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Godrej Family Announces Split after 127 years

ICICIdirect 7 Mins 24 May 2024

The Godrej family is in the news - the group is splitting after 127 years. If you want to know the split details and the potential impact on your holding companies of Godrej group - this is the article for you.

About Godrej Group

The Godrej Group is a prominent Indian multinational conglomerate headquartered in Mumbai. Established in 1897 by Ardeshir Godrej and Pirojsha Burjorji Godrej, the group has since diversified into various sectors, playing a major role in shaping India's economic landscape for over 125 years.

Here are the different business verticals of the Godrej group:

  • Consumer Goods: This is the largest business segment of the Godrej Group, encompassing a wide range of household products under iconic brands like Godrej Appliances, Godrej Interio, Godrej Security, Godrej Air Products, Godrej Consumer Products, and more.
  • Real Estate: Godrej Properties is a leading player in the Indian real estate sector, known for its quality construction, innovation, and commitment to sustainability.
  • Chemicals: Godrej Industries Limited's chemical division manufactures oleochemicals, surfactants, fatty alcohols, and glycerine, catering to various industries.
  • Agriculture: Godrej Agrovet offers animal feed, agri inputs, and poultry products, contributing significantly to India's agricultural sector.
  • Aerospace & Defence: Godrej Aerospace is a trusted partner for India's space program, manufacturing critical components for launch vehicles and spacecraft.

Split of Godrej Business

Recently, the Godrej family, after 127 years of being a united conglomerate, underwent a significant business split. Here's a breakdown of the division:

Godrej Industries Group (GIG): The group is headed by Adi Godrej (Chairman) and his nephew Pirojsha Godrej (to become Chairman in 2026). It comprises primarily of listed companies focused on consumer goods, chemicals, and real estate. The company details are as below:

  • Godrej Industries Limited (Chemicals)
  • Godrej Consumer Products Limited (Soap, Haircare, Household Products)
  • Godrej Appliances Limited
  • Godrej Properties Limited (Real Estate)
  • Astec Lifesciences Limited (Healthcare Products)

Godrej Enterprises Group (GEG): It is led by Jamshyd Godrej (Chairman and Managing Director). It primarily consists of unlisted businesses and a significant land bank. The company includes:

  • Godrej & Boyce Manufacturing Company Limited (Appliances, Furniture, Security Systems, Aerospace)
  • Godrej Agrovet Limited (Animal Feed, Agri Inputs)
  • Remaining subsidiaries and affiliates of Godrej & Boyce

Reason for split

Now, coming to the main point - the reason for the split. Here are some of the potential reasons for the split:

  • Personal Dynamics: While not publicly stated, differences in personal dynamics or working styles between family members could have played a role in the decision.
  • Size and Complexity: The Godrej conglomerate has grown significantly over the years, encompassing a diverse range of businesses. Managing such a complex entity can be challenging, and a split could have aimed to improve operational efficiency.
  • Growth Strategies: The two family branches, led by Adi Godrej and Jamshyd Godrej, might have had differing perspectives on how to grow the businesses. One branch might have favored aggressive expansion or acquisitions, while the other preferred a more conservative approach.
  • Focus Areas: Their visions could have diverged regarding the focus areas for future investments. Perhaps one side prioritized core businesses like consumer goods, while the other wanted to explore new ventures in technology or emerging sectors.
  • Faster Decision-Making: With separate entities, each group can make decisions more swiftly without needing consensus from the entire family. This agility could be crucial in a dynamic business environment.

Market Cap of Godrej Companies

We have mentioned different listed companies of the Godrej group. Here is the market cap of them:

Listed Company

Market Cap

Godrej Industries Limited

Rs 2,79,453 crore

Godrej Consumer Products Limited

Rs 1,31,217 crore

Godrej Properties Limited

Rs 77,541 crore

Astec Lifesciences Limited

Rs 2,245 crore

Way forward

On the way forward, Jamshyd Godrej said, "Since 1897, Godrej & Boyce has always been driven by the strong purpose of nation-building. With this future-facing family agreement now in place, we can further drive our growth aspirations with fewer complexities and focus on leveraging our core strengths in high-tech engineering and design-led innovation across our strong portfolio of strategic, consumer, and emerging businesses."

Overall, the Godrej business split has created two distinct investment propositions. Investors should carefully consider their risk tolerance and investment goals when evaluating opportunities within each group. Here are some points to consider:

  • Performance of Listed Companies: For GIG, the performance of the group's listed companies (Godrej Industries, Godrej Consumer Products, and Godrej Properties) will likely be a key driver of investor sentiment.
  • Future of Unlisted Businesses: For GEG, the success of its unlisted businesses, particularly Godrej Agrovet, and any potential future plans for these entities (IPO, spin-offs) will be crucial factors for investors.
  • Management Execution: The ability of both GIG and GEG management teams to execute their respective strategies and deliver on their promises to investors will be critical for long-term success.

Before you go

Before you leave, we would like to reiterate that the realignment has been arrived at mindfully and respectfully. Based on whatever we have covered, we hope you will be able to make better investing decisions around Godrej companies.

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