Climax Near For Rs 11,000 Cr KK Modi Family Dispute
Drama surrounding the Rs 11,000 crore (approximately USD 1.32 billion) family dispute in the KK Modi Group, one of India's oldest business families, is likely nearing a climax. After many adjournments in the past few years, the Supreme Court (SC) has set a tentative date for the final hearing in the case involving former IPL (Indian Premier League) commissioner Lalit Modi versus his mother Bina Modi on 23 January.
While the SC judgement in the case could be a landmark and set a precedent for future arbitration cases, it will spurr a battle for the control of India's oldest cigarette maker Gorgrey Philips, sources said.
KK Modi Family Trust is the promoter of Godfrey Phillips, which owns one the world's largest selling cigarette brand Marlboro. Family patriarch KK Modi passed away in 2019 leaving behind a will for the division of the assets of the trust to be equally divided among his wife Bina Modi, son Lalit Modi, Samir Modi, daughter Charu Modi and grandchildren. Majority of the trust assets comprise stake in Godfrey Phillips.
Lalit Modi is ensconced in London and can't travel to India as his passport was cancelled for violations of the Foreign Exchange Management Act when he was the IPL chief. Yet, the climax of a high stakes battle between him and his mother is likely to stretch for several months to come even after the SC order, as the division of family assets could likely require a sale of Godfrey Philips, unless the family works out alternatives to generate the cash for distribution and division of assets.
In 2020, Lalit Modi had filed for arbitration in Singapore for the disposal of the assets in a year and division of money and also moved an application for the grant of certain emergency measures. Bina and Charu Modi moved Delhi High Court seeking injunction, which was granted by the court that restrained Lalit Modi's Singapore arbitration proceedings. The matter reached the SC, which had appointed former judges as arbitrators and asked the family to come up with a solution.
Settlement plan: Godfrey Phillips likely to be on the block?
Since KK Modi Trust's stake is locked in Godfrey Phillips, its sale can generate cash to be distributed among the family members, experts say. But insiders say that even though Lalit Modi wants to sell or pass the control of the company to UK’s largest cigarette maker Philip Morris, which already owns a 25 per cent stake in Godfrey Phillips, Bina Modi wants to keep the control of the company with her.
Lalit Modi, who is currently ensconced in London, will receive Rs 917 crore initially as part of the settlement, the documents show. His son Ruchir Modi, who is at the helm at Godfrey Phillips, and daughter Aliya Modi, too, will receive Rs 917 crore each as part of the settlement.
Samir Modi, the younger brother of Lalit Modi, his wife Shivani Modi and two daughters — Jayati and Vedika Modi — will receive Rs 687.5 crore each. Lalit Modi’s sister Charu Bharti, along with her two family members, will receive Rs 917 crore each.
Bina Modi will get Rs 2,750 crore. After her demise, the amount will be distributed — Rs 275 crore each — to the 10 family members, the settlement documents say.
It is likely Godfrey Phillips will be put on the block for the settlement and division of the assets. Reportedly, the family trust had earlier approached global investment bankers, including Goldman Sachs, Morgan Stanley, JP Morgan and Credit Suisse, for the mandate to handle their stake sale.
KK Modi Investments and Financials owns a 29.23 per cent stake in Godfrey Family Trust and the recent settlement terms say the entire stake sale money will go to the KK Modi Family Trust, which will further distribute it. Another 12.6 per cent stake in Godfrey Phillips is held by Indofil Industries, 1.01 per cent by Super Investments, 0.15 per cent by UK Modi Branch (Longwell Invest), 0.19 per cent by BKM Branch, 0.15 per cent by Swasth Invest and 0.15 per cent by SK Modi Branch. All these are KK Modi Family held entities. The UK’s Philip Morris Global Brands owns a 25 per cent stake.
How Bina Modi will gain more control over Godfrey Phillips
Bina Modi is currently the executive director and chairperson of Godfrey Philips and controls the company board. On 7 December, Godfrey Phillips sought shareholder approval for the purchase of a 5 percent stake from the markets by Godfrey Phillips ESPS Trust. Simply put, the trust will acquire 5 per cent stake in the company as part of the employee stock option scheme. Effectively, this will ensure tightening of control over Godfrey Phillips by Bina Modi by the virtue of the additional 5 percent stake, since she also controls other entities that own a large stake in Godfrey Phillips.
