In the shadow of wealth creation and the context of Indian business families, the recent update to the Kalyani-Hiremath family feud casts a sombre light on the pitfalls of prosperity and trust-based family agreements. The operative word ‘trust’ here is not a legal structure but about human value.
The rift, now manifesting in courtroom battles over claims of family assets, especially going back two generations, symbolises a broader narrative of discord within affluent Indian business households. As generations multiply and global exposure reshapes family dynamics, conflicts over inheritance and authority escalate, leaving legacies tarnished and unity fractured.
The ongoing dispute between Bharat Forge chairman, Baba Kalyani, and his sister Sugandha Hiremath has entered a new phase, with Sugandha’s family filing a lawsuit in a Pune court recently, seeking the division of Kalyani family assets. Alleging that they have a rightful share in the Kalyani Hindu Undivided Family (HUF) assets, they contend that Baba Kalyani has withheld transparency regarding their entitlement.
The Kalyani Group, comprising eight listed companies valued at over Rs 69,000 crore collectively, including Bharat Forge with a dominant 45% stake, finds itself embroiled in this legal tussle. Additionally, another legal battle ensued when Baba Kalyani attempted to raise his group’s stake by 5% in Hikal, a company under his brother-in-law Jaidev Hiremath’s leadership.
Last year, the Hiremath family approached the Bombay high court, citing Kalyani’s failure to adhere to a familial agreement to transfer all Hikal Limited shares. This listed entity, in which the Baba Kalyani group holds 34%, compared to the Hiremath family’s 34.84%, operates in diverse sectors, including active pharmaceutical ingredients (APIs).
Under Baba Kalyani’s stewardship, his faction of the family business has experienced remarkable growth, solidifying its position as a powerhouse in the industry over the decades. Did such growth create wealth disparities within the larger family tree? The crux of the feud seems to be the desire to equitably distribute the accumulated spoils.
However, the reliance on trust-based familial agreements complicates the enforcement of legal obligations, exacerbating the conflict. This serves as a stark reminder for Indian business families to swiftly adapt to more formalised structures, learning the harsh lesson that without clear legal frameworks, disputes over wealth distribution can quickly spiral out of control. Numerous business families encounter internal conflicts that escalate into legal disputes. This trend commonly arises with successive generations, particularly when uncles, cousins, and in-laws are integrated into business operations. Unlike the original founders who established the enterprise, subsequent family members often struggle to establish consensus regarding succession and roles within the company.
But there lies a fundamental question: when should the torch pass from one hand to another? And when should one step back or even step down? Baba Kalyani’s contested directorship, challenged upon crossing the threshold of 75 years, echoes this quandary. In May last year, a majority of institutional shareholders of Bharat Forge, a company controlled by Baba Kalyani, voted against a resolution to approve reappointing him as the company’s managing director. According to the voting results, 53.51% of institutional investors’ votes were against the resolution, while 46.49% votes were in favour. Kalyani however retained the post of the company’s managing director as the special resolution went in his favour thanks to the dominant promoter group votes that his family controls.
The shareholders’ divided stance reflects the tug-of-war between tradition and pragmatism, between reverence for founders and the foundations of succession planning. Yet, amidst the legal wrangling, there emerges a poignant reminder for business luminaries: the essence of graceful retreat. Market watchers would recall multiple instances of promoters calling in favours to salvage their votes to hold onto their Board seats. There is a lesson in these. When is the right time to step down or step away?
The majority of India’s prominent enterprises, characterised by their size, scale, and stature, share a common denominator: family disputes. These conflicts often stem from a lack of formal succession planning, as evidenced by numerous notable examples. From the ongoing Kalyani-Hiremath feud to historical disputes like the Ambani family rift, the Murugappa group’s internal strife over board representation for a daughter, and conflicts within the Kirloskar, Singhanias, Wadia families, familial discord continues to plague India’s corporate landscape. Each case illuminates valuable lessons.
Despite wealth and education, human frailties such as greed and jealousy can still fracture familial bonds and tear apart longstanding legacies. These conflicts underscore the importance of addressing underlying issues of trust, communication, and succession planning within affluent family enterprises, highlighting the imperative of fostering unity and transparency to safeguard against the corrosive effects of familial discord.
While this might seem philosophical, it is not: Families often reveal their true motivations when money and power are at stake. The challenge of equitably distributing wealth and power among siblings and within families is a widespread issue. Internationally, many family-owned businesses swiftly transition to professional management to mitigate conflicts, alongside the fear of shareholder lawsuits, notably those initiated by activist shareholders. But then, succession planning is not the strongest forte of Indian business families.
Srinath Sridharan is a policy researcher and corporate advisor. He tweets at @ssmumbai.
