Large family businesses dominate Indian commerce, with the ten most valuable family business groups in India worth nearly $900 billion, according to research firm Hurun India.
According to statistics – reported by the British newspaper The Economist – the value of the 100 largest groups in India amounts to $1.4 trillion, and first-generation family business groups represent only a fifth of this value.
According to a study co-authored by Kavil Ramachandran of the Indian School of Business, nine-tenths of listed companies in India are controlled by family firms, a much higher proportion than in the West.
While family businesses in the United States control few of the giant companies: there is no Bill Gates family at Microsoft, no Steve Jobs family at Apple, and media mogul Rupert Murdoch is under pressure from an activist investor to give up his family’s control of News Corp.
Disputes
The British newspaper reported that the huge role of families in India is changing the face of business; disputes over succession to corporate leadership seats, such as the one between Reliance Industries Chairman Mukesh Ambani and his brother (after 2002), are common, and often lead to the division of groups into multiple companies, and business empires are mixed through marriage.
According to the report, foreign companies such as American Disney realized that doing business in the country is easier with the help of a well-connected family.
After independence from Britain, Indian governments sought to avoid the dominance of a few families in the economy, and passed various laws between 1947 and 1969 to limit the growth of large corporations. Many companies were nationalized and the state kept various industries, such as mining and communications, for itself.
But in practice, the enormous regulatory burden of doing business in the country continued to benefit large, well-connected family businesses, an advantage that persists today, the report says.
In a country with weak institutions, these firms are better positioned to attract capital, negotiate with workers, and influence government policy in their favor, and a focus on leaving a legacy may also encourage family businesses to invest more in their long-term success.
It helps that India, unlike many rich countries, has not imposed an inheritance tax since 1985, making it easier to maintain family control across generations, the British newspaper reported.
Change is coming
However, there are signs that change is underway, and not just at Reliance, which is expected to be taken over by an old hand named Manoj Modi after the departure of Mukesh Ambani (who is not from his family).
The report added that there are very few Tata family members left in the famous company that bears the family name, and the last member of the family to run it, Ratan Tata, stepped down from his position in 2012 (albeit with a brief appearance in 2016).
When Anand Mahindra retired in 2020 as chairman of Mahindra Group, another Indian company, he handed over the reins to an employee, as did Harsh Mariwala when he stepped down in 2014 as chairman of Marico, a family business he had transformed into a major consumer goods company.
Over time, the growing dynamism of the Indian economy may weaken the grip of families on businesses, the paper says, but change will be slow.
Gautam Adani, India’s second-richest man and founder of the Adani Group, has been vocal about his desire for his family to succeed him as Reliance CEO.
