TVS Holdings Revises RPT Policy Months Before TVS Emerald Divestment

TVS Holdings adjusted its related-party transaction policy shortly before selling its entire stake in subsidiary TVS Emerald, sparking concerns over asset valuation and the equity of business interest distributions among the family.

TVS Holdings Adjusts RPT Policy Prior to Subsidiary Stake Sale

TVS Holdings amended its related-party transaction (RPT) policy less than five months before selling its entire stake in real estate subsidiary TVS Emerald to a promoter-group company, changing the benchmark for determining when property transactions would be classified as material and require shareholder approval. The policy was revised on August 8, 2024, according to company documents. On December 31, 2024, TVS Holdings sold its entire stake in Emerald to Vee Ess Trading Private Limited for ₹485.85 crore. A comparison of the revised policy with its February 2020 version shows that the company replaced the reference to its net worth with consolidated net worth for calculating the materiality threshold applicable to transactions involving the sale, disposal or purchase of property. The revised policy also introduced a ₹1,000-crore ceiling, with the lower of this amount or 10% of consolidated net worth determining the threshold.

Family Dispute and Strategic Concerns

The change assumes significance amid an ongoing dispute over the division of business interests within the family of TVS chairman emeritus Venu Srinivasan. His wife, Mallika Srinivasan, has questioned whether she was adequately apprised of the economic potential of the real estate business and whether its transfer adequately accounted for its land bank, development pipeline and future earnings. The concern is that moving Emerald out of listed TVS Holdings and into a promoter-group entity shifted the opportunity to benefit from its future growth away from the listed company. The disagreement forms part of a wider dispute over the distribution of family wealth. Mallika Srinivasan and her daughter Lakshmi Venu are understood to be seeking what they consider an equitable division of family interests, while Venu Srinivasan and his son Sudarshan Venu maintain that the separation of business interests has already been completed on fair terms.

Materiality Thresholds and Financial Benchmarks

The February 5, 2020 policy classified transactions involving the sale, disposal or purchase of property as material if their value amounted to 10% or more of the company’s net worth. It did not expressly specify whether the calculation was to be based on standalone or consolidated net worth. The August 8, 2024 revision expressly introduced consolidated net worth as the benchmark and added a ₹1,000-crore upper limit. The threshold would be triggered when the transaction value reached the lower of ₹1,000 crore or 10% of the company’s consolidated net worth. Using consolidated rather than standalone financial statements changes the base against which the threshold is calculated, as it takes into account the financial position of subsidiaries. TVS Holdings’ FY24 annual report disclosed a standalone net worth of ₹1,372.63 crore. Emerald’s net worth was separately disclosed at ₹232.8 crore in connection with the sale. While Emerald’s net worth represented approximately 16.96% of TVS Holdings’ standalone net worth, it accounted for about 8.89% of the company’s consolidated net worth. The two figures, however, represent a comparison of Emerald’s net worth with that of its parent and should not be confused with the value of the property transaction for determining its materiality under the RPT policy.

Disclosure and Regulatory Compliance

TVS Holdings’ disclosures recorded Emerald’s revenue at ₹355.66 crore, equivalent to 0.88% of the company’s consolidated revenue. The company described the transfer as an arm’s-length transaction based on a valuation report. However, its announcement did not explain the commercial rationale for the sale, attach the valuation report or identify the valuer and the methodology and assumptions used to arrive at the valuation. Regulation 23(1) of SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations requires listed companies to formulate a board-approved policy on related-party transactions, specifying materiality thresholds, and review it at least once every three years. Regulation 23(4) requires prior shareholder approval for material related-party transactions and subsequent material modifications, subject to specified exemptions. Related parties are barred from voting on such resolutions, irrespective of whether they are related to the particular transaction. The company’s RPT policy also requires the Audit Committee to consider whether the terms of a proposed transaction are fair to the company, whether there are compelling commercial reasons for entering into it and whether it is in the company’s interest.

Growth and Valuation of TVS Emerald

Emerald’s business has expanded considerably since the transfer. The real estate developer operates in Chennai and Bengaluru, developing apartments, villas and residential plots. Its website also markets senior-living homes and luxury residences. A December 2025 assessment by Crisil Ratings reported that Emerald’s consolidated operating income increased to ₹866 crore in FY25 from ₹369 crore in FY24. Its profit after tax rose to ₹23 crore from ₹10 crore during the same period. Crisil separately reported property sales of ₹1,010 crore in FY25. These represent sales bookings and are distinct from revenue recognised during the financial year. The rating agency identified a 67-acre land bank with development potential exceeding ₹5,300 crore and projected medium-term sales of ₹2,000 crore to ₹2,500 crore. It also flagged risks associated with debt-funded land acquisitions and execution in the real estate sector. The scale of Emerald’s land bank and its subsequent business growth have added to the questions surrounding the economic value of the asset at the time it was transferred out of the listed company.

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