How an ugly marital feud could change Indian business

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A COMMON FEATURE of family business is friction, to put it politely, between relatives. When the business is a multibillion-dollar concern and the feuds carry a whiff of scandal—think the Redstones at Paramount Global or the Bettencourts at L’Oréal—they spawn bestsellers or Netflix documentaries. India, where family firms generate an estimated 79% of GDP, has no shortage of similar drama. The latest could produce something rather less frivolous—better corporate governance.

The dispute in question involves Gautam Singhania, the classic-car-loving billionaire chairman of Raymond, a conglomerate spanning everything from men’s suits to car parts, and his wife, Nawaz Modi, a yoga teacher with ties to Bollywood and author of “Pause, Rewind: Natural Anti-Ageing Techniques”. The long-simmering spat erupted into the open after Ms Modi was locked out of a company Diwali party by Mr Singhania
in November and posted about it on YouTube. This and other related videos, including one in which Ms Modi alleges her husband physically abused her, have together notched up over 1m views. In some Ms Modi gets the support of her father-in-law, Vijaypat Singhania, who created Raymond before handing control to his son in 2015 and subsequently being kicked out of the company and the family home.

Although Ms Modi has not filed for divorce, she is demanding 75% of the family’s 49% stake in Raymond for herself and the couple’s two daughters. In a statement, Gautam Singhania said, “I have chosen not to comment on the reports in media about matters pertaining to my personal life as maintaining the dignity of my family is paramount to me.” He has assured employees that business would go on as usual. Investors are unconvinced that it will. Since September Raymond’s market value has declined from $1.7bn to $1.4bn, even as the Indian market as a whole has soared.

So far, so scandalously familiar. Where the Raymond saga differs from similar dust-ups, in India and elsewhere, is in its potential impact on business more broadly. In an unusual move, Institutional Investor Advisory Services (IIAS), an Indian proxy-advisory firm, has waded in. In the name of protecting minority shareholders, it has urged independent directors to call on Mr Singhania to step aside while the board looks into the matter.

This unusual request has jolted a cosy setup. Independent directorships in Indian family-controlled firms are often seen as sinecures handed out in return for loyalty. The IIAS’s demand has thus struck a nerve. Serious financial newspapers have weighed in. The Financial Express lamented how independent board members in India Inc too often ignore “red-flag governance lapses”. Raymond’s independent directors say that “such matrimonial disputes…lie beyond [their] remit”. But they have nevertheless retained an independent legal counsel to advise them. By Indian standards, that is a bold move.

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