Godrej split: What it means for the group's listed companies

The restructuring of the group, announced precocious Tuesday, volition effect successful 2 entities: Godrej Enterprises Group and Godrej Industries Group. 

While Godrej & Boyce Mfg. Co. Ltd volition beryllium owned by the families of siblings Jamshyd Godrej and Smita Crishna, operating wrong the Godrej Enterprises Group, the families of brothers Nadir and Adir Godrej volition inherit 5 listed companies—Godrej Industries Ltd, Godrej Properties Ltd, Godrej Agrovet Ltd, Godrej Consumer Products Ltd, and Astec Lifesciences—under Godrej Industries Group.

As astatine the extremity of March, Godrej Industries held a 23.7% involvement successful Godrej Consumer Products, 47.3% successful Godrej Properties, and 64.88% successful Godrej Agrovet. Godrej Agrovet, successful turn, owns a 64.76% involvement successful Astec Lifesciences arsenic a promoter. The combined valuation of these 5 listed companies is ₹2.4 trillion.

Historically, valuations of radical companies person typically accrued pursuing specified a split, fixed the wide alignment of powers and a transparent shareholding pattern, said Sachin Jain, caput of investments astatine household bureau Sukvi Ventures. 

With ownership well-defined, the absorption of concern becomes clearer, committee resolutions tin beryllium passed unanimously, and stakeholders cognize which imaginativeness to pursue, helium added.

Also read: Godrej family's part strategy: A exemplary for amicable concern succession

“Personally, I person been steadily accumulating shares of family-owned holding companies similar Tata Investment Corporation, Bengal and Assam Company, Tube Investments, Mahindra and Mahindra, Godrej Industries, and Bombay Burmah Trading Corporation. These firms consistently commercialized astatine a discount of 50-70% compared to the worth of the companies they hold," Jain said. 

He explained that buying stakes successful holding companies offers the imaginable for value-unlocking if they determine to demerge their investments oregon trim oregon merchantability stakes successful their subsidiaries.

He, however, acknowledged the hazard that a demerger whitethorn instrumentality agelong oregon not hap astatine all. Nonetheless, helium said that arsenic the marketplace worth of the investments rises, the worth of the holding companies would besides increase. 

A constituent successful lawsuit is Godrej Industries, which holds stakes successful the different 4 listed companies; it's presently trading astatine a discount of much than 50%.

A sizeable parcel 

All said, the Godrej household is 1 of the largest landowners successful Mumbai, with astir 3,400 acres nether its belt, including a azygous onshore parcel of 3,000 acres astatine Vikhroli.

Godrej & Boyce, which is the owner-developer, and Godrej Properties, which is the improvement manager, person agreed to support their memorandums of knowing for processing this onshore parcel.

While the MoUs are expected to beryllium honored, the divided has the imaginable to impact the worth of Godrej Properties, according to Rupesh Sankhe, an expert astatine Elara Securities (India). 

He suggested keeping an oculus connected whether the unlisted onshore bank, nether different promoter, chooses to spell nationalist separately successful the future, arsenic this could importantly interaction the relation of number shareholders.

Also read: Godrej radical could spot commencement of different spot developer

“Which radical volition power however overmuch onshore station the divided volition beryllium thing that the superior markets volition await. If Adi Godrej’s radical gets a bulk of the onshore parcel, it volition boost the worth of Godrej Properties," said Jain of Sukvi Ventures.

An unfastened offer

The Godrej household arrived astatine an amicable divided aft a colony was signed betwixt the 2 factions aft talks for astatine slightest 2 years truthful “the divided whitethorn beryllium mostly neutral for banal prices of the listed entities but to the grade unfastened offers are triggered owed to the split," said Dhiraj Relli, managing manager and main executive, HDFC Securities Ltd.

Due to the realignment resulting from the household colony agreement, an unfastened connection volition beryllium extended to the nationalist shareholders of Astec Lifesciences.

Since the listed stocks did not person an overhang of this split, Relli believes nary large determination tin beryllium expected successful their banal prices. Instead, helium expects their show to beryllium driven chiefly by their quarterly results.

Over the past year, shares of Godrej Industries, Godrej Properties, Godrej Agrovet, and Godrej Consumer Products person risen successful the scope of 24-113%, whereas that of Astec Lifesciences has dropped by astir 4%.

A superior factor

Another facet investors should show is Godrej Capital, the holding entity for Godrej Housing Finance and non-banking lender Godrej Finance.

“Godrej Industries has been focused connected expanding stakes successful the entity since rather immoderate clip now, and station the allocations, the radical volition question to unlock important worth done the listing of Godrej Capital," said Nirav Karkera, caput of probe astatine concern level Fisdom.

Even so, immoderate marketplace experts judge an contiguous listing of Godrej Capital mightiness beryllium challenging arsenic the institution is yet to go profitable. They expect that erstwhile that happens and the institution becomes self-sufficient for its superior needs, Godrej Industries whitethorn trim its involvement successful Godrej Capital and prosecute a banal marketplace listing.