Succession planning through a private family trust allows the promoter to control the trust and have the freedom to transfer assets to the beneficiaries, which is set out in the trust deed.
Mumbai: At a time when succession planning is becoming a contentious issue in India Inc, the promoters of EmamiNSE 3.09 % group are hammering out their own version of family office.
The Kolkata-based FMCG-to-cement conglomerate is in discussions to transfer shares into a family trust to avoid complications and disputes associated with succession plans in large family businesses, people with direct knowledge of the matter told ET.
All five children of the two unrelated promoters, RS Agarwal and RS Goenka, have taken up profit and loss responsibility of group businesses, while the promoters have barred their sons-in-law and daughters-in-law from being involved in any of the Rs 10,000-crore plus group’s commercial businesses as part of its succession plan being put in place.
“The grand children can always join the family business depending on their interest,” said RS Agarwal. “A family trust may also be a practical move since we are a very large family. We are giving it a very serious thought.”
Succession planning through a private family trust allows the promoter to control the trust and have the freedom to transfer assets to the beneficiaries, which is set out in the trust deed. The trustee may be a beneficiary, family member, relative, or there can even be a professional trustee appointed for the management of the trust.
The Emami group has already set up a family advisory board with representation from the younger generation of the two promoters, who are also consulting US-based Family Business Consulting Group to help in this process, according to group insiders.
Non-family professionals heading various businesses in the group will report to the advisory board that comprises Agarwal’s children Aditya Agarwal, Harsh Agarwal and Priti Sureka, Goenka’s sons Mohan Goenka and Manish Goenka, his brother Sushil Goenka and nephew Prashant Goenka.
“We have ensured that the next generation in the family shares a close relationship similar to Agarwal and me and all of them are not different from each other in their values, mind sets and approach to business,” RS Goenka said.
Rajesh Narain Gupta, managing partner at law firm SNG Partners, said families feel that sons-in-law cannot be reprimanded if there is a rift after being inducted in the business. It can affect families emotionally and businesses financially, he said. “Many families do not like their family wealth or business to be managed outside their bloodline unless the successors are only daughters,” Gupta said.
The Emami group is governed by a family constitution. The apex family council comprises second generation promoter directors, headed by the two founders. The business council comprises both the founders and second-generation directors as well as the group’s professional business heads, who meet periodically to take major decisions.
Charting out the succession plan for Emami family will be a very challenging and sensitive task as any move could ruffle a few feathers, group watchers said. “Both families have equal crossholdings across various group companies, and while both unrelated families are united, different career plans may change the family direction in the future,” a group insider told ET.
All businesses of the Emami group have one member from each family on board as a director.
“Everyone has an operating role,” a group insider said. “Our business is governed by business governance rules. For instance, the policy that no one can give loan to outsiders is mentioned in the governance roles of individual shareholders.”
The personal care products business is distributed and divided between three people — Mohan Goenka, Harsh Agarwal and Priti Sureka. Each of them is looking after a few of the brands. Prashant Goenka is responsible for international marketing division.RS Goenka’s younger brother Sushil Goenka is the MD and responsible for operations.
Aditya Agarwal and Manish Goenka look after cement, edible oil, biodiesel and paper businesses. One of Goenka nephews, Ashish Goenka is training under them in cement business, whereas another nephew, Jayant Goenka is training under them in edible oil business. Jayant’s brother, Sachin, is also training under them in paper business.
“The objective of training the younger generation is that at a later stage they can take on more responsible positions in the business they are in,” a group insider said. “We have other businesses like retail outlets — Frankross and Starmark, hospitals, etc., which are all run by senior professionals.”
Market capitalisation of Emami Limited, the flagship company of the group, has grown to over Rs 18,000 crore now from Rs 11,000 crore five years ago.
While its revenues have grown at a compound annual growth rate of 8.6% over the past five years to Rs 2,530 crore in 2017-18, its net profit has declined at a rate of 6.5% to Rs 307 crore during the same period.
Emami, Emami PaperNSE -0.12 % and Emami Realty — the three listed companies of the group — have directors from both promoter families on the board and cross-holdings between group companies.