee performance of the Research Analyst or provide any assurance of returns to investors”

“Investments in securities market are subject to market risks. Read all the related documents carefully before investing.”

“The securities quoted are for illustration only and are not recommendatory”

Stock specific investment disclosure:

Reliance- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service

Lux Industries- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service

Vadilal- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service

Solar Industries- Not Invested. Not Traded in last 30 days. Not an active recommendation in Research Service

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Saurav Jalan
26 Αυγ 2023

Hi Ankush,

Very good insights on promoter disputes. Bajaj Group is indeed a fine example of how ownership and operational control should be segregated in a large corporate house. Ownership is divided by taking family members into consideration under a holding company structure and operational control is divided by taking individual talent, inclination and passion towards a particular business so that they can express themselves fully in their domain. Kushagra Bajaj who wanted to go separate in terms of ownership and well as operational control was ultimately given the freedom so that the entrepreneurial energy of a youngster is not subdued. All the other businesses are within the same holding company structure run by different members of the family.


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