BUSINESS: Singapore's feuding Jumabhoys
By Salil Tripathi
A suspicious land deal and a stock-option wrangle are polarizing the Singapore-based
Jumabhoys, one of Southeast Asia's wealthiest non-Chinese dynasties. Strife
is nothing new to the family but this time the damage may be beyond repair
Flanked by two young women in Singapore Airlines uniforms, Ameer Jumabhoy
marched on to the stage in the elegant Raffles City Ballroom. The occasion:
Scotts Holdings Ltd.’s annual bash. Wearing a pilot’s cap in keeping with
the evening’s aviation theme, the 70-year-old corporate chief stepped to
the microphone. His staff, gathered in their expectant hundreds, were more
than usually attentive.
Everyone in the ballroom that evening last November knew Jumabhoy’s two eldest
sons were feuding. Most also knew regulators were probing Scotts over the
propriety of some of its business practices. Company veterans hoped their
chief would have reassuring words for the staff, baffled by the rivalry between
brothers who had always seemed to get along. The Jumabhoys had seen strife,
but this latest feud threatened to tear apart Singapore’s best known Indian
business dynasty. We’re going through some turbulence now, Jumabhoy said
soothingly. But as your flight captain, I can assure you we’ll overcome that.
The captain had badly misread the radar. Five months later, one Friday morning
in April, Ameer convened a meeting of senior staff. His baritone faltering,
the Scotts chairman confirmed what most of Singapore already knew: Amid mounting
pressure, his favorite son Iqbal, 39, had quit as Scotts executive director.
Ameer called Iqbal’s departure a great loss. Said one onlooker: He made it
sound like a death in the family.
Within days, Iqbal’s estranged brother Rafiq, 45, had won effective control
of Scotts. With the support of two uncles, he was made managing director
of Scotts Investments (Singapore) Pte. Ltd. (SIS). Through SIS, the Jumabhoys
own 42.5 percent of the Singapore-listed development company. With assets
of $440 million, the Scotts empire stretches from London to Canberra. In
Singapore, it controls the A&W fast-food chain, has a big slice of duty-free
operations at Changi airport, plus major property holdings.
With Rafiq in the ascendant, he and his uncle Yusuf replaced Ameer and Iqbal
as SIS’s nominees on the board of Scotts Holdings. Days later, Rafiq and
Yusuf, with the support of four independent directors, voted to remove Ameer
as Scotts executive chairman. For Rafiq, this was a heady brew of vindication
and vengeance he had been ousted as Scotts’ managing director last September
after falling out with his father and brother.
At the heart of the wrangling are two disputes that have pitted brother against
brother. Rafiq is angry because he was kept in the dark about a controversial
land deal near New Delhi. For his part, Iqbal is furious because in 1992
his grandfather, Rajabali Jumabhoy, gave Rafiq a stock option and potential
control of SIS.
The boardroom bloodletting in April was yet another act in a saga that must
be giving tycoons pause throughout Asia. What business patriarch hasn’t feared
ruin by battling sons or daughters; or, for that matter, worried that young
scions would tie up with outside predators to seize the family jewels?
Scotts Holdings is a prize worthy of any predator. Its chain of upscale serviced
apartments Ascott and Palm Courtt are racking up enviable occupancy rates
in Singapore, despite stiffening competition. Moreover, the landmark Scotts
Shopping Center is doing a brisk trade, even as much of Singapore’s retail
industry has been slipping into a coma.
Stock market rumors abound that it will be only a matter of time before the
likes of property tycoon Ng Teng Fong or hotelier Ong Beng Seng start to
circle. To succeed, they would need the support of at least one Jumabhoy.
Should the Jumabhoys lose control of Scotts Holdings, the company could find
itself bailing out the family. Over the years, the clan has pledged Scotts
shares to raise money for private businesses. Under the terms of these loans,
the banks could force Scotts to cover the family’s debts. Or the banks could
sell the shares to a corporate predator.
The unfolding events have transfixed Singapore’s Indian community (8 percent
of the population), which widely regards the Jumabhoys as akin to aristocracy.
With an estimated fortune of $300 million, the clan is one of Southeast Asia’s
richest non-Chinese dynasties. Visiting Indian politicians hobnob with them;
local organizers call upon them to sponsor India-themed exhibitions and events.
More melodrama seems assured. Ameer and Iqbal have asked for a court-appointed
manager to run SIS. (Rafiq and his uncle Yusuf are opposing the motion.)
Singapore’s Commercial Affairs Department is investigating the Indian land
deal. Meanwhile, Rafiq and his allies, in a move with potentially far-reaching
consequences, have ordered an independent audit of all SIS investments.
Scotts has long been aware of what it means to be viewed by investors as
a family heirloom. When the company was preparing to go public in 1991, it
was anxious to point out that 12 of 17 top executives were not Jumabhoys.
This is not a family-run company, Ameer would often say. Rafiq and Iqbal
were family, but they were well-educated professionals not merely dilettantes
milking their lineage. (Asad, the youngest brother, who runs some of the
clan’s private interests, will say only, I’m glad I got out long ago.)
They are very, very bright brothers, sighs a long-time family friend. If
only they could work together. When Rafiq and Iqbal did work in harmony,
according to Scotts executives, they were perfect foils. Rafiq is visionary
and entrepreneurial; Iqbal is a down-to-earth numbers man. In less fractious
times, their talents and temperaments were at least complementary.
Rafiq studied politics, philosophy and economics at Oxford University and
later qualified to be an accountant. He is not shy about sharing his erudition,
happy to spend hours discussing British writers Anthony Burgess and D.J.
Enright, and peppering his speeches with references to Greek philosophers.
Not that he is a dusty bookworm. When his alma mater, Singapore’s elite Anglo-Chinese
School, celebrated a jubilee, Rafiq was happy to be master of ceremonies
and play host to actress Isabella Rossellini.
Like his father, Rafiq has become a public figure in Singapore through good
works, serving on the National Arts Council and the Singapore Tourist Promotion
Board. Singapore’s deputy prime minister, Brig.-Gen. Lee Hsien Loong, sought
Rafiq’s counsel in 1991 while preparing the Strategic Economic Plan, a joint
effort by the public and private sectors to anticipate and manage rapid economic
change. An ethnic Indian achiever in a mostly Chinese society, Rafiq has
been known to call himself a chocolate Chinaman.
Iqbal, an engineer trained at the Massachusetts Institute of Technology and
a former banker, is a more reserved figure, happy to melt into the background
at cocktail parties. Wordy digressions are not his style: He keeps to the
point and expects others to as well, though he is rarely anything but polite
and gracious. As Scotts’ financial controller, he was known to be meticulous
and a stickler for financial discipline, and he is credited with steering
Scotts out of cash-guzzling investments. That reputation, however, has been
somewhat clouded by the India land project.
But last November, as wrangling worsened, management control passed out of
family hands. Chng Hee Kok, a 48-year-old engineer and a ruling-party parliamentarian
for 11 years, was appointed Scotts chief executive. Chng is well acquainted
with family strife: He was brought in as chief executive at Singapore’s Yeo
Hiap Seng Ltd. for five crucial months last year when, in an acrimonious
battle, control passed from Alan Yeo to property tycoon Ng Teng Fong (see
Appetite for Acquisition, page 38).
Chng is known as a Mr. Fix-It. He has a home toolshop and tinkers with machines.
I compartmentalize things into boxes and solve them. When my job is done,
I go. One of Chng’s first acts at Scotts was to nudge Iqbal sideways and
hire as chief financial officer Jessie Goh, who had helped him sort out the
mess at Yeo Hiap Seng.
Since going public Scotts has focused on expanding beyond Singapore, which
is simply too small to sustain major earnings growth. The company expanded
its Ascott and Palm Courtt serviced apartments to prime areas of Bangkok,
London and Jakarta (with another block due to open in Kuala Lumpur’s new
city center next year), and scouted around for other opportunities in the
Scotts’ most ambitious move overseas, however, has been exceptionally messy.
Although the Jumabhoys never abandoned their affinity with India, they declined
to invest until the country recanted its faith in socialism. When Prime Minister
P.V. Narasimha Rao launched his economic reforms in 1991, however, Ameer
became an early booster, steering delegations of Singapore businessmen to
In 1994, Scotts explored the prospects for a township development in Gurgaon,
home of an automobile factory of Maruti Ltd., a joint venture involving Japan’s
Suzuki Corp. A 40-minute drive southwest from New Delhi, Gurgaon has attracted
a swarm of developers since Maruti cars began rolling off the assembly line
in the early 1980s.
With an infrastructure superior to Delhi’s, Gurgaon’s new townships typically
have schools, clinics, parks and unpolluted air, all in short supply in the
capital. Fortunes have been made building these townships. But this is not
a business for the fastidious. As one banker says: Everyone knows how land
is bought in India. You have to keep paying various people and there are
no receipts. Sometimes up to half the price is paid in cash so the seller
can escape high capital-gains taxes.
To avoid directly involving itself in such practices, Scotts hired two Indian
intermediaries, Pradip Jain and Vijay Bhati, to accumulate 75 hectares of
agricultural land. Before long, Scotts discovered that the duo had disbursed
$2.1 million without following proper procedures. Nor did they have supporting
In early 1995 the company recruited R.K. Jatia, an Indian industrialist,
to get the project cracking. Jain and Bhati were eased out and in an unusual
move allowed to buy 8 hectares of land at the original price of $750,000.
They got a bargain: Land prices tripled last year.
At $12.3 million, the Gurgaon investment was equal to one-fifth of Scotts’
1995 turnover. And yet the project was never authorized by the company’s
directors, and most senior executives knew little about it. Worse, the company
was offering financial guarantees and stand-by letters of credit to people
(like Jain and Bhati) and companies over whom it had little legal control.
Nor was legal title for the land in Scotts’ name. Moreover, Iqbal didn’t
tell the board that he had allowed Jatia to swap the original security, held
in escrow, for another. Had the security cover been insufficient, Scotts
would have been exposed to financial loss.
Scotts’ troubles took a more public twist on Sept. 5, when a group of Commercial
Affairs Department investigators descended on the Singapore headquarters
just as directors of the company’s audit committee were trooping into the
board-room. CAD officers cordoned off the area, sifted through papers relating
to the India land deal, and whisked board members to the department’s swanky
new premises at nearby Winsland House for questioning. They knew exactly
what they were looking for, said an executive who was there.
Back at the office, the mood was glum. Employees huddled together, speculating
and gossiping in whispers for fear of hidden microphones. Some factions immediately
blamed Rafiq for blowing the whistle, an accusation he denies. The day after
the CAD raid, Scotts Holdings announced tersely that Rafiq had ceased to
be managing director.
Rafiq says that important information about the land deal was kept from him,
even though at the time he was Scotts’ managing director and a member of
a committee overseeing the project. An independent audit, demanded by Rafiq
and carried out in late 1995 by Ernst & Young, criticized the way the
project was implemented.
Scotts, by then under the control of trouble-shooting chief executive Chng,
dropped a bombshell in February. After having painstakingly accumulated the
Gurgaon land, it sold its entire interest to Jatia for $17.3 million. When
I came in, Chng says, I realized it was a complex, complicated deal. The
company was not in a position to provide the complete picture. It took us
some time to piece the story together.
Scotts management, led by Iqbal, crowed about earning a 41 percent profit
for shareholders. However, property agents in New Delhi claim the plot could
have fetched up to $35 million. Rafiq publicly questioned whether the company
had got the best price. He said the buyer, Jatia, was an interested party;
that there had been at least one other offer; that the land would soon have
appreciated since a license to convert it into a township was imminent; and
that no independent valuation had been done.
Curiously, Jatia sold the land within days to the Ansal group, a Delhi-based
developer and partner in Scotts’ Bangkok apartment project. Ansal quickly
secured zoning changes, dramatically improving the land’s value. Scotts has
not fully explained why it sacrificed potentially ample returns except to
say that it would have been costly to develop the land or why Ansal kept
Scotts out of the deal.
Iqbal has dismissed the dispute as a family matter. We made a profit on a
land deal in India and some people are holding a funeral wake, he blustered.
An internal inquiry has since blamed Iqbal for keeping key information from
Scotts had to ask the Stock Exchange of Singapore (SES) for a rare two weeks’
grace in posting its 1995 results. Later, it revealed to the SES that some
of its earlier announcements about the Gurgaon project were partly false.
Even today, many questions about the deal have not been answered. Ernst &
Young said in its report that $2.6 million should be written off because
of doubts about ownership of a parcel of land. Scotts has since claimed that
it has received documentation for all the land, except for a plot worth $629,000,
but the auditing firm has not yet corroborated the claim.
Whatever the truth about the India deal, the stock-option dispute promises
to be equally divisive. In 1992 Scotts founder Rajabali Jumabhoy gave Rafiq,
his favorite grandson, a five-year option to buy Scotts shares held by SIS.
The conversion price was 85 Singapore cents a share, a small premium over
the peak price that year of 76 Singapore cents. (With takeover speculation
mounting, the stock price had floated up to S$1.30 by April this year.)
The option was revealed only last July when Rafiq, already a major shareholder
in Scotts, informed the stock exchange about it. For his part, Iqbal says
there was an oral or implied agreement that the option be split between them.
In October, Rajabali, Ameer’s brothers, a sister and their children sued
Rafiq, Iqbal and Ameer, seeking to annul the option. They claimed Ameer’s
branch of the family exposed SIS to speculative investments. While Scotts
continues to be profitable, they said, SIS posted losses. They want 71 million
SIS shares transferred back to the trust Rajabali set up for his heirs in
Should the action get to court, Rajabali will feel right at home. A veteran
litigant, he has even sued his own brother. My descendants [should] take
Rajabali wrote in his 1988 autobiography, Multi-racial Singapore On to the
Nineties, and not quarrel amongst themselves like my uncle and my father
or my brother and myself.
Rafiq, however, seems to have inherited his grandfather’s combativeness.
[Ours] may be a family business, he once told a TV interviewer, but it is
not the business of the family what goes on inside the business. To demonstrate
his intent to exercise his option, he sought to buy 7.8 million of Scotts
shares for $4.7 million. Scotts refused to transfer the shares because the
option remains in dispute. Last year, Rafiq was at a garden party when it
began to rain. He promptly produced an umbrella. You are well-prepared these
days, remarked a guest. I have carried the umbrella too long for the rest
of the family, Rafiq replied. It’s about time I do it for myself.
The Jumabhoy family may have weathered its recent storms so far, but discontent
has been brewing for some time in Singapore’s investment community about
how Scotts Holdings is managed. One reason for the displeasure is the price
Scotts set for its initial public share offering in August 1991 a hefty multiple
of 57 times earnings. Prospective investors were hardly hammering on the
door, though the subscription rate, at 1.3 times the shares available, was
just enough to spare everybody’s blushes.
Chief Executive Chng insists he is not bothered by market perceptions, arguing
that the company has ample growth opportunities in the region. Serviced apartments
will lead the charge. Scotts has five properties: Singapore (Palm Courtt
and Ascott, together comprising 321 units), Jakarta (188 units), Bangkok
(110 units), and London’s Ascott Mayfair (56 units).
Scotts also is actively looking at Phnom Penh, Ho Chi Minh City, Hanoi, Shanghai,
Sydney, Canberra and the major cities of India. It is developing residential
property in Singapore and Australia, and plans to open a food court in Vietnam.
The Ascott in Singapore, Jumabhoys’ 12-year-old flagship project, enjoyed
the advantage of being in the right place at the right time. As Singapore
emerged as a gateway city for Southeast Asia, the Ascott became a home away
from home for executives wanting to keep the family together while they explored
the terra incognita of Jakarta, Bangkok and Kuala Lumpur. Unlike a regular
hotel, it did not have high operating costs. Nor was it subject to the seasonal
vagaries of the tourism trade.
Since then, big property players like Robert Kuok’s Shangri-La, Ng Teng Fong’s
Far East group and Malaysia’s Sime Darby have opened their own serviced apartments
in Singapore, challenging the Ascott on its home turf.
Some analysts estimate the serviced apartments could contribute 70 percent
of Scotts’ total revenue next year, up from 50 percent. Lim Chung Chun of
Baring Securities (Singapore) Pte. Ltd. says: Scotts’ biggest plus point
is its assets. They have not yet seen the stream of earnings from their overseas
projects. Yes, the serviced apartment sector is getting crowded in Singapore,
but the growth is meeting unsatisfied demand. Scotts will do well.
Scotts says investors have failed to understand that the company is a service-provider,
not a real-estate developer; a shopping-center manager, not a mall-builder.
Scotts Shopping Center opened Singapore’s first air-conditioned food court
in 1985, published the first shopping-center magazine in 1990, and runs weekly
talks on issues ranging from physical abuse to fashion trends for its core
target clientele: sophisticated Singaporean career women between 25 and 35.
Still, this is a maturing market and sales growth lies in competing for the
regional tourist dollar. Here, however, Scotts is up against shopping malls
in Indonesia and Malaysia, which in some cases have taken well-managed centers
like Scotts as their inspiration and improved upon them.
Scotts’ one foray into new terrain in Singapore faltered badly. In 1991,
almost as a personal project of Rafiq’s, it opened Lau Pa Sat (or festival
market). The aim was to create an Asian equivalent of London’s bohemian Covent
Garden. But constraints imposed by authorities virtually strangled it at
birth. Air conditioning was forbidden, so the tie-wearing lunch crowd ate
elsewhere. At night the area was deserted. Scotts sold the market last year
for $5.7 million after spending $7.1 million. It lost $1.4 million in 1994
Yet even as the troubles have piled up, Ameer Jumabhoy has maintained a family
trait of remaining calm in the face of crisis. As a recent guest at the Singapore
home of the Indian High Commissioner, he airily dismissed the ructions over
the India land project: This is a storm in a tea-cup, he said. Forget these
family shenanigans. The company is doing fine.
Scotts’ fundamentals are certainly strong but the company is not large enough
to survive many major jolts. Scotts’ net earnings last year [$45,645, after
a big write-off on the Lau Pa Sat misadventure], are so small that they cannot
even cover their legal costs, says one businessman. When a large tanker is
hit, it can withstand it because it has resilience and strength. This is
a small ship. A small ship with several would-be captains squabbling on the