Sucheta Dalal :Lodha: Insider who became an outsider
Sucheta Dalal

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Lodha: Insider who became an outsider  

Jul 19, 2004



 

The attention of an entire nation is rivetted on the usually genial and smiling Rajendra S.Lodha. After all, it is not everyday that an accountant, however reputable, is bequeathed a Rs 5,000 crore corporate empire in preference to family claims. And when the inheritance is a slice of one of India’s two best-known corporate names, it has all the makings of a real-life thriller that is indeed stranger than fiction would dare to be. Nobody can argue that Rajendra Lodha does not have stature of his own today.

In 2002, he became the first professional to be elected President of the Federation of Indian Chambers of Commerce and Industry Indian (FICCI), which mainly represents family-owned, Indian manufacturing companies. But although he is a gold medallist Chartered Accountant and graces scores of corporate boards and policy committees, Lodha continues to be identified primarily as a Birla family retainer. He even belongs to the same Maheshwari community as the Birlas.

And although it is the late Priyamvada Birla who left him an heir to the M.P.Birla empire, his firm Lodha & Company audits companies across all seven factions of the Birla empire. In fact, one could argue that there is nobody who knows the strengths and warts of the Birla empire more intimately than Rajendra Lodha and his sons. And that intimate insider knowledge gives him the power to single-handedly take on a united and determined clan, whose combined networth is estimated at a phenomenal Rs 40,000 crore in India alone.

The Birla family’s reaction shows a sense of panic and bewilderment at the development, which is natural for a group that has always depended on trusted chiefs whose loyalty was unquestioned. The normally reserved and publicity-shy clan has collectively questioned the validity of Priyamvada’s will and intend to contest it. As their press statement says, it is not about the money; each of them has more than enough of their own. The money must all go to charity, they say but not to— ironically — an ‘‘outsider’’.

They claim that it is not even about the 25 per cent stake that Lodha inherits in the Birla Group’s nerve centre and holding company Pilani Investments. (But nobody is really buying the Birla bravado when they say that they will not negotiate a buyout of the Pilani holding from Lodha).

The great distress at a trusted associate taking over the empire is logical. An observer says, ‘‘after all Rajendra Lodha and his sons were auditors, advisers, friends, philosophers, directors, trustees of the Birla trusts’’.  

Consider the facts. Although Lodha has inherited the M.P.Birla group, he was so close to the late Aditya Vikram Birla that his own son is named Aditya Vikram. Even his prestigious appointment to the Central Board of the State Bank of India was always attributed partly to the clout of the late A.V.Birla rather than fully a recognition of his own stature.

And that is why he audited companies across the Birla factions. In the last few years however, he has developed his own enviable standing in the Indian corporate world. He is now on the Boards of the National Securities Depository Ltd (NSDL), Tourism Finance Corporation and Oriental Insurance Company as well as on Sebi’s committees on takeover code. He is on the board of Reliance-controlled Indian Petrochemcials Corporation Ltd on L.N.Mittal’s core holding company, closely connected with the Manu Chhabria group companies and is chairman of Alfred Herbert (India) Ltd.

The biggest surprise in the unfolding drama is that a clan that has banded together to fulfil, what they say was M.P.Birla’s original will, leaving his assets to charity, did not even know the mind of Priyamvada until after her demise. While they may have a point in questioning the brevity of Mrs Birla’s will (believed to be just four or five paragraphs) and the fact that she left nothing to her own family or considered the incongruity of assets like Birla Park leaving the extended family, the picture is incomplete.  

Why didn’t the Birlas see any signal in the appointment of R.S. Lodha as co-chairman in Birla Corporation and later in Universal Cables (in July 2004)? Weren’t they close enough to the departed soul to offer their own help and expertise? Any impartial observer is bound to weigh the Birla claims today against the fact of Priyamvada Birla’s actions when alive, including the holidays she seems to have shared with the Lodhas even in the South Pole.  

While the Birla clan wants to ensure that M.P.Birla’s assets go to charity, there is no reason to suspect that Rajendra Lodha, who was close to the lady, will not fulfil the same mandate. After all, she trusted him enough to give him executive powers on the most Birla trusts and educational institution that her branch of the family controlled. The question is how far can the clan go in questioning Rajendra Lodha’s loyalty and dedication? Can they suddenly brand him a traitor and schemer after the entire clan depended on his skills for so many years? Had they any reasons to doubt his integrity before this?  

Clearly these are difficult questions and resolving them would involve the washing of extremely dirty linen in public. Although the Chhabria and Modi siblings have fought bitter family feuds in public, it would be anathema to the Birla clan as we have observed it so far. That is why, no matter what the public rhetoric, one suspects that there will be a settlement in the end. Sources who are in touch with developments say a few broad areas of compromise are already being considered. These are — that Lodha may part with the equity in Pilani Investments for a price; that sentimental assets such as Birla Park may go back to the group and Lodha may be asked not to use the Birla name for M.P.Birla companies that he will continue to control. And finally, that Lodha and his sons will most certainly move out of the audit and directorships of all Birla companies and promise to maintain confidentiality. This certainly seems a more plausible scenario.  

Email: [email protected]

http://www.indianexpress.com/full_story.php?content_id=51290

 

 


-- Sucheta Dalal



 



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