Peace At Murugappa Group

The Chennai-based Murugappa family, which owns one of the largest and well-diversified business conglomerates, has decided to sign an out-of-court peace pact with the family branch of late MV Murugappan.

Murugappan has two daughters—Valli Arunachalam and Vellachi Murugappan. Valli Arunachalam has been engaged in a pitched legal battle with the rest of the Murugappa family.

She has taken the legal route, demanding that she be adequately accommodated in the running of the Murugappa family business now that her father was no more. Alternatively, she is reported to have suggested the holdings of their late father Murugappan be bought out by the rest of the branches of the family.

Valli has been hitting the national headlines since 2020 when she chose to take the whole issue to court.

In identical press releases, both sides – Valli and the Murugappa family – said they have agreed to "settle the disputes and differences between the family branch of late MV Murugappan (including Valli Arunachalam and Vellachi Murugappan), on one side, and the rest of the family members, on the other side, which arose post the demise of late MV Murugappan".

"The members of the Murugappa family first discussed and concluded the terms of the family arrangement amongst themselves at a meeting in the presence of their respective advisors. This understanding was recorded today by way of a memorandum entered into by the members of the Murugappa family with the family branch of late MV Murugappan (including Valli Arunachalam and Vellachi Murugappan)," the release said.

"The family members are committed to undertake the necessary transactions to effect the family arrangement within the next 90 days,” it added.

“The family arrangement is envisaged primarily to bring about amity and maintain goodwill amongst the members of the Murugappa family, and to maintain the overall harmony within the family, in this generation, as well as in the future. The family arrangement ensures that all the issues between the members will be settled. The terms of the family arrangement itself are confidential,” said the release.

Meanwhile, they have also agreed to withdraw all legal proceedings between the family groups.

"No listed company forming part of the Murugappa Group is a party to the family arrangement, and nothing in the family arrangement relates to the management or control of, or grants any special rights to the parties in, any such companies," the release said.

The over $5 billion Murugappa Group has, for decades, enjoyed a quiet profile. In fact, it pioneered the concept of a group corporate board and let professionals manage the operating entities.

The quiet surrounding the south Indian business empire was shaken when Valli Arunchalam went public sometime in 2022 to articulate her predicament in the system after the demise of her father at Carborundum Universal Ltd. Valli’s move took the corporate world in this part of the country completely off-guard. It was somewhat unusual for the Chennai-based conglomerate to find itself in such a situation.

Valli, the elder daughter, wanted an equal opportunity in the family business on the same terms as the male heirs. She also sought a seat on the board of Ambadi Investments Ltd., the holding company of the group. Alternatively, she suggested that the family member buy her stake. Valli Arunachalam and her sister together hold 8.15% stake in AIL.

The shareholders of AIL, however, rejected a resolution to appoint her as a director on the board of the company. That was sometime in the third quarter of 2022.

"It was always our wish that the family issues remain within and are settled at the family level, but clearly it seems the family is more concerned about protecting its draconian perspectives and practices, even if it means forcing us to take the battle to courts. We will not shy away this time," she had told a financial daily then.

Highly-placed sources had told this writer then that an exit price was indeed suggested to her. She, however, found that to be below fair value. Hence, she sought a representation on the board of AIL. Her demand was rejected by the shareholders, however.

Valli’s predicament is akin to the one faced by the late Cyrus Mistry of the Shapoorji Pallonji Group.

Mistry was thrown out of the chairmanship of Tata Sons, the holding company of the Tata Group, after he fell out with Ratan Tata on a number of issues. The Mistry family is the largest minority shareholder in the Tata holding company. The Mistry family at that point felt that a separation was best for the stakeholders of the Pallonji group.

The dynamics of holding company valuations involve one too many imponderables that strictly don’t fall within the domain of a pure business relationship.

A host of factors – trust, customs, family code and a sense of long-standing bonding – define the dynamics which are very often difficult to quantify in monetary terms. Given these peculiarities in holding company arrangements, friction resolution can get problematic.

Buying out a shareholder in a holding company is not as simple as one may think. A number of questions arise. For instance, do these holding firms have enough free float money to buy out any shareholder? Do others have ready money to buy out the willing quitter?

Co-existing with an unwilling partner in a business engagement can prove disaster for everybody in the end. The freedom to exit cannot be questioned. If that freedom could be conceded without upsetting the apple cart, it should be quickly pursued without any time lost.

The Murugappa Group probably has understood that a prolonged quarrel – that has gone legal – will do no good to the image and reputation of the group. It is good that both sides have chosen to smoke the peace pipe.

KT Jagannathan is a senior financial journalist based in Chennai. He has been in business journalism for over three decades, covering corporate developments and critical industry verticals. He is the co-founder of www.carnaticdarbar.com, a news website for Carnatic music, a niche art form. He is also learning the wind instrument flute.

The views expressed here are those of the author and do not necessarily represent the views of BQ Prime or its editorial team.