The Hindu Business Line : Birla family holds meeting; Lodha stays away from office

According to one view, a difficult problem in the transfer of assets, if and when the transfer has to be made, will be their segregation in cases where crossholdings are involved in the companies concerned.

Kolkata/New Delhi , July 14

IT is business as usual for Birla Corporation, the flagship of the M.P. Birla Group of companies.

A senior official of the company told Business Line here today that though Mr R.S. Lodha, the co-chairman of the company, did not attend office today "we have been receiving necessary instructions from him as usual".

It is learnt from reliable sources that Mr Lodha has not set foot inside Birla Buildings because he would prefer to avoid meeting in person the top brass of the Birla clan at this juncture.

Birla Buildings in Kolkata houses the registered offices of a major chunk of the outfits belonging to several Birla groups.

In fact, today another round of meetings was held by the heads of the various Birla wings to discuss strategy about countering the validity of the will of the late Priyamvada Birla under which all the assets of the M.P. Birla group of companies have been given to Mr Lodha.

The meetings were attended by, among others, Mr B.K. Birla, Mr K.K. Birla, Mr G.P. Birla and Mr S.K. Birla.

Evidently, the succession process was set in motion a few years ago when Mr Lodha, an outsider vis-à-vis the Birla family, was made joint chairperson of the M.P. Birla group companies - a first for any Birla outfit, as industry observers point out.

In fact, it is felt that the key to the whole issue lies in the segregation of the crossholdings of various Birla factions in Pilani Investments. A few years ago the M.P. Birla group's holding in the company was sought to be surrendered to possible takers within the family.

However, the move got stalled because of the absence of consensus on the pricing of the holding.

The M.P. Birla group is said to have an annual turnover of approximately Rs 2,000 crore. Some of the constituents of the group are Birla Corp, Birla Ericsson, Vindya Telelinks and Universal Cables.

Mr Lodha's own firm, among the best-known names in the accounting world, is expected to take a hit in the wake of the confrontation. This is because Lodha & Co serves as auditor to a number of major Birla entities among which are Indo-Gulf Corporation, Grasim, Birla Global Finance, Birla VXL, Mysore Cements and Mangalam Cement.

Birla family sources have been quoted as saying that Lodha & Co would be replaced as auditors of Birla firms. However, senior officials of the Birla group who spoke to Business Line today said that this would be a difficult step to take because of the long association of the auditors with the group.

Even as the Birla family insiders question the validity of Priyamvada Birla's will, which forms the key to the succession battle between the Birla family and Lodha, informed sources said the will had been drafted as early as 1999 in which Mr Lodha was given management control and supervision of the MP Birla empire.

Also, Priyamvada Birla issued "other instructions" in the subsequent years conferring more powers to Mr Lodha.

In fact, they point out that over the years, Mr Lodha became Ms Birla's "trusted lieutenant as he stood by her and had helped her for a long time." They argue that Mr Lodha was not made managing director of the companies as an employee is, but co-chairman with Ms Birla herself, which in itself is an indication of what she was planning for the future.

Mr Lodha was made co-chairman of Birla Corporation Ltd last year. He was made co-chairman of Universal Cables Ltd, as reported by the company on July 6, 2004 to the NSE.

Besides, he is director on the board of almost all M.P. Birla Group companies, including Punjab Produce Holdings Pvt Ltd, Vindhya Telelinks Ltd and Hindustan Gums and Chemicals Ltd.

According to sources, Mr Lodha is also a key figure with executive powers in the main Birla trusts and education institutions, including being a trustee of Bharatiya Vidya Bhavan, UK, and Bombay Hospital, Mumbai.

The other educational institutes run by the group include South Point School, M.P. Birla Foundation Higher Secondary School, M.P. Birla Institute of Management, Bangalore, and the Industrial Training Institute, Rewa, as well as the M.P. Birla Planetarium, among others.

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