The soon-to-be ex-wife of Zoho cofounder and CEO Sridhar Vembu alleges he abandoned her and their special needs son and is keeping them from receiving their fair share.
After nearly a quarter of a century living in the San Francisco Bay area and running business software provider Zoho from there, Indian-born Sridhar Vembu decided to go home. The CEO and cofounder of Zoho, which Forbes values at nearly $5 billion, left California and settled into Mathalamparai village in the southern Indian state of Tamil Nadu. “I want my employees to live in these villages because it brings a lot of cross-fertilisation of ideas,” Vembu told Forbes India in June 2020. “I decided that if I’m going to start these rural initiatives, I’m going to need to set myself up in the village, too.”
His move and his dedication to providing rural employment has won him accolades. He appeared on the cover of Forbes India (a Forbes licensee) with a story of “his vision from the village” and has been favorably featured in numerous press articles. He was conferred the Padma Shri, one of India’s highest civilian awards, in 2021 and has been praised by Prime Minister Narendra Modi.
His wife of three decades, Pramila Srinivasan, has a different take. Vembu left for India in early 2020 and never returned. According to a source close to Srinivasan, he contacted her via WhatsApp in November 2020 to say he wanted a divorce and filed papers in August 2021. In the divorce case in California, where they resided together for years, she claims Vembu deliberately got rid of a big chunk of his Zoho stake in a complex transaction that moved Zoho’s intellectual property to India and eventually placed the majority of the shares with his sister and her husband, without ever telling her.
“My husband of 29 years not only abandoned me and his son with special needs in 2020,” Srinivasan states in a January court filing, “he decided to make fictitious transfers or ‘sales’ of our most valuable community asset to his family members without their paying any cash or other consideration, and without ever telling me or asking my permission.”
Pramila Srinivasan opines on her estranged husband’s hypocrisy.
Source: January 2023 filing from Pramila Srinivasan in the Vembu & Srinivasan divorce case.
Srinivasan declined to speak to Forbes. But John Farley, her attorney and partner at Rottenstreich Lieberman Farley LLP in New York City, commented that “the community property law in California does not allow a spouse during marriage to secretly dispose of assets without obtaining the other spouse’s consent. After all ‘community’ property in effect means jointly owned—a duty to be transparent with your spouse and not to engage in secret transactions to try to evade the 50-50 legal requirement.”
Vembu disputes the allegations. “I never transferred any shares to anyone and my (and therefore Pramila’s) financial interest in these entities never went down, so the question does not arise of me hiding anything,” Vembu said in an email to Forbes. “I moved to India to devote myself to my dream of rural development and revival, powered by technology,” Vembu added later. “I tried to get (Pramila) to come to India with Siddhu [our son] but she refused and the pandemic laid waste to any hope of reconciling. I have never left her or Siddhu to any financial hardship.” He does not address the allegation that he didn’t discuss the sale of Zoho’s intellectual property with his wife.
Divorces among wealthy couples can be nasty affairs, with the most extreme involving everything from forged artwork and smelly fish left in an ex-spouse’s air conditioning vents to fights over hidden assets. An ex-wife of a Russian oligarch accused her husband of transferring a Palm Beach mansion and two Greek islands to overseas trusts to put them out of her reach. The ex-husband of candy heiress Jacqueline Mars alleged that he had no idea his former wife was a billionaire when he signed an ironclad $30 million prenup.
What makes this story so unusual is how and why Zoho’s cofounders and biggest shareholders agreed to a series of transactions that not only valued the company and its intellectual property at what now seems like a low figure, but also ultimately resulted in them having much smaller stakes in the company.
While Vembu has been running Zoho for nearly a quarter century, his sister Radha and brother Sekar own the bulk of the company, according to Indian filings. A product manager at Zoho, Radha has a 47.8% stake in the company that’s currently worth an estimated $2.2 billion. Sekar, founder of Vembu Technologies in Chennai, owns 35.2% worth $1.6 billion. Vembu owns 5%, worth $225 million. The family, now worth at least $4 billion, was ranked No. 48 on Forbes’ 2022 list of India’s 100 Richest under Sridhar’s name due to his prominence as founder and CEO.
In a court filing, Vembu says “Media reports about my net worth are highly exaggerated because they are based on assumptions and suppositions, not facts. To get facts, private financial information about ZCPL [Zoho India] would have to be disclosed to the media—and ZCPL, as a private company, does not do that.” However, the company does have to disclose its financials and shareholdings to the Indian Ministry of Corporate Affairs, which puts the information in a searchable database and is the basis of Forbes’ valuation of the family’s fortune.
Forbes was unable to reach either Radha or Sekar. Vembu’s lawyers declined to comment. According to a June 2022 deposition of Ram Srinivasan, the siblings’ paternal uncle (no relation to Pramila Srinivasan), Radha holds the shares for Vembu. “ ‘She replied that I just got sucked into it..It is Sridhar’s money,” Ram Srinivasan said, claiming that Radha told him that “Sridhar asked me to hold it.” When asked why Vembu might have asked her to hold the shares, rather than his brothers, the uncle speculated that it might have something to do with the fact that the brothers were often fighting. And, he added, “In my opinion, after his divorce is all done, the whole money will go to [Sridhar] one way or another.”
Sridhar Vembu’s uncle, Ram Srinivasan, gives his take.
Source: June 2022 Deposition by Ram Srinivasan in the Vembu & Srinivasan divorce case.
One thing is for certain: Vembu has gladly portrayed himself to be a bootstrapped entrepreneur behind one of India’s most successful software companies who nevertheless has no interest in being rich. “I am a capitalist and I don’t care about net worth,” he told Forbes India in 2020.
A graduate of the Indian Institute of Technology Madras, Vembu first arrived in the U.S. in 1989 to get a PhD in electrical engineering from Princeton. He married Srinivasan (whom he met while he was at graduate school) in 1993 and joined Qualcomm the following year. He worked at Qualcomm for two years on wireless communication technology, according to a 2007 interview. Soon he moved to the San Francisco Bay area and began running AdventNet, the predecessor to Zoho, though its origin story, like many details in this divorce case, is up for debate. Zoho declined to comment but the company’s own website says it was started in a small apartment in the suburbs of Chennai. A timeline on the same site says it began as AdventNet in New Jersey. In a 2017 Forbes Asia article, Vembu is said to have teamed up with Tony Thomas, an AT&T Bell Labs engineer, to start AdventNet along with Vembu’s brothers Kumar and Sekar and two other friends. In Vembu’s declaration, he says he didn’t found the initial company, called Advent Network Management, but simply introduced Thomas to his brother Kumar, who had his own company in India, and the two began working together. Vembu later worked with Thomas. Then, in 1998, Thomas restructured the company into AdventNet, giving himself a 45% stake and Vembu a 22% stake. (This is a different tale than the one he shared with Forbes Asia and Forbes India; both publications describe him as the founder or cofounder of AdventNet and Zoho.)
Meanwhile Srinivasan, who got a PhD in electrical and computer engineering from Purdue University in 1997, says she worked to support the couple during these early years. Since 2010 she has run a company called MedicalMine that provides electronic health records. She also takes care of their 23-year-old son, who has autism and special needs, and started a nonprofit, The Brain Foundation, in 2019 to support research and treatment for people with autism.
Regardless of the backstory, AdventNet took off. Revenue hit $10 million by 2000, according to an interview Vembu gave. That same year he turned down a venture capitalist whose investment would have valued the company at $200 million, according to a 2012 Bloomberg article. Behind the scenes – and nowhere to be found on its website or the many news articles that feature Vembu – there were changes afoot.
According to Vembu’s legal declaration, he and Thomas no longer saw eye to eye. So at a January 2010 board meeting, they agreed to sell the company, renamed Zoho the previous year. In his deposition, Thomas did not mention any disagreement. Instead he said that the case was made to him by multiple people including Vembu that it made sense to hold the IP in India where the product was being developed. “Sridhar and I would talk all the time…the sentiment was definitely very clear. He felt it, and by the end of it, I felt equally strongly that it made sense, and the ownership should be shifted.” In December, a new company, Zoho Corporation Private Limited, was set up in India by Vembu and his brother-in-law Rajendran Dandapani, according to a memorandum of association, showing them owning 43% and 57%, respectively. Vembu’s lawyers say he only ever owned 5% of the India-based company.
By the end of 2011, more shares were issued and a new shareholding structure was set forth: according to a cap table filed by Srinivasan’s lawyers, Vembu’s sister Radha got a 49% stake, her husband Dandapani received 34%, Thomas held 8% and Vembu 5%, with three others owning the remaining 4%. Thomas and Vembu sold Zoho’s intellectual property to the new entity ZPCL for $50 million, though it’s unclear how and when the money was paid. Thomas said in his declaration that he thought payments were made over time. According to Srinavasan’s court filings, there is no evidence that the new entity ever paid. In his email, Vembu said the proceeds of the sale are still held by the original U.S. company, now called T&V Holdings, as cash, real estate assets and securities, “and have appreciated in value since the IP sale transaction.” As to the price, both Vembu and Thomas, in his deposition, say an independent valuation was done. Thomas also said he thought the price was fair but confirmed that no other offers were solicited.
In 2014, the IRS started an audit of Zoho. The case was later closed; Vembu said in his sworn statement that in 2017, the IRS concluded that it was a “legitimate arm’s length transaction.” Srinavasan’s legal team has asked for a copy of the IRS letter but has not received it yet.
In another twist, the company’s ownership changed yet again. According to a new cap table filed in 2015, Radha’s husband Dandapani dropped off the list of shareholders and Vembu’s brother Sekar showed up with a 35% stake.
Vembu is adamant he did nothing wrong. In his sworn declaration in January, Vembu says “I never transferred my ownership interest in the Zoho Corporation to Radha without consideration.”
Also these changes took place years before their split, raising the question as to why. Some have suggested there was a tax benefit moving to India. Prior to 2012, software could be exported from India tax free from special economic zones; a government document shows that Zoho India is located in such a zone. Today software exports are still exempt from taxes on such items as goods and services, but income tax is applicable on profits, says Gautam Khurana, managing partner of India Law Offices in Delhi, India, who also points out that it’s much easier for an Indian company to hire Indian staffers than one that’s U.S. based. It is also possible that Vembu and Thomas did, in fact, believe they got a fair deal.
There is no doubt that Vembu has run the show from the start, overseeing a period of immense growth. Today the still privately-held Zoho has 12,000 employees and 80 million users of its software. Revenue for the year through March 2022 hit $922 million, and Forbes values the company at $4.5 billion.
As for his ex-wife and son, Vembu is remorseful: “Our family was destroyed by the tragedy of autism. Pramila was a super-mom of autism, and she truly made heroic efforts,” said Vembu, who described two decades of non-stop treatment for their son with so many drugs, infusions, therapies and increasingly risky treatments that he could no longer condone. “I was so depressed that I considered suicide at one point. Eventually I found my own relief to my suffering through service to rural poor in India.”
His uncle suggests in his deposition that Vembu might have bigger plans. Vembu, who supports the ruling BJP party in India and Prime Minister Narendra Modi, could go into politics: “Now that he has money, next thing is power.”
Regardless, this case won’t be settled any time soon. Srinivasan’s legal team has asked for 147 categories of documents and a spokesperson for her said that “Pramila looks forward to her day in court and the opportunity to shed light on the transactions Sridhar never disclosed to her over 10 years and is trying to use to deprive her and their son of their fair share under the laws of the state of California. She trusts the California court to do justice after hearing all the evidence.”
Says Charles Kolstad, a partner at the law firm Withers Worldwide who specializes in international tax and corporate matters and has been in practice for four decades, “There is a pattern of successful entrepreneurs whose spouses have supported them, and weird things happen…and the spouses get left in the lurch. It’s sad.”