Murugappa Group 3-way split talks are back on track

Mumbai: Discussions among the promoters of Murugappa Group to finalise a new family settlement have regained momentum, signalling intent from the three different factions of the storied Chennai-based group to resolve disagreements over business valuations and facilitate a three-way split, said people in the know.

Law firm Cyril Amarchand Mangaldas and Transaction Square, a tax, regulatory, and business advisory firm, have been working with the family to come up with a separation structure that is both legally acceptable and tax-friendly to help dismantle its intricate promoter shareholdings and cross holdings among family factions and ensure clarity in governance, independence in management, and transparency in capital allocation.

The evolving consensus includes granting a right of first refusal on share transfers and ensuring that businesses with higher valuations -such as CG Power, Tube Investments of India (TII), Cholamandalam, and Shanti Gears-contribute proportionately to achieve an equitable settlement. Given the number of listed entities involved, finalisation of terms is still some time away.

The group comprises 11 listed companies including Carborundum Universal, Cholamandalam Investment and Finance Company, CG Power, Coromandel International, EID Parry (India), and TII.

But the family members who had so far taken a hard stand are “now keen to move ahead toward a resolution”, said a veteran family-business observer on the condition of anonymity, as the talks are still in the family domain.

Busy Deal Calendar
Murugappa Group has seen robust M&A activity and new investment announcements in recent months. There are several unlisted companies and joint ventures as well.It is also likely that the Murugappa family may show openness to evolving its traditionally patriarchal approach as the new generation steps in.

In its August 23 edition, ET was the first to report the much-celebrated turnaround of CG Power within four years of its takeover by group company TII. This led to a 70-fold jump in the share price of CG Power after the TII buyout at ₹8.56 apiece.

This asset had become a bone of contention among different family factions that make up the promoter group. What perhaps has inadvertently helped is the slide in share prices of several group companies that had surged in the past 12-24 months. For example, TII shares are down 20% year to date, while CG Power is down 18% in that same period.

Until recently, the value appreciation of a handful of group companies compared to others was at the heart of the dispute among at least two of the three factions of the extended family.

The argument has been over how three equal groups can be carved out of the current corporate structure–collectively owned by seven branches of the Murugappa family through family holding company Ambadi Investment that owns shares of various companies–without revising the terms of an older family agreement.

“The family is waiting for the two advisors to come up with a blueprint within the agreed formula,” said a family associate. “Since that has been agreed upon, it should be relatively quicker now that all sides seem to be more flexible in their stand.”

The group spokesperson did not comment on the development.

Legal Issues
The current settlement push follows a significant milestone achieved in August 2023, when the family announced a resolution with Valli Arunachalam, daughter of the late MV Murugappan. This marked the end of a prolonged legal battle and signalled a broader commitment to internal harmony.

Arun Alagappan, son of former Chairman M A Alagappan, is likely to continue leading Coromandel International. Vellayan Subbiah, son of former Chairman M V Subbiah, is expected to retain control of Cholamandalam Investment and Finance, Cholamandalam MS General Insurance, and Cholamandalam Financial Holdings.

Along with Vellayan Subbiah, Arun Murugappan (MAM Arunachalam) is tipped to oversee TII, TI Cycles, Shanthi Gears, CG Power, TI Mobility, and the group’s semiconductor venture.