GMR GROUP

ORIGINS
 G.M.Rao‘s father was a successful dealer of jute, food
grains and gold.
 Division of Wealth – Each son received some property
and INR 3,00,000.
 G.M.RAO – Mechanical Engineer from Andhra University.
Worked in a Paper Mill and with PWD.
 The brothers joined together and opened a trading
venture, dealing in jute like their father.
 In 1988, the brothers separated as they had different
ideas. G.M.Rao wanted to reinvest the profits and expand
whereas his brothers were interested in profits.
 He received a jute mill as part of the settlement.
 Joined the board of Vysya Bank in 1985.

 Largest shareholder of Vysya Bank and in 1993, decided to
run the bank himself.
 Brought Bank Brussels Lambert (BBL) into the project, giving
it a 5 per cent stake, and upgraded the bank‘s systems and
processes with the new partner‘s help.
 In late 2002, BBL was acquired by ING, with Vysya Bank
included as part of the deal, and Rao received INR5.6 billion
for his stake.
 Retired as its Director and Chairman in 2006.
 Learning's from the bank venture –
• Exposed to the modern world of finance and broadened my
outlook on business.
• Good businesses crashing due to conflicting family interests
on business matters and lack of governance mechanisms in
the family.

.DIVERSIFICATION OF GMR GROUP            Ferro-alloy manufacturing (1991-92) Sugar production (1995) Breweries (1998) A 200-megawatt (MW) power project in Chennai ( mid-1990s) A barge-mounted power plant. Highways and Urban Infrastructure.34 billion in 2010. the world‘s first and largest.67 billion in 2009-10 as compared to INR10. Company‘s assets were valued at INR149.62 billion in 2005-06 Growth rate (CAGR) of 44 per cent. in Mangalore in late 2001 . Airports Manufacturing (agri-business. mainly sugar) Net revenue of INR 45.

FAMILY TREE .

S. a joint venture to develop a Malaysian airport and a collaboration with a Malaysian firm to bid for the Indian government’s golden quadrilateral road projects. Joined GMR IN 1995. Construction of a SEZ. • Bachelor of Commerce degree from University of Hull & Joined family business in 1996. • Served as CFA as well as the Board Of Directors. a life insurance joint venture with ING and Vysya Bank.Soft Drinks Bottling & Aquaculture. • Involved in developing strategic tie-ups for a power project. (DIAL) in 2006. along with Raju. Developed Two Power Projects in Karnataka and Andhra Pradesh. • Director of Delhi and Hyderabad Airports. Road Projects & the Delhi Airport. Managing director of the Delhi International Airport Ltd. Handling Property Development. • Since 2008. • Also oversaw GMR’s corporate services (including human resources as well as the international business) • Completed his bachelor of commerce degree in 1996 and formally joined the Group as a director in 1998 • Initially inducted him into their sugar factory development.B RAJU KIRAN • • • • Ventures. • Oversaw operations and business development and was the business development head of the Group’s airport business. . • Helped shape the overall strategy and positioning of the organization.

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especially in rural areas. vocational and other programs for local communities. developing village libraries and facilitating par ticipator y rural development. such as collaboration with Helpage India to operate mobile medical units that ser ve nearly 100 villages weekly. creating health awareness.  Run as an entrepreneurial enterprise focused on developing education. .  Established five institutes for self -empowerment and vocational training for unemployed youth and women. motivated to ser ve those in need. 3 to 5 per cent of the group‘s profit af ter tax (PAT) went into the Foundation . Rao established the GMR Varalakshmi Foundation (GMRVF). providing addiction counseling.CSR  In 1991 . healthcare. par tly through collaborations with the government. These institutes trained unemployed youth in a variety of skills (e. repair of household appliances and simple electronic products) and  Facilitated bank loans for aspiring micro -entrepreneurs..  Healthcare initiatives also included par tnerships.  Providing mentorship to youth clubs. GMRVF worked intensively with five disadvantaged communities in Rajam.  Aimed at making high -quality educational institutions accessible to India‘s poorest segments.g.

―By committing more and more time to the Foundation.  First.‖ . with a board of directors consisting of family and non-family independent executive directors. women of the family could develop an identity for themselves beyond deriving satisfaction from such initiatives.  Rao said. Mission .To build entrepreneurial organizations that make a difference to society through creation of value .  GMRVF was headed by a non-family chief executive officer (CEO).and second-generation females of the Rao family served on the board and took part in multiple Foundation activities.

& GMR Industries(Airports) Ltd.BUSINESS PROFILE  GMR Holdings Pvt. Ltd.GMR Infrastructure Ltd.  Due to the rapid expansion of the group. his sons and his son-in-law. Raju. Kiran. so as to assign roles and responsibilities to each family member.  Ownership structures has remained consistent with equity proposed to be distributed equally among Rao.B & 2 independent non-family executives. Rao in 2006 hired strategy consultants Mckinsey & Company. Is the holding company with 2 subsidiary companies. S.  Decision making Council – Rao. .

FAMILY CONSTITUTION AND OTHER GOVERNANCE INITIATIVES Anticipating and mitigating significant risks associated with family business “infant mortality” leveraging the family’s special strengths keeping the family together. from generation to generation. Fostering stewardship among family members to promote the Group’s long-term success and sustainability. .

the family spent considerable time refining the roadmap. Peter Leach. The family discovered that the largest challenge involved managing individual aspirations. In 2002. Throughout the process. to assess the family’s situation and make governancerelated and other recommendations at a two-day retreat. again. comprising the four male members working at GMR and their wives. with the help of external experts.New focus on family governance form a family council. invited an internationally renowned familybusiness advisor. the family kept focus on maintaining harmony. both Raju and Kiran expressed the desire to have more operational freedom under the GMR umbrella. mission. . the family council generated a long-term agenda and roadmap for navigating future family governance. fixing an agenda of top priorities and other key tasks. Over the next year. vision and key policies that should go into a family constitution. to begin discussing the values. For instance.

The family believed that the business should be run on a day-to-day basis by highly qualified non-family executives. sets of core values for the family and the business. retaining entrepreneurship in the family. two separate. The aim was to ensure a smooth transition of business from generation to generation and enable professionals to take on their rightful roles without any interference from the family. or “destiny.” of the Group. The family constitution articulated and elaborated on each set. while avoiding creation of silos of activities. though overlapping.FAMILY PHILOSOPHY aimed to create a long-term sustainable governance structure and set policies to serve the family in the current generation and beyond The effort was to strengthen and sustain bonding among family members. as these were considered pillars of the business’s culture and continuity. . while family members should retain control over the high-level strategy. In line with this philosophy. family members were to withdraw gradually from operations and restrict themselves to fulfilling investment needs and providing strategic inputs and counselling for the Group’s businesses and activities. businesses in which each family member might get trapped.

which leads to disputes. ―Instead of setting up just one trust where all the family members have a stake. Thus. . so there is clarity.  Family members in future generations who wanted to enter the business could not expect easy advancement — they would have to earn promotions through hard work and impressive achievements.KEY FEATURES OF CONSTITUTION  A goal of the constitution was to emphasize family members‘ flexibility about joining the business. the daughter and myself.  Rao decided to set up a separate fund for such individuals. the document also addressed how to handle family members opting out of the business to pursue independent careers. we set up four trusts (known as ‗column trusts‘) for each of the two sons.‖ Rao said.

work culture and the founder‘s and other leader s‘ passion for building the Group. Member s of future generations wishing to join the Group would be required to sign an agreement for adherence to the constitution and their per formance would be appraised through the same system as for non family professional s. They were required to work outside the family firm for approximately three year s before joining the business. Family member s were not directly appointed to senior positions nor did they repor t to other family member s. a series of two -month summer stints). a formal process had not yet been determined . Appraiser s would include non -family member s of the board but as the third generation was still far from working age. as well as engendering a sense of pride and belonging in the entrant.  An internship of twelve months was compulsor y.. . which could be completed during undergraduate year s (e.  The minimum level at which a future -generati on family member could join was set as assistant general manager.  Assignments associated with these internships would help familiarize family member s with GMR‘s business practices.g.  There was also an induction process that ever y newcomer to the business was required to undergo.

. provided such work did not interfere with their care-giving responsibilities..  The constitution indicated that they and future female family members could take up external part -time jobs or start their own businesses.e. the wives of the four male members now working in the Group) had chosen not to work in the business in order to take care of their children. future -generation members were also to be remunerated based on merit and performance. Like any other employee.  Women of the first and second generations (i.

 Ownership of holding by Rao. deadlock facilitator) would interview all three and make a final.  The second-generation husband and wife would select their own successor trustees.  There was also a clearly defined process for leadership succession: Raju. was being settled in four family trusts. . then a family appointment board consisting of two independent directors and a facilitator (i. If they could not agree then the third trustee would be the oldest direct descendant member of the family.  Succeeding Rao would be anyone selected by the husband and wife. with the husband. The three trustees of each trust would select the voting trustee for the voting trust.e..B. binding decision. were to select a successor unanimously from amongst themselves upon the announcement of Rao‘s pending retirement. Kiran and S. who held nearly 100 per cent. If they could reach no unanimous decision. wife and Rao holding equal voting rights within each.

The future family directors were to retire at 65 years of age. The family agreed that the constitution would undergo a formal review in ever y generation and once ever y 10 years. the family business forum.  The successor would ser ve for five years and then of fer himself for re election. with a successor chosen three years before his actual retirement date.  The constitution also provided a family code of conduct to ensure ef fective family governance. Until that date. the successor would be appointed deputy chairman or a similar designation. with the leadership transition conducted in a phased manner. Constitution -related proposals from at least two members belonging to dif ferent units would go to the family business forum for comments before the proposals were submitted for approval by the family council . the non -business family forum and the founders business of fice .  To make his mantra of ―keeping the family together‖ work in practice. Fur ther stipulations were that Rao would retire by age 70 at the latest. Rao also included several formal organizational structures in the constitution. These included the family council.

P. vision and values.M .M. family mission.THE ROLE OF NON-FAMILY EXPERTS  P. It needed to be streamlined and all the functi ons of family of fice needed to be brought under one roof. ― Wealth management for the family was still not ver y well-organized . was a well-known process consultant in human behavi or. as well as establishing the family of fice. in fostering family governance.  He was actively i nvol ved in strengthening family bonds and teaching the Rao family skills for managing interper sonal dif ferences. Kumar (P.  According to Sastr y. such as: ― Which comes fir st: business or family?‖  His role was to collaborate with P.M. he would sometimes push them to answer uncomfor table questi ons.‖ . wi th many year s of experience of working with family businesses .) was hired in 2003 to assi st the fami ly in drawing a family governance structure.  During meetings among the famil y member s.M .

the counselor s included an American -based leader ship exper t and coach. healthy relationships and conflict resolution . an emotional intelligence exper t and a spiritual-behavioral coach. family member s never felt that they had done enough collective development to emotional bonding.  In April 2007.  The founder s business of fice team had identified training programs and mentoring sessions for the third generation and suggested courses and programs they could under take as they matured. which was crucial to practising the values specified by the constitution .  All were engaged to help the family maintain mature and positive per spectives and develop emotional intelligence. . Throughout this process. an organizational psychologist. openness and constructive communication skills in order to foster bonding in relationships. togetherness. keeping in mind emerging leadership requirements for the business and family.

 the family‘s male members felt that outside help would benefit the family because all four of them were aggressively pursuing business growth and spent very little time together or with the family.  The family focused on team-building.  The family had clearly benefited yet Rao planned to reduce the family‘s dependence on such experts. cohesiveness and personal development plans. the family was planning to organize a series of training programs on managing dif ferences or conflicts of interest. behavioral skills and spiritual intelligence. with the implication that the family members would become more skilled in engaging in a meaningful dialogue without outside help.  In 2008.  The facilitators drew up individual development plans with emphasis on developing competencies. .

• as a trader I learned the basics of the business. • as an industrialist I discovered the importance of managing relationships with my stakeholders.As a final thought. • as a banker I learned the importance of cash management. I was a student leader. . delivering on promises and building teams. Rao added: My journey over the last 35 years has been one of continuous learning experiences based on family values and beliefs: • as a student.

but practicing it in its entirety would be the real test. . ―Writing the family constitution was an arduous challenge. but whether or not Rao‘s children and grandchildren would uphold the family‘s values and remain as committed to the constitution.‖  He had instituted clear governance practices and had completed the constitution during his lifetime.THE FUTURE OF GMR  Rao stated.

even as India‘s economy became increasingly complex and competitive. without creating any sense of division between sons and son in-law?  Overarching these concerns was Rao‘s wish that GMR would continue its strong per formance fueled by a happy and collaborative family well into future generations. . leaving limited time for family governance matters. maintaining role clarity for individual members was not an easy task .  The family planned to move out of operations and restrict themselves to strategy -making in the long run  Their desire for growth and the external pressure to sustain their track record of per formance would require all the male members of the family to continue to be deeply involved in business. several new concerns emerged.  Would they be able to find a true balance between work and family life?  Would all of them deliver value equally as per the expectations of other stakeholders. The speed and intensity with which Rao had created structures and systems in the family were considered.  For example.

ELEMENTS OF THE FAMILY GOVERNANCE SYSTEM .

FAMILY COUNCIL  At GMR the family council composed of the four male members and their wives.  Primarily responsibility of the council was to develop responsible business stewardship among shareholders.  The council appointed family advisors.  The council met very two months. .

It also determined the dividend split between the family fund and trusts. In 2010.FAMILY BUSINESS FORUM     The FBF served as bridge between the business and the family. . The FBF met at least once in every two months. the FBF included only the male family members.

 Its purpose was to strengthen family members relationships.  It met every two months with pre -established agenda and recorded minutes. .  All decisions made in this forum were consensus -based.NON-BUSINESS FAMILY FORUM  The NBFF was run by the women of the GMR family.

 The family also collectively established several principles to be respected by all. .FAMILY VALUES  The constitution indicated eight family values.  Humility. entrepreneurship. trust and faith and managing dif ferences formed core values.  While the remaining four values were viewed as operating principles.

 The GMR family had decided to separate the family leader‘s role from that of the business leader. .FAMILY CODE OF CONDUCT  There were specified principles and procedures.  All meetings were recorded on video for prosperity.  All dif ferences were to be resolved within 72hours of the beginning of an incident.  If the incident were not resolved. an internal/external facilitator would assist the concerned parties.

 The family fund was to be funded by a certain percentage of dividends of the holding company and income of certain family assets. with separate sub -funds for each.FAMILY FUND AND RELATED ENTITIES  A family fund was to be established to maintain financial equity among family members. .  The fund was aimed at meeting essential security and development needs.

SHARE OWNERSHIP AND DIVIDENDS  It was decided that the holding would remain private.  Sale of shares outside the family was prohibited.  Four discretionary trusts were created for the four family branched. .

 The whole family was encouraged to gather to celebrate various festivals. .  A family assembly was to be held once annually.  The assembly was not instituted for the current generation.FAMILY RETREATS AND FAMILY ASSEMBLY  It was organized once or twice annually.