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How Big is the Hinduja Group? Why are the Hinduja Brothers Fighting Over the Company's Fortunes?

Editor, TRANSFIN.
Dec 7, 2021 5:37 AM 5 min read
Editorial

The Hinduja Group is set to increase its ownership of IndusInd International Holding Ltd., the promoter entity of IndusInd Bank, India's fifth-largest private lender.

The Group is reportedly readying a warchest of over $1bn to raise their stake - expected to happen in tranches - in the entity to 26%, on the heels of the RBI's updated guidelines that allow promoters to own up to 26% of banks.

The development comes at a time when IndusInd Bank's financials are improving - its CAR improved to 17.37% while net profit jumped 73% YoY in Q2FY22 even as gross NPAs climbed down sequentially from 2.88% to 2.21%.

As for the conglomerate, the development comes amid an escalating family feud that threatens to unravel the 107-year-old Group.

What Does the Hinduja Group Do?

One of the most well-known family-run businesses in India, the Hinduja Group traces its origins to Shikarpur, town in Sindh, where Parmanand Deepchand Hinduja founded the company in 1914. The same year, PD Hinduja travelled to Mumbai, and five years later the Group's first international operation was set up in Tehran. Iran would remain the HQ for the Group until 1979, when the Islamic Revolution enveloped the country. Since then, the Hinduja empire has been run from Europe - London, to be precise.

How Big is the Hinduja Group? Why are the Hinduja Brothers Fighting Over the Company's Fortunes?In its initial days, the company focused on merchant banking and trade. But since 1971, which was when it was taken over by PD's sons - the Hinduja brothers - following his demise, it has rapidly diversified.

FYI: The four brothers are Srichand P. Hinduja (commonly referred to as "SP"), Gopichand P. Hinduja, Prakash P. Hinduja and Ashok P. Hinduja.

 

How Big is the Hinduja Group?

Much of the conglomerate's early successes came from being able to distribute Bollywood films abroad. Today, it oversees dozens of companies dabbling in banking, finance, infrastructure, real estate, power, specialty chemicals, healthcare, energy, IT, transport, media, renewables, hospitality etc.

In 1978, Hinduja Bank was founded in Geneva. The Group soon acquired Gulf Oil International, which owned the rights to Gulf Oil's brand outside the US, Portugal and Spain. In 1987, Ashok Leyland was taken over by a JV between the Hinduja Group and Iveco, part of the Fiat Group. Two decades later, the Hindujas bought out Inveco's stake as well. In 1994, IndusInd Bank began operations and Hinduja Global Solutions was incorporated in 2000.

Six Group companies are listed in India - Ashok Leyland, IndusInd Bank, Gulf Oil Corp., Hinduja Foundries, Hinduja Global Solutions and Hinduja Ventures with a combined market cap of approximately ₹1,14,378cr ($15,28bn). And with a collective net worth of $15bn, the Hinduja Brothers run a conglomerate that employs over 150,000 people worldwide.

Also, while the four brothers reside across the globe - SP and Gopichand reside in London while Prakash and Ashok live in Monaco and Mumbai respectively - between them, they own some valuable properties. This includes the Old War Office building in Whitehall (the UK equivalent of Rajpath or Lutyens) and the Carlton House Terrace, a sprawling mansion next to Buckingham Palace.

 

Cracks in the Pavement: The Hinduja Family Dispute

For decades, the Hinduja Group seemed to be the model family-run business enterprise, with the three younger brothers rallying around SP under the motto “everything belongs to everyone and nothing belongs to anyone”.

Over time, though, cracks began appearing in the House of Hinduja. And as of today, the family feud has led to a pile of court cases in London and Switzerland, and threatens to dismantle the century-old enterprise.



A 2014 letter signed by the four brothers reportedly stated that assets held by one brother belonged to all four. In the coming years, SP and his daughter - Vinoo - went to court seeking "a declaration that neither document has legal effect, whether as a will, power of attorney, declaration of trust or other binding document, or alternatively that the documents are revocable and have been revoked”. At the crux of the boiling conflict was Hinduja Bank, of which SP and Vinoo claimed sole ownership.

Last year, a UK court ruled in SP’s favour, saying the three younger brothers had used the 2014 letter to take control of the Geneva-based bank.

Now, Hinduja Bank - recently renamed (provocatively, one might say) by Vinoo’s son Karam to “SP Hinduja Banque Privee” - is a small one, with only $2.6bn in client assets. But its prospects may determine the future trajectory of the conglomerate, which is passing on to the third generation of the Hinduja family.

What complicates matters is 85-year-old SP’s dementia and contradictory statements from both sides about the patriarch’s wishes for the Group’s assets. SP reportedly insisted in 2015 that the 2014 letter “doesn’t reflect his wishes and that the family’s assets should be separated”. But the younger brothers - and their children - say SP and his daughter’s actions “go against our founder’s and family’s values” - in particular the principle that “everything belongs to everyone and nothing belongs to anyone”.

Opaque holding structures and the brothers’ geographically complicated domiciles don’t help either. (There’s also a London lawsuit from 2018 over $1bn in assets held at the Swiss bank by a company tied to Ashok Leyland.)

With disagreements dissolving into diatribes, the family’s decades-long renown for unity may be at stake. The younger brothers allege a power grab by SP’s daughters, who, they claim, are using their father’s weakened state to go against his long-held wishes. Vinoo and Karam have admonished such allegations and accuse the rest of the family of misogyny.

 

That Said…

The Hinduja Group is no stranger to high-profile controversies. In the 1980s, they were accused of taking bribes from Swedish gunmaker Bofors for a defence contract for procuring heavy artillery for India. However, these charges were quashed by the Delhi High Court in 2015 and a 2017 appeal by the CBI was dismissed by the Supreme Court in 2018.

Two decades after the Bofors scandal, the Group found itself entangled in Britain’s “cash-for-passports” scandal, which involved accusations that high-level British politicians intervened to expedite SP’s citizenship application process. In 2005, 100 army vehicles were sold by Ashok Leyland to the Sudanese Defence Ministry, a transaction that was alleged to have violated UK arms export legislation and the then-existing international sanctions on Sudan.

And less than three months ago, Switzerland's highest court ruled that Prakash Hinduja could owe c. $137m in back taxes amid allegations that he tried to pass himself off as a resident of Monaco and falsified the value of his fortune. The court also upheld a decision to freeze his assets.

FIN.
 

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