What started as a tiff between billionaire Adi Godrej and former top executive at Godrej Group, Arumugham Mahendran, who has launched a new firm with products that competes with popular Godrej brands Good Knight and Hit, has become a full-blown legal battle.
Godrej Consumer Products Ltd (GCPL) has filed a case for breach of trust against its former managing director Mahendran in the Bombay High Court. The flagship of the Godrej group has alleged that the former official is misusing classified information for insecticide segment which will compete with the two Godrej Consumer brands.
Mahendran had floated a new company Global Consumer Products Pvt Ltd (formerly Global Beverages and Foods Pvt. Ltd) in 2013 after quitting Godrej Consumer, according to VCCEdge, the data research platform of VCCircle. He had roped in Goldman Sachs and Mitsui Global Investment (Mitsui), a unit of Japan's Mitsui & Co. Ltd, among others as investors in the consumer products company.
According to the filings in the Bombay High Court, the Godrej Consumer has filed the case on September 8. Justice Gautam Patel has directed A Mahendran and Global Consumer to file their reply by September 27.
“The Plaintiffs (Global Consumer) filed a volume in a sealed cover containing what they claim is the confidential information disclosed to the defendants (A Mahendran) at various times,” said Justice Patel in his order of September 19. “They (respondents) will also file in sealed cover any information that they claim is proprietary to them or confidential. Till such time as they make those filings, they will not be entitled to inspect the volume of the confidential/proprietary information filed by the Plaintiffs.”
According to the court order, “The defendants will be entitled to inspect the plaintiffs’ sealed volume only after those filings are complete.” The court has directed Godrej Consumer to file its rejoinder in response to Mahendran’s reply by 4 October.
"Given that the matter is currently sub-judice, we do not wish to and neither do we think it is appropriate to comment on the same at this juncture," said a spokesperson for Mahendran’s Global Consumer in its response to VCCircle query. Email sent and phone calls made to Godrej Consumer went unanswered.
Senior counsels Venkatesh Dhond and Ravi Kadam along with Himanshu Kane, managing partner of law firm WS Kane & Co, are representing Godrej Consumer in the matter. A Mahendran and Global Consumer are being represented by senior counsel Janak Dwarkadas and Amey Gokhale, partner of law firm Shardul Amarchand Mangaldas.
Mahendran’s long tryst with Godrej
This comes over three months after Adi Godrej publicly voiced his concerns over Mahendran planning to launch products in direct competition with Godrej brands.
"Him (Mahendran) launching household insecticides is both a serious ethical and legal breach...I am also very surprised that global investors like Goldman Sachs are allowing this to happen under their watch," Godrej had told The Economic Times then.
Mahendran had a long association of almost two decades with Godrej Group and was managing director of Godrej Consumer when he quit in 2013. The association started in the year 1994 when he became the chief executive of Godrej Sara Lee joint venture, where Godrej Consumer was a minority shareholder.
Initially, Global Consumer was positioned as a food and beverages firm. It had attracted Rs 315 crore ($50.8 million then) funding from Goldman Sachs and Mitsui, among others. When officially launched in 2014, the firm had said it would be engaged in juices, confectionaries and snacks as a business. Mahendran had said he will also invest his own money in the company and will be the chairman and managing director of the company.
This was the second major deal where Mahendran roped in others to back him for a consumer sector business.
In January 2014, private equity firm India Value Fund Advisors backed Mahendran to acquire majority stake in ISS Hicare, one of the largest pesticide services companies in the country.
ISS Hicare operated through 52 branches in 27 cities and served over 1 lakh residential customers and 10,000 commercial customers with 1,500 employees and a network of franchise partners, when the deal was announced. It was owned by Denmark’s ISS Global.
Interestingly, ISS Hicare itself was started in 2004 by Godrej Industries Ltd (a key shareholder of Godrej Consumer) and Mahendran, to provide pest control services to residential customers in Mumbai, eventually expanding to become a pan-India player serving both residential and commercial customers. Formerly known as Godrej Hicare, it was acquired by Danish multinational ISS Global in 2009 for close to Rs 100 crore.
Early this year, Global Consumer expanded its business horizon and product basket as it decided to launch insect repellent brand ‘DND’. Along with home insecticide, the company also has chocolate and confectionary products under the brand ‘LuvIt’, fruit juices under the brand Cherio and herbal beauty care products under the brand ‘Ved Rasaa’.
This broadened its business mandate as a FMCG company and pitched it in direct competition with Godrej Consumer.
Godrej Consumer, which clocked revenues of around Rs 9,000 crore for the year ended 31 March 016, is the leader in home insecticide market with over 52% market share. The company also has a strong presence in personal care segments with soaps and hair colouring products.
Global Consumer’s confectionaries also compete with another business in which both Godrej and Mahendran were involved together. Mahendran, held a small stake in Godrej Industries’ JV with America confectionery maker Hershey that sold Nutrine.
Mahendran has held small stake in a clutch of Godrej firms, in the past.
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