Godrej Group Stocks Sparkle After Split News

On May 2, 2024, Godrej group stocks saw increases between 2% and 8% after it was announced that the founding family plans to split the 127-year-old conglomerate into two distinct entities. The division, finalized late Tuesday, will result in one branch led by Adi Godrej and his brother Nadir, and another managed by their cousins Jamshyd and Smita.  

Adi Godrej and his brother Nadir will lead the Godrej Industries Group, encompassing publicly listed companies such as Godrej Industries Ltd, Godrej Consumer Products Ltd, Godrej Properties Ltd, Godrej Agrovet Ltd, and Astec Lifesciences Ltd. Notably, Godrej Consumer Products is the most significant, boasting a market capitalization of ₹1.26 lakh crore as of April 30.

As part of the restructuring, the family of Adi and Nadir Godrej will make an open offer to the shareholders of Astec Lifesciences. This move led to a substantial increase in Astec Lifesciences' share prices, representing the most significant rise among all the companies in the Godrej group.

The base price for the open offer has been set at ₹1,069.75 per share, reflecting a 17% discount to its last closing price. Triggered under SEBI regulations following the settlement, the open offer by Adi and Nadir's family seeks to acquire a 26% stake in Astec Lifesciences, amounting to a total of ₹545 crore.

Cousins Jamshyd Godrej and Smita Crishna will take control of the unlisted companies and the land bank, which will be part of Godrej Enterprises. This entity includes Godrej & Boyce Manufacturing Co. Jamshyd Godrej and Smita Crishna's Godrej Enterprises will engage in various sectors, including aerospace, aviation, defense, energy, construction, IT, and software, with Nyrika Holkar as the Executive Director.

While both branches will continue using the Godrej brand name, they have established a six-year non-compete agreement barring them from entering each other's fields. After this period, they may explore opportunities in each other's sectors, but will not be allowed to use the Godrej name for such ventures, as per sources and regulatory filings. 

The shareholdings of family members will be adjusted across various companies to correspond with the businesses they inherit. Both factions will retain the right to use the Godrej brand name. Additionally, the agreement encompasses provisions for royalty payments, brand usage, and the development of the land bank.

“The realignment has been arrived at in a respectful and mindful way to maintain harmony and to better align ownership in acknowledgement of the differing visions of the Godrej family members. This will help maximize strategic direction, focus, agility, and will accelerate the process of creating long-term value for shareholders and all other stakeholders," the company statement on April 30 said.

“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,” said Jamshyd Godrej on future outlook.

The realignment will be implemented after the relevant regulatory approvals have been obtained.