Succession Planning At Venu Srinivasan Group: A Quiet Transition

Late evening on March 21, three listed companies — TVS Motor Co., TVS Holdings Ltd. and Sundaram Clayton Ltd. — filed identical letters of communication with the stock exchanges on an arrangement between the members of the Venu Srinivasan family, once a part of the erstwhile TVS Group.

The memorandum of understanding is dated March 20, and its execution was completed on March 21.

Venu Srinivasan, his wife, Mallika Srinivasan, and their children - daughter Lakshmi Venu and son Sudarshan Venu — are signatories to the MoU. Significantly enough, they are part of the promoter/promoter group in these companies.

Reading between the lines, the stock exchange communication by these listed entities gives a clue or two to the quiet transition that is being initiated at the Venu Srinivasan group.

According to the MoU, "Mr. Sudarshan Venu has agreed that, inter alia, he and persons controlled by him shall not use certain trademarks (including, TVS) in relation to certain businesses, including design, manufacturing and supply of aluminium and magnesium die castings/machined castings for OEMs and the after-market, and he has also agreed to not compete for a defined period including in the business of agricultural machinery, including tractors, and self-propelled farm equipment."

Similarly, under the MoU, "Mrs. Mallika Srinivasan and Dr. Lakshmi Venu have agreed that, inter alia, they and persons controlled by them shall not use certain trademarks (including TVS) in relation to certain businesses, including two-wheeler and three-wheeler vehicles, financial services and real-estate business, and they have also agreed to, inter alia, not engage in certain businesses, including two-wheeler and three-wheeler vehicles, parts and/or accessories for any such vehicles, for a defined period."

Significantly enough, their identical letters of communication to the stock exchanges have also made it clear that their respective businesses would not in any way be adversely affected by the family agreement reached between their promoters.

The larger TVS group, comprising four families, underwent a formal legal separation a few years ago, and all the four families have gone their separate ways since then.

What does one make of the latest family arrangement at the Venu Srinivasan group? Long-time corporate watchers see in this move a kind of succession planning. There is, however, nothing explicit about the succession planning in the MoU. Nevertheless, the industrial corridor of the city of Chennai is abuzz with assorted interpretations of the move. Coming events cast their shadow before them. Is the MoU an indication of the shape of things to come at the Venu Srinivasan group?

What lends credence to such interpretations is the fact that the MoU does incorporate a kind of non-compete undertakings by Sudharshan Venu, Lakshmi Venu and Mallika Srinivasan.

What adds further support to this interpretation is the fact that the agreement under the MoU between them brings into its scope the tractors and farm equipment business that is not part of the traditional array of TVS business but a business that is part of the amalgamation group. Late A Sivasailam belonged to the promoter family of the amalgamation group. Mallika Srinivasan is her daughter.

The amalgamation group is a largely privately held one and the tractor and farm equipment business, managed by Mallika Srinivasan, forms a significant chunk in value terms of that group.

The latest family arrangement must be read in the context of the earlier reorganisation in the Venu Srinivasan group. The earlier restructuring, it may be recalled, split the two-wheeler and its cluster of finance and real-estate business and the aluminium and magnesium die casting and machine casting.

Sundaram Clayton Ltd., which was newly constituted in the demerger scheme, took over the aluminium and magnesium die casting and machine casting. TVS Holdings Ltd., which became a pure-play holding company, presently holds the two-wheeler and its adjunct business, finance and real estate.

Lakshmi Venu is the non-executive and non-independent director of TVS Motor Co. Sudarshan Venu is the managing director of the company. Lakshmi Venu is the managing director of Sundaram Clayton. Sudarshan Venu does not figure on the board of SCL. Sudarashan Venu is the managing director of TVS Holdings. Lakshmi Venu does not figure on the board of TVS Holdings.

A perusal of the BSE information reveals that a majority of the shares of Sundaram Clayton and TVS Holdings are held by a family trust. "This gives the flexibility to switch it any which way among the family members," Ranganathan, former director and partner of Ernst & Young, says.

Noticeably, the MoU in family arrangement also talks of a no-compete undertaking by Sudarshan Venu. He has agreed to "not compete for a defined period, including in the business of agricultural machinery, including tractors, and self-propelled farm equipment."

This naturally sets off intense discussion in the Chennai corporate world. "The inference that the tractor and farm equipment business may be inherited by Lakshmi Venu, through her mother Mallika Srinivasan, may not be devoid of logic,” says Ranganathan.

A major reorganisation of the parent company of TVS Motor in 2012 saw Venu Srinivasan and his brother, Gopal Srinivasan, go their ways amicably. The latest family arrangement at Venu Srinivasan group has drawn more than quite an interest across the canvass. Will this transition model be picked up by other groups in the erstwhile TVS family?

KT Jagannathan is a senior financial journalist based in Chennai. He has been in business journalism for over three decades, covering corporate developments and critical industry verticals. He is the co-founder of www.carnaticdarbar.com, a news website for Carnatic music, a niche art form.

Disclaimer: The views expressed here are those of the author and do not necessarily represent the views of NDTV Profit or its editorial team.