Business

TVS Group's Ownership Structure Rejig Is an Important Lesson for Family-Run Businesses

In an expanded family-run corporate empire, relationship management becomes an onerous task in itself.

In a significant step forward, the family behind the TVS Group has come together to put in place a mechanism that will help ensure that the ownership of shares in a group firm rests with the management that runs it.

The nearly 110-year-old group – which has interests in everything from auto components to finance – is  perhaps the first family business in India to even attempt a scientific way out of the ownership cobweb that has entangled many other corporate empires.

The move deserves closer attention, coming as it does in the wake of the bitter spat between the Tatas and the Mistrys, a feud that has reached the country’s highest court.

Closer home, the Murugappa Group has been facing a tough test with how it deals with Valli Arunachalam (daughter of the late M.V. Murugappan) and her demand for representation in the group’s holding company.  Alternatively, she wants the group to buy out her family stake. So far, though, Valli has been met with strong resistance, which has prompted her to go public and accuse the Murugappa group mandarins of favouring only the sons in the family.

In the meanwhile, the Murugappa group has gone in for a major organisational overhaul, and reported to have quietly buried the group corporate board, which was touted as a masterstroke model to professionalise the overall business.

The history of India Inc is writ large with such familial conflict – the Ambani family, of course, being the most high-profile instance. Mukesh and Anil’s fight for the family business spilled over to the pages of newspapers, and a resolution finally saw the two go their separate ways.

The younger Ambani today is a fallen hero. The elder Ambani, on the other hand, recently welcomed a new addition to his family and has started to think about how to divide his empire between his offspring.

Also read: Book Excerpt: The Unravelling of Anil Ambani’s Empire

Coming back to the TVS Group, what is the family doing? While their empire is a well-respected group in this part of the world, it hasn’t been free of inner friction.

The TVS group has four families – T.S. Krishna, T.S. Srinivasan, T.S. Rajam and T.S. Santhanam.

In the 1990s, two of the four groups were engaged in a bitter legal row over the flotation of competing businesses. The holding company of the groups, TVS & Sons, remained without a chairman for a considerable time after the demise of T.S. Santhanam. That Suresh Krishna took over the chairmanship of the holding company subsequently was, however, a different matter.

Post-liberalisation, things did change, with the various groups within the larger TVS family sort of engaging with each other and trying to practice co-operative co-existence.

The T.S. Santhanam family (S. Ram and S.Viji, his sons) has already gone on its own and established a group of its own comprising companies such Sundaram Finance, Wheels India, Sundaram Homes and the like.  The T.S. Krishna group (comprising sons Suresh Krishna, late K. Mahesh and K. Ramesh) has under it companies such as Sundram Fasteners, Sundram Brake Linings and so son.

The T.S. Srinivasan branch comprises sons Venu Srinivasan, Gopal Srinivasan and their brother-in-law T.K. Balaji. Venu Srinivasan and Gopal Srinivasan have since charted their own independent courses. The two sons of late T.S. Rajam (R.Ratnam and R. Ramachandran) are no more and the group is now represented by R. Dinesh, his brothers and cousins.

As time went by, the family has seen new additions to individual families within the TVS group. In an expanded empire, relationship management is a task in itself with younger ones having an independent thought process. And, a synchronised approach to business in a quick changing environment may well nigh be difficult, if not entirely impossible. How to navigate a business environment that demands equality sans any discrimination of either gender or otherwise?

Thus, the TVS group is probably trying to resolve this upfront amicably so that each has the space to experiment and articulate without being a problem for others in the group.

Also read: In Mistry’s Plan to Separate from the Tata Group, Questions About the Future

The restructuring must be seen in the light of these deeply articulated reflections.

“The members of the TVS family have agreed to subscribe to the terms of a memorandum of family arrangement in order to record the terms of a family arrangement to align and synchronize the ownership of shares in various companies/businesses belonging to the TVS Group with the management of the respective companies/business,” said a statement from the group.

Following this, the existing management of the various listed and unlisted companies/businesses in the TVS Group will continue to be managed by the same family members.

“The nominated members of the TVS family will now deliberate on the steps to be taken to further implement this arrangement,” the statement added.

Perhaps, this will involve the process of individual entities and their management buying out the shares of the TVS holding firms in their companies. How will this happen? As it is, the four groups have their own investment arms.

The group essentially consists of businesses started by the original founder, T.V. Sundaram Iyengar and his lineal descendants constitute the TVS family. The family has been engaged, for more than a century, in a diverse range of businesses through various entities in which the branches of the TVS Family have invested in or through T V Sundram Iyengar & Sons Private Limited (the group’s holding company), Sundaram Industries Private Limited and Southern Roadways Private Limited.

Over the decades, the TVS family has expanded their businesses and the TVS Group has grown into a large business conglomerate with interests in several businesses operating in diversified fields.

“The present shareholders of the TVS holding companies primarily consist of the third and fourth generations of the original founder, T.V. Sundaram Iyengar. The various businesses/entities of the TVS Group have been traditionally managed by members of the different branches of the TVS family. With the passage of time, the members of the TVS family felt that the ownership of shares in various companies/ businesses should align and synchronise with the management of the respective companies and, therefore, the memorandum of family arrangement has been entered into,” said a release.

Though the details are still being clarified, it is claimed that the TVS brand “is being allotted to each family group and company for their use in their lines of business on a perpetual royalty-free basis.”

If it works out, the TVS proposal could yet be a solution for many unresolved issues in the Indian family business world.

K.T. Jagannathan is a senior business journalist based out of Chennai.