The bitter battle for inheritance underway at Godfrey Phillips India, the country’s second-largest cigarette maker by market cap, is set for a climax at the annual general meeting of shareholders on September 6.
And on the eve of the crucial meeting, group matriarch and Chairperson and Managing Director (CMD) Bina Modi received a shot in the arm with Delhi High Court allowing her to cast a vote on the behalf of the K.K. Modi family trust at the AGM. The trust has nearly 47.5 per cent stake in the company, with partner, global giant Philip Morris International holding just over 25 per cent stake. However, the right to appoint the MD vests solely with the Modi promoter block.
The High Court also dismissed pleas by Samir and Ruchir Modi to stop Bina from voting at the AGM.
The court order has completely tipped the balance in favour of the Bina Modi bloc, sealing the fate of her 55-year-old estranged son Samir Modi.
Samir Modi, Executive Director of the K.K. Modi Group’s flagship company is proposed to be ousted by the opposing camp led by his mother Bina Modi. A resolution seeking his removal for his overall conduct during board meetings and outside, along with another one to renew the term of Bina as the Chairperson and Managing Director (CMD) is being voted on by shareholders.
Samir was appointed director for five years in Aug 2021. However, SEBI rules require a renewal of the directorship every three years and the AGM could be the swansong of his career at his father’s flagship tobacco company.
“I was a great guy under my father’s tutelage. I was a rising star,” said Samir Modi in an exclusive interview to Business Today TV. “Suddenly because I am opposing and asking questions, I am being ousted,” he added. “All I wanted was a reason for why GPI is shutting down 24Seven, why I was assaulted, why my finger was broken and why the market share of GPI is falling”, he said when asked about why he was being voted out by the tobacco company’s board.
Godfrey Phillips is in the process of selling its retail business under the 24Seven brand. The company has signed a term sheet for sale with retail start-up player New Shop, and is looking to close the deal by the end of September. Earlier this July, the company had received permission from the Delhi High Court to divest the retail business. The board’s decision to sell the retail business was opposed by Samir.
“The retail business was set up under guidance of my father, the late K.K. Modi so that we could have an alternate stream of income just like ITC has done for their businesses. We have spent considerable amount of money in setting up the business and growing it.” He added that the 24Seven employed 1,650 people and was better than its rival 7-Eleven. “We are doing sales of Rs 40-50 lakh per store while 7-Eleven is doing just Rs 10-14 lakh. We would have more or less broken soon”, Samir added.
Responding to this comment, sources close to Bina Modi pointed to the accumulated losses of nearly Rs 700 crore in the retail business. “Moving out of the retail business was a well-considered decision of the Board to shed non-core businesses. We had earlier moved out of other businesses like tea and this has helped us remain focussed on profitability,” they said, adding that Bina Modi had taken bold decisions to keep the company competitive.
“How can I be held be responsible? I am not the MD of GPI. If they felt the need to shut it down, they should have done it five years ago. The company has got accumulated reserves of Rs 3,000 crore that have not been paid to shareholders”, Modi said.
The family feud over the inheritance of GPI has had little impact on its stock with the share more than tripling in value in the past one year. In the past one month alone, the share is up 60 per cent giving the Mumbai-headquartered company a value of more than Rs 33,000 crore.
The board is split along two lines – with most directors backing Bina Modi and her daughter Charu Bhatia. The other side comprises Samir Modi who, interestingly, has the support of his brother Lalit Modi (of IPL fame). Samir is also supported by several proxy firms headed by Glass Lewis which has objected to the continuation of Bina Modi at the helm of affairs of GPI.
Samir Modi has meanwhile suggested dividing the K.K. Modi group which comprises Godfrey Phillips India, Indofil, Modicare and Colorbar between the family members.
Questions are also being raised about the inordinately high remuneration for both Bina and Samir Modi. Bina Modi received Rs 34.53 crore from GPI in 2023-24, 108 per cent higher than Rs 16.62 crore in 2022-23. Samir Modi received a whopping Rs 51.42 crore in FY24, 40 per cent more than his compensation a year ago.
What’s also being asked is what changed between the board meetings on May 30 and Aug 7. The May meeting did not mention anything adverse about Samir Modi. The August board meeting decided to drop him.
Sources close to Bina Modi say that she remains focussed on the growing the company that she took over in 2019, after the passing of her husband, KK Modi that year in November. “She has led the company well and increased market share. In the last fiscal, the company recorded an all-time profit before tax of over Rs 1000 crore”, they added.
