Inside the ₹1,300 cr spat between billionaire Baba Kalyani and his sister

The two powerful executives were there at the request of the eminent Pune-based industrialist Neelkanth Kalyani, founder of Bharat Forge. They were joined by his wife Sulochana Kalyani and their eldest son Babasaheb Neelkanth Kalyani, better known as Baba Kalyani.

Nadkarni and Vaghul had been invited to be witnesses to a family agreement. Subsequently, they drew up a document detailing what was discussed and agreed upon, and the witnesses signed the document, which was duly notarised.

View Full Image

What transpired at this meeting and the validity of the document is now at the centre of a bitter internecine battle that has broken out between billionaire industrialist and Bharat Forge chairman Baba Kalyani and his sister Sugandha Hiremath, over equity shares worth some ₹1,300 crore (as on this week) in a publicly traded specialty chemicals company named Hikal, owned by both families.

In March, Sugandha Hiremath approached the Bombay High Court arguing that her elder brother had breached a family agreement under which their father had instructed that equity shares in Hikal owned by the Kalyani family would eventually be transferred to her. Baba Kalyani has vehemently denied the plea in his response, offering a different version of what transpired at the meeting and arguing that he was never a party to that agreement and nor did he sign it.

Apart from Kalyani, who is 74, and Vaghul, who is 87, others who attended that meeting 29 years ago are no more.

A spokesperson for Kalyani said they had nothing to add to what they had said in court in response to the petition. Vaghul could not be reached.

‘Sweat and Blood’

In her first media interaction since filing the petition, Hiremath said she was determined to fight for her due.

Hikal was built with her husband Jaidev Hiremath’s “sweat and blood”. “I have to fight for my rights, and what my father wanted for me,” she said.

“In India, women do not receive anything initially, and I represent all women who are deprived of their rights.” At the heart of the dispute is Kalyani Group’s 34% stake, valued at about ₹1,261 crore. According to her, it was her parents’ wish that she gets the Hikal stake owned by the Kalyani group.

The Hiremath family owns 34.84% of Hikal, while the Kalyani group through its investment companies owns 34.01%, with the rest owned by the public. The company, which is in the business of active pharmaceutical ingredients (APIs) and crop-protection chemicals, is controlled by the Hiremath family. Sugandha’s husband Jaidev is the executive chairman and their son Sameer is the managing director. Baba Kalyani as well as his son Amit Kalyani are on the board.

Hiremath, now 71, is diminutive in person but radiates the same formidable resolve her illustrious brother Baba Kalyani is known for in the industry. “I went to the court not only to protect my interests but also my family’s interest,” she said.

The dispute has a technical complication in that the equity shares under contention are owned not by Baba Kalyani but by investment holding companies of the Kalyani group that are publicly listed.

“Neither is the said defendant (Kalyani group’s investment companies) a party to any such arrangements/agreement, nor can its Assets be said to be that of Defendant No. 1 (Baba Kalyani) so as to warrant a transfer of the said Defendant’s assets to the Plaintiffs in terms of the purported arrangement/ agreement,” the Kalyanis said in their response to the petition in court.

Sugandha understands this complication and says her father had envisaged this hurdle and had a solution for this too. That the Kalyani family will buy the stake at market value and gift it to her. In line with her father’s plan, even gift taxes would have to be paid by the Kalyani trusts.

‘Benefit of Tailwinds’

Before becoming an entrepreneur, Hiremath, who was on a brief visit to India from the UK, had a chance meeting with T. Thomas, the then-chairman of FMCG giant Hindustan Lever (now Hindustan Unilever).

Thomas, impressed by the young Hiremath, asked him to stay back and join the Lever office “from tomorrow”. Hiremath was doing well at the fast-moving consumer goods company when his father-in-law’s persuasion finally got him to start his own enterprise.

Jaidev Hiremath, Sugandha’s husband, and the current non-executive chairman of Hikal founded the company in 1988 and built it from the ground up after being persuaded by his father-in-law, (N.A. Kalyani) who wanted his son-in-law to take up “some entrepreneurship”, instead of working for someone else. N.A. Kalyani arranged for the initial seed capital from Surajmukhi Investments, a 100% subsidiary of Kalyani Steels.

“Jaidev built the business and the Hikal brand is now known worldwide,” Sugandha said, recalling with amusement how Baba Kalyani used to call Hikal a tinpot company, in view of its relatively small scale of operations.

In his response to the petition, Kalyani disputes that characterisation and says he played a significant role in the company’s early days. “Apart from the material financial contribution, the Plaintiffs regularly consulted me on all aspects of Hikal’s activities and operations. Board and shareholdings meetings aside, I regularly attended review meetings at Hikal to monitor Hikal’s activities and progress. I was at the relevant time the Chairman of the company.”

Either way, Hikal is today enjoying a favourable business climate.

“The benefit of tailwinds in terms of new opportunities arising from global supply chain disruptions and China plus one strategy is playing out as the company receives new inquiries from global innovator companies in the CDMO (Pharma) business segment. Management expects this segment to be a leading growth driver in the next few years,” BP Equities said in a June 2022 research report.

The Founder’s Wish

Sugandha says her father called the June 1994 meeting in the presence of the veteran bankers to make sure his position was stated in their presence.

She recalls those events for Mint. “Several differences arose between BNK (Baba Kalyani) on the one hand, and N.A. Kalyani/ Sulochana N.K. on the other. As a result, there was a handwritten MoU signed by both N.A. Kalyani and Baba Kalyani on 30 October 1993, providing for the transfer of shares of Hikal to the Hiremath Family. “Hikal will go to Sugandha & Jaya,” her father deemed. Her father would refer to his son-in-law Jaidev as Jaya.

Kalyani does not dispute this memorandum but says it was rendered invalid as his father himself did not abide by it.

“I am aware of a memorandum dated 30th October 1993 under which it is stated that Hikal will go to the Plaintiffs … Notably, NAK himself breached the terms of the Memorandum … in as much as he sold shares held by the family in Bharat Forge Limited (BFL), which shares otherwise were expressly agreed to be transferred to me… As such, the Memorandum dated 30th October 1993 stood repudiated and abandoned.”

The meeting at the Taj Mahal Hotel in the presence of the eminent bankers happened subsequently. While Sugandha says she has documents to show that her father clearly instructed that the Kalyani family’s shareholding would eventually go to her and even laid down the manner in which it would be done, Baba Kalyani has said in his response that it was unilaterally drawn up by his father and he never signed it. He also says the document inaccurately captures the gist of their discussion.

“As such, I deny that there was any agreement reached on 19 June 1994 regarding the transfer of shares in Hikal to the Plaintiffs, as alleged. I deny the contents of the documents … as it does not correctly reflect the understanding of the parties with respect to the shares in Hikal. This document was drawn up by NAK unilaterally and while it purports to record our discussions at the meeting held on 19 June 1994, it does not do so correctly.”

Sugandha says the gist of the understanding was that all Hikal shares held by Kalyani family holding entities were to be transferred to Hiremaths after the demise of N.A. Kalyani and Sulochana Kalyani (i.e., both parents).

Counter Claim

The ownership dispute, simmering till now, reached a head after her mother passed away earlier this year. Hikal notified the stock exchanges of the family dispute late last month when they received a letter from the Kalyani group companies seeking permission to increase their stake in Hikal by a further 5%. It came as a shock, Sugandha said. “Here we were looking at my brother handing over the stake, but instead, we got notice that they intended to increase their stake.”

The Kalyani group raising their stake in Hikal would be unfair to other shareholders, including the minority shareholders, she said. There are many future projects at Hikal that the board is aware of, that the public shareholders are not privy to, she explained.

The Kalyanis, too, are using the same argument in their defense. They argue their stake in Hikal is held by a separate legal entity—Kalyani Investment Company—with over 16,479 public shareholders. “Any relief will have the effect of depriving thousands of shareholders’ property that is owned by Defendant no.2 (Kalyani Investments). They have traded in the scrip of defendant no.2 for over a decade on the basis of its assets and any act that adversely affects such shareholders ought not be permitted,” they have pleaded before the Bombay High Court.

At one point in our conversation, Sugandha fought back tears, and with a voice choked with emotion, said the sudden turn of events triggered by her brother has not given her an opportunity to grieve the demise of her mother, who she was close to. “I always looked up to my brother as the eldest in the family after my father passed away.”

Big Brother

The mien of Baba Kalyani is often perceived to be no-nonsense and even a tad arrogant, which doesn’t always go down well with his interlocutors. But over a long career, he has forged his place among India’s industrialists as a world-class institution builder. Bharat Forge, founded by his father who went into business after matriculation, has grown into the world’s second largest forgings manufacturer after Germany’s Thyssenkrupp. Kalyani has parlayed its success into building an industrial group with interests in power, steel, oil and gas, aerospace components and defence, with the world’s leading names such as Daimler Chrysler and Alstom among customers and partners. Most heavy-duty trucks that trundle along the US expressways have underpinnings supplied by Bharat Forge.

A Massachusetts Institute of Technology-trained engineer, Kalyani is in his elements when he delves into engineering and manufacturing practices. During a brief interaction at Hannover Messe, one of the world’s largest Industrial trade fairs, he once told this writer not to waste time at the India pavilion. See what the European companies are doing at their pavilion, he said.

Succession disputes had plagued the family for years. Kalyani said in an interview to Business Today in 1998 that there were differences around succession but they did not affect the functioning of the companies.

“In fact, differences between father Neelkanth and son Baba reached a peak when the founder tried to distribute the family stake in Bharat Forge among both his sons, Baba and Gaurishankar, and his daughter Sugandha,” the magazine reported in the special issue on family businesses, dated January 1998.

His mother had gone to court against younger son Gaurishankar, alleging property grab. Gaurishankar’s daughter had also gone to court against Baba Kalyani, demanding her share of assets.

As for the present dispute over Hikal, the rancour is in sharp contrast to the unity that must have once prevailed—the company’s name was derived from the first few alphabets of the names Hiremath and Kalyani.