Neutron Valli Arunachalam On The  Chain Reaction She Hopes To Set Off At Murugappa
A graphical representation of a nuclear chain reaction. (Image: BloombergQuint)

Neutron Valli Arunachalam On The Chain Reaction She Hopes To Set Off At Murugappa

Valli Arunachalam is guarded in her responses. She won’t discuss the value of her family’s stake in the privately held Ambadi Investments Ltd.— a holding company of the Rs 37,000-crore by revenue Murugappa Group. She won’t detail any legal help she’s getting in mounting her rather public campaign against the family-controlled, 120-year-old South India-based group that has business interests ranging from auto components to sugar to financial services. And when asked if her father, the late MV Murugappan, had anticipated this stalemate, and if he had why didn't he resolve it before his demise, she reiterates what she’s said in interview after interview—she’s only respecting her father’s dying wish.

That the just over 8 percent stake he bequeathed to his wife and two daughters be offered back to other family branches that co-own Ambadi.

Valli Arunachalam: The challenge that we are facing is that the first time in the Murugappa family, a male heir has passed away with no male children. So, we are just two daughters, my sister and me. And my father, being progressive, bequeathed everything to my mother, my sister and I. We have been seeking to implement his will, which is —his wish was that we offer the shares of the holding company to the family. That is exactly what we’ve done, but there have been a lot of challenges along the way. The family has said they do not have the money, (and asked us) to keep the shares and collect the dividend. Although we have been following up regularly to try to implement my father’ wishes, exactly as he as he wanted, that has not happened. Therefore, in August of 2019, we have asked for board representation, and I think it is a fair ask. In Ambadi, the shareholders and the owners are one and the same because 91 percent of the company is owned by the family. So, if the other branches in the family all have representatives, why can’t our branch also have a representative in the holding company?

You mentioned this is the first time that a family member has bequeathed shares to daughters. Didn’t your father envisage that for you to find a seat on the board would be close to impossible?

Valli Arunachalam: Well, I think his wish is what is central here. His wish was that we offer it to the family. Beyond that, I cannot comment what would have been in his mind.

Did you’ll discuss any of this when he was alive? An exit or an alternative to that? Or, given that no woman has ever gotten representation on the board the only option, according to him, was to sell those shares to other branches of the family.

Valli Arunachalam: That's something that never really came up. Both my sister and I, we had families and successful careers. Both of us are well educated and we had our own lives and so, this was not front and centre. But it has become front and centre after my father has passed away.

There was no discussion when he was alive on what the outcomes could potentially be given that this is a very valuable stake that your family owns, right?

Valli Arunachalam: True. I just think given who my father was, and the fact that he has done so much for the family —both not just in terms of growing the business, but in taking care of individuals in the family, and on a personal level, I think he just placed his trust in the family —that family values would triumph over all ends. I think he believed that the family would honour his wishes.

Neutron Valli Arunachalam On The  Chain Reaction She Hopes To Set Off At Murugappa

The Story So Far...

After her father’s death, Valli Arunachalam became the karta of the family HUF that owned some 3 percent in Ambadi. Her mother also owns 5-odd percent.

She claims women in the families that own and control the group rarely inherit shares. Daughters don’t, she says. But her father was made of more progressive stuff.

Two years ago, soon after her father’s demise, Arunachalam offered to sell her family's shareholding to the other branches that control the Murugappa Group.

She said their response was they didn’t have the money to buy the sake. “Keep the shares and collect the dividend,” she says they told her.

She later reiterated the sale offer, putting a valuation on the table and offering to negotiate. That met with no response.

In the absence of an exit, her next option was to get involved with the group business, she said. She sought a board seat and at the company annual shareholder meeting even sent a representative with questions regarding the financial performance of the group.

But all she’s been met with are delaying tactics, she claimed. Prompting her to take her battle to the media.

Legally, board positions are not inherited. On what grounds are you seeking to replace your father on the board?

Valli Arunachalam: Now let’s take a specific case. This is a fact. The current executive chairman of the group, Mr. MM Murugappan, he was inducted onto the Ambadi board, at the age of 23, just three months after his father passed away . So, when a male member at a very young age, without experience in the group companies can be inducted to the board, why is it that female members cannot be inducted, after their father’s passing, to the board? The difference is here. Both of us (sisters) have years (of experience). I have 23 years’ experience working for multinational corporations, Fortune 500 companies, and my sister too has a decade of experience working for IT companies. So why is it that the bar is set differently for male heirs versus female heirs?

That is the core of your battle?

Valli Arunachalam: It is. Gender bias is at the core of my battle. And this is one of the examples of gender bias.

There are six promoter director representing six different branches of the family and your father’s was the seventh?

Valli Arunachalam: Yes. My father did have a seat on our board until 2016. So, my question is when with the same shareholding, my father was able to hold a position on the board. Why is it after him, with that same shareholding, we can't get a seat on the board? The only valid reason I can think of that's different from the other branches is —we don’t lack the qualification or the shareholding or the experience —so, what else could it be, except gender?

Did the board explain why they were denying you a seat?

Valli Arunachalam: First they said, I was claiming it as a succession right and I indicated to them that in the very first ask I said it was based on our shareholding. Then they said it was because I did not have enough experience in the group companies, to which I said, well, female members are never given that opportunity. So please don't discriminate against us because of our gender. Then they said that it's because female members have never asked for a board position. But then I've been asking all along for a board position. So then finally, I gave this example which I just gave you —of Mr. MM Murugappan —and since then I’ve not had any further communications on this matter.

In the past few weeks, since you went public with this dispute, have you heard from the family or any branches of the family or any members of the Ambadi board?

Valli Arunachalam: So far, I have not heard from them. But I did get a letter from the Company Secretary on Dec. 11, stating that there had been a board meeting in late November, and they had considered my request for a board position, but neither did they make any decision (nor say no). I mean it was well within their power to appoint me as an additional director which they didn't do. It was also well within their power to call a shareholder meeting to consider my appointment, which they didn't do either. Instead, they just said that they considered it and it will be discussed at the next shareholder meeting, but there was no date set for the shareholder meeting. So that is the last communication that I received.

Neutron Valli Arunachalam On The  Chain Reaction She Hopes To Set Off At Murugappa

Preferred Outcomes...

Arunachalam’s story has captured media imagination. A lone (female) warrior trying to penetrate the male-only board of Ambadi. A modern woman who won't be silenced or cowed. A nuclear physicist who believes she, or her sister, would be a valuable addition to any corporate board.

Or as Arunachalam puts it —the gender equivalent of a nuclear chain reaction.

I’m just a neutron initiating contact (with uranium) to create a powerful chain reaction that I hope will unleash opportunities for women.

But physics and corporate law don’t mix well.

Board seats cannot be inherited, demanded or cajoled, and Arunachalam knows that. She could seek a shareholder vote but she doesn't have enough votes to ensure the success of such a resolution.

Besides, even if the public campaign were to force the Ambadi board to concede wouldn't she be stuck in a rather hostile situation? One board seat in nine hardly makes for influence.

Did you have any discussion with any of the various family branches on an option for you to sell those shares to an third external party?

Valli Arunachalam: No, we have not had that discussion.

When they refused to buy your family’s shareholding did you not bring up the point that if they won’t buy it then your only exit option is to find a third party to purchase the shares?

Valli Arunachalam: See, I’m a very patient person and I know they said no once but that doesn't mean that we shouldn’t continue to pursue, to see if we can have them agree. What’s central here is my father's wish, right? After all that he has done for the family I truly believed that they would respond in kind and honour his wishes. So, I continue to ask patiently. I have been asking patiently for now over two years.

Have you valued what the you family’s shareholding is worth? And have you also spoken to the Ambadi board about selling it in small tranches rather than selling it in one go?

Valli Arunachalam: Yes. The answer to your first question is yes, we have done a valuation by a third party and we have tabled that offer to them, but they have not come back with a counteroffer.

And did you offer to sell it in tranches?

Valli Arunachalam: We requested for face-to-face meetings with them to discuss the mechanics and to discuss the details. We even suggested an agenda for the meeting. But the family has not agreed.

What is the dividend your family earns every year on this stake?

Valli Arunachalam: I don't wish to quantify that. I think it's sufficient to say that we do get dividends.

Is there a reason why you’re hesitant to talk about value or dividend? Is it that you don’t want this to seem about money?
Yes, and I think it is the issues that are more important. I mean, money is just a number.

It is a large amount of money at stake. Why should women be shy about discussing money?

Valli Arunachalam: I think let’s just step back, right? I want to think a little bit outside the box. I think money comes, money goes. But I think what’s important here is values. Right. Sometimes money detracts from the real focus. So, I want to keep the focus on the social issues, the challenges that women face now. I don’t want numbers to detract from that.

Have you found any support from the women in the other branches of the family?

Valli Arunachalam: I haven't discussed it with the other women in the family.

You've chosen not to, or it's not come up or is it awkward?

Valli Arunachalam: All those branches are already represented on the board? Represented by the sons. So, I've not really discussed that.

Do you really want a board seat? All eight would likely be hostile. Besides with one board seat, you would have very limited say in either the running of the company or its investment decisions in the Murugappa group. Or is the demand for a board seat a way to bring them to the negotiating table to get them to purchase your stake and give you an exit?

Valli Arunachalam: So, I think the first step in getting the board seat is to have visibility into the operations of the company. Right now, we don't have any visibility into the operations of the company. So, I think that’s what I’m hoping to get.

How would that help you if your original battle is to exit the stake?

Valli Arunachalam: To me, it comes as a stepping stone.

To what?

Valli Arunachalam: A stepping stone to first of all getting visibility into the company and affairs and then we'll just have to take it one step at a time from there.

Have you considered sale to a third party?

Valli Arunachalam: I would say I cannot comment on that right now.

There is a provision in the company’s articles of association that allow the board to reject a transfer of shares. So if the board is not in favour of whoever's buying it from you, they can block you. Have you had these conversations with them or with your lawyers?

Valli Arunachalam: Well, I have sought legal advice. My understanding is that, that's a standard (provision). But we do have the option of selling it outside.

Why not consider selling it to a third party, as your next step?

Valli Arunachalam: It is my father's wish, right? So, we wanted to respect his wish. So, if that's not possible then the other logical step seemed to ask for the board position. But if both of these options are also going to end up against a brick wall, then we do have to look at other options.

What would you prefer? Would you really prefer a board seat in a board that is hostile to the very first woman it may take on board? Or would you actually prefer to exit — whether it's the family that buys it or you sell it to a third party?

Valli Arunachalam: I think the first preference would be for the family to purchase shares because that is in keeping with my father's wishes, that would be the first preference.

You've said in previous interviews that if it comes to that, you would not step back from making this a legal fight. Is that correct?

Valli Arunachalam: If my hands are tied, and I've exhausted all options, then yes, that is something I would consider.

BloombergQuint estimates the shareholding of Valli Arunachalam, her sister Vellachi Murugappan and their mother MV Valli Murugappan to be worth at least Rs 1,500 crore.

But, given the legal complexities it’s not clear how easy that would be to monetise outside of family buyers.

Arunachalam probably knows her best option is to convince the family to buy her out. To bring them to the negotiating table, the petite, soft-spoken, technology consultant for chipmakers and semiconductor companies, is careful to play down hard-nosed issues such as money and legalities, instead making a gender-based argument that’s tough not to sympathise with.

The Murugappa Group has yet to respond to emailed queries on the issues raised by Arunachalam.

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