Greed lies at the heart of the very public battle between the once close-knit brothers.
On a chilly winter night in the second week of January, the 3,000-acre Sanghinagar looked calm and serene. An eerie silence draped the sprawling industrial and plantation estate, located at Hayatnagar, about 40 km from Hyderabad.
Far from peaceful, however, are Ravi and Girish Kumar Sanghi, the younger of the four Sanghi brothers, who built the Sanghi group of industries. They are embroiled in a bitter and protracted battle for control of group companies with elder brothers Anand Prakash and Sudhir Sanghi.
The public spat has taken many by surprise. The brothers are signatories to an agreement that shares the group companies and their properties equitably among them. The understanding also states that any dispute should be settled internally, not legally or publicly.
Nevertheless, it was a very public washing of Sanghi family linen over property last month, with rival groups reportedly clashing in the Sanghinagar premises. And the saga, in the words of Ravi Sanghi, has become “murkier”.
Sudhir Sanghi filed a complaint in the Hayatnagar Police Station on December 25, 2010, alleging that “henchmen and goondas” allegedly hired by his two younger siblings had assaulted him and his family members. The younger brothers have denied the charges.
Until the rift became public, the Sanghi brothers were widely considered a closely-knit family, who together built an industrial conglomerate from scratch. As the group’s operations expanded, they prided themselves as being a ‘new breed of corporate tigers’.
In 1979, the brothers set up Sanghi Textiles at an investment of Rs 1 crore. The group now comprises 20 enterprises valued collectively at over Rs 2,000 crore. Of these, only two are listed. Cross-holdings ensure each brother has interests in every group company. Thus, the dispute between the brothers is over management, shareholding, assets and liabilities of the entire group.
“In the last 30 years, the division of work among us was very clear. Our elder brothers have been responsible for corporate affairs, while we two have been entrusted with managing industrial operations. Accordingly, we live in Sanghinagar, where the industries are located, and the elder ones live in the city,” says Ravi Sanghi.
So, what happened? According to Ravi and Girish Sanghi, problems first surfaced in 2006-07 with real estate prices in Hyderabad soaring. “Anand and Sudhir wanted control over the land and the cement plant (in Gujarat). They resorted to forgery and changed the shareholding pattern in their favour to gain control over all the group companies. After coming to know of this, we protested,” says Ravi Sanghi.
He says the elder brothers refused to implement the understanding. “Following this, we approached the Company Law Board (CLB), where we have filed 13 petitions since 2008,” adds Ravi Sanghi.
In October 2008, the CLB held compromise talks with the four brothers. After the talks, the CLB passed an order stating the brothers had reached an agreement on Anand and Sudhir Sanghi exiting on receipt of “proper consideration for their 25 per cent share in all companies.”
However, the elder brothers filed a petition two days later with the CLB, stating this compromise was not valid. “On October 23, 2008, they wanted to enter into an MoU with one of our competitors to sell Sanghi Cement,” says Ravi Sanghi. The younger siblings were furious.
The elder brothers’ contended that the consideration offered for their share in group companies was inadequate. Speaking on their behalf, sons Amit and Sidharth Sanghi say Ravi Sanghi came out with a property division plan that was unacceptable. According to the plan, the estimated value of Ravi Sanghi’s share was about Rs 1,200 crore, Girish’s share was Rs 600 crore and Anand and Sudhir’s share was worth only Rs 100 crore each, they say.
Amit Sanghi said Ravi Sanghi wanted Sanghipuram (in Kutch, where the cement plant is located) and one-fourth of Sanghinagar. This included Sanghi Cements, Sanghi Polymers land and Ravi Sanghi’s house. Similarly, Girish wanted land in Sanghinagar, Sanghi Textiles and Vaarta daily, which would be worth Rs 600 crore.
“We want the properties to be valued by independent assessors and given 25 per cent rightful share,” says Sidharth Sanghi. Girish Sanghi does not have a problem with an independent valuer. “Let them come out with a formula. What do they want?” he asks.
Ravi Sanghi is managing director of Sanghi Industries, which includes Sanghi Cement. This is currently the most profitable company in the group. In 2009-10, it posted a turnover of Rs 674.51 crore and a net profit of Rs 89 crore. It is now planning capacity expansion involving an investment of about Rs 1,000 crore. Girish Sanghi, a former Rajya Sabha member, looks after Sanghi Textiles and the group's Vaarta Telugu and Hindi dailies. Both units are stated to be making reasonable profits.
Of the other faction, Sudhir Sanghi is managing director of Sanghi Polyesters, which is incurring losses and its operations have virtually ground to a halt. Anand Sanghi looks after Sanghi Spinners, which is also said to be incurring losses.
“Sanghi Polyesters and Sanghi Spinners are the major loss-making units in our group. All other companies are earning profits,” Girish Sanghi says, adding, “If we talk of performance and contribution to the group, their (elder brothers’) contribution is negative.”
In one of their petitions filed before the CLB, Ravi and Girish Sanghi accused their elder brothers of “manipulation of records and disposing of shares” belonging to them. In turn, in a petition filed in court, Sudhir Sanghi stated that Ravi Sanghi “has been threatening the management, especially the managing director, by usurping the powers of the managing director and causing day-to-day unruly interference in all aspects of the management.”
Similar petitions have been filed in respect of all the unlisted group companies. The Sanghi group has floated different companies on similar lines to retain the status of a small-scale industry. All these companies are stated to be ‘holding immovable property’, apart from the shares of other companies.
“The crux of the problem is greed and non-performance. They are unable to perform and unable to digest my growth and popularity,” claims Girish Sanghi.
Ravi Sanghi, however, is optimistic that the dispute will be settled in the near future. “It is just a matter of time. We have already settled with Anand. We have to settle with Sudhir. Possibly in another 15 days, some sort of a settlement should take place,” he says.