In this edition, we talk about the Godrej Group’s settlement and how it shows the way to business families. We also talk about the latest set of high-frequency economic indicators, the US Federal Reserve’s policy decision and iPhone maker Apple Inc.’s share buyback that sets new records.
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Two decades ago, in November 2004 to be exact, India Inc. was rocked by what remains to this day perhaps the biggest battle for family fortunes. That month, billionaire Mukesh Ambani admitted to having “ownership issues” with his younger brother Anil over the management of the Reliance empire that their father, the late Dhirubhai Ambani, had founded and left to their care without a will.
After several months of an acrimonious public fight, the brothers divided the empire with Mukesh getting the flagship energy business and Anil taking control of telecom, infrastructure, and financial services units. Since then, Mukesh Ambani has gone from strength to strength and even put three of his children in charge of three different companies under the group. Almost all of Anil Ambani’s businesses, meanwhile, have failed.
Why are we talking about the Ambani brothers? Well, because this week, another storied business family divided their conglomerate—and in a manner that’s dramatically opposite of the Ambani saga.
The Mumbai-based Godrej family this week decided to restructure its shareholding to essentially divide the various businesses under brothers Adi Godrej and Nadir Godrej on one side and their cousin Jamshyd Godrej on the other.
The conglomerate will be split into two entities, Godrej Enterprises Group (GEG) and Godrej Industries Group (GIG). The two groups will continue to use the Godrej brand.
GEG runs businesses across aerospace, aviation, defence and liquid engines, among others. It will be headed by 75-year-old Jamshyd Godrej as chairperson and managing director and his niece Nyrika Holkar as executive director. Jamshyd Godrej was earlier managing director and chairman of Godrej & Boyce, a privately-held company founded in 1897.
GIG will be led by chairperson Nadir Godrej, 73, but will be controlled by Adi Godrej and their immediate family. This group will house listed companies such as Godrej Industries, Godrej Consumer Products, Godrej Properties, Godrej Agrovet and Astec Lifesciences.
Adi Godrej, who is now 82, stepped down as chairman of Godrej Industries in August 2021, handing over the reign to his younger brother. Adi Godrej’s son Pirojsha Godrej will take over from Nadir Godrej as GIG chairperson in August 2026.
The Ambani settlement two decades ago was a classic case of how not to divide generational wealth and family business. The Godrej family division will be a classic case of how to do it right.
Consumption Climbing
The Godrej family settlement aside, corporate India was this week mostly busy with quarterly earnings. While many companies missed analysts’ estimates, a number of high-frequency indicators this week showed that the Indian economy—Asia’s third-largest—remains in sound health.
Data released this week showed that the government collected a record Rs 2.10 trillion, or almost $25.15 billion, as gross goods and services tax (GST) in April. This is an increase of 12.4% from Rs 1.87 trillion collected in April last year. After refunds, the net GST mop-up jumped 15.5% year-on-year to Rs 1.92 trillion.
To be sure, GST collection in April is usually higher as taxpayers clear their dues when the financial year ends in March. Still, the surge in GST revenue over the past few months is a positive indicator of economic activity and rising compliance.
Another set of data showed that growth in India’s factory output slowed a tad in April but remained strong thanks to robust demand that pushed firms to increase raw material purchases.
The HSBC India Manufacturing Purchasing Managers’ Index, compiled by S&P Global, fell to 58.8 in April from a 16-year high of 59.1 in March. Despite the fall, the index was above the 50-mark that separates expansion from contraction for the 34th month in a row.
The S&P survey also showed that production and new orders fell from March but remained strong. International demand, too, stayed in good shape. Business confidence improved and factories hired more workers, the survey showed.
Staying with the manufacturing sector, India’s automobile sector recorded another strong month in April. Maruti Suzuki, Tata Motors, Hyundai, Toyota, TVS Motor and Eicher reported higher sales of cars and two-wheelers in April from a year earlier, indicating that private consumption remains sturdy.
Tata Motors reported an 11.4% increase in sales to 77,521 units while Maruti Suzuki said sales rose 4.7% to 168,089. Hyundai Motor India posted a 9.5% jump in sales to 63,701 units. TVS Motor said sales surged 25.3% to 383,615 units. Toyota’s sales soared 32% to 20,494 units while Eicher recorded an 11.9% jump in sales to 81,870 units.
The strong set of numbers comes after Indian automakers recorded record sales volumes in 2023-24 and indicates that the momentum is likely to continue in the current financial year.
Standing Still
While the Indian economy remains on a strong wicket, the biggest macroeconomy-related news this week came from the US, where the Federal Reserve decided to keep interest rates unchanged for its sixth policy meeting.
The central bank’s Federal Open Market Committee said it doesn’t intend to cut rates—which are at a two-decade high—until it has “greater confidence” that inflation is firmly moving towards its 2% target. “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks,” the Fed said in a statement.
On the plus side, Fed Chair Jerome Powell also ruled out the possibility of a rate hike, pushing US stock markets higher. “I think it’s unlikely that the next policy rate move will be a hike,” Powell said.
So, what does it mean for India? For one, the Fed move will be a factor in the Reserve Bank of India’s decision when it meets next. The RBI kept interest rates unchanged last month and will review its monetary policy starting June 5, a day after results for general elections are declared. But with the US central bank keeping rates on hold, it is unlikely the RBI will choose a different path, especially with political considerations out of the way by then.
Apple of Everyone’s Eye
For those interested in US tech news, Apple Inc. this week created a new record. The iPhone maker announced a share buyback of a staggering $110 billion—the biggest in US history.
In doing so, the Tim Cook-led company beat its own record. In fact, Apple accounts for the six largest share buybacks in US corporate history. The company announced a $100-billion buyback in 2018, followed by $75 billion in 2019 and $100 billion each in 2021, 2022 and 2023. Google parent Alphabet Inc, Microsoft and Facebook are among the other US tech companies that often announce large share buybacks.
Apple’s buyback announcement came after it exceeded estimates for quarterly results and lifted its quarterly dividend for the 12th consecutive year. The buyback will support its shares, which have lagged behind other large US tech companies such as chipmaker Nvidia this year.
Apple also achieved record revenue in India during the January-March quarter, according to CEO Tim Cook. “We did grow strong by double-digit, and so we were very, very pleased with that. It was a new March quarter revenue record for us. I see it [India] as an incredibly exciting market and it’s a major focus for us,” he said during the company’s earnings call.
Market Wrap
Indian stock markets had a holiday-shortened week due to the Maharashtra Day holiday on Wednesday. Benchmark indices Sensex and Nifty 50 ended mostly flat this week, with losses on Friday erasing gains made earlier. Stock markets fell on Friday likely due to the US Fed’s commentary on inflation and pre-election concerns in India.
The biggest Nifty losers this week were HCL Tech, Apollo Hospitals, Kotak Mahindra Bank and Bharti Airtel. HDFC Life Insurance, Adani Enterprises, Larsen & Toubro fell, too, as did other tech stocks such as Wipro, LTIMindtree, Tech Mahindra and Infosys. FMCG companies Nestle India, ITC, Britannia, and Tata Consumer also ended in the red.
Mahindra & Mahindra was the biggest gainer this week, buoyed by the launch of its XUV 3XO sub-compact SUV that analysts feel will help it gain market share from Tata Motors’ Nexon and Maruti Suzuki’s Brezza. State-run Power Grid, Coal India, State Bank of India, Bharat Petroleum, NTPC, and ONGC also ended higher.
Bajaj Finance edged up after the Reserve Bank of India lifted its two-year-old ban on some lending products offered by the company. Grasim, ICICI Bank, and Asian Paints were among the other gainers.
Earnings snapshot
- Adani Enterprises Q4 consolidated net profit falls 38% to Rs 451 crore
- Adani Ports Q4 consolidated net profit jumps 76% to Rs 2,040 crore
- Adani Wilmar Q4 consolidated net profit soars 67.5% to Rs 157 crore
- Adani Group-owned Ambjua Cements Q4 profit rises to Rs 532 crore from Rs 502 crore, misses estimates
- Coal India Q4 consolidated net profit rises 26.3% to Rs 8,682 crore
- Indian Oil Corp reports 52% fall in Q4 profit to Rs 4,838 crore
- Tyre makers MRF, CEAT post surprise drop in quarterly profits as rubber prices jump
- Dabur India tops estimates as Q4 profit rises 16.2% to Rs 350 crore
- Godrej Properties Q4 revenue falls 13.4% to Rs 1,426 crore, net profit rises 14% to Rs 471 crore
Other Headlines
- SEBI issues show-cause notices to seven Adani Group companies
- Jindal Stainless to invest Rs 5,400 crore for capacity expansion, acquisitions
- Kotak Mahindra Bank joint managing director KVS Manian resigns
- BSE to increase transaction charges on two options contracts based on Sensex and Bankex
- India’s March infrastructure output rises 5.2% year on year versus 7.1% in February
- SK Finance files draft prospectus for Rs 2,200-crore IPO
- Lenders to Go First explore options including liquidation for the bankrupt airline
- RBI lifts ban on some lending products offered by Bajaj Finance
- GIFT City regulator allows foreign funds to issue participatory notes to investors
- Food safety regulator widens probe into spices after contamination fears
That’s all for this week. Until next week, happy investing!
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