Family plays a central role in the lives of Indians, a fact that extends prominently into the business world. In India, family-owned businesses (FOBs) account for more than 75% of the national GDP, one of the highest ratios globally, with projections suggesting this could increase to 80-85% by 2047.
According to McKinsey research, FOBs experienced revenue growth approximately 2.3% higher than their non-family-owned counterparts between 2017 and 2022. Additionally, from 2012 to 2022, FOBs delivered returns to shareholders that were twice as high as those of non-family businesses. These FOBs wield significant influence in Indian commerce, with the top ten family-business groups valued at nearly $900 billion, according to Hurun India.
The total value of the top 100 family firms reaches $1.4 trillion, with first-generation businesses contributing only 20% of this figure. Research by Kavil Ramachandran from the Indian School of Business reveals that 90% of India's listed companies are family-controlled, a stark contrast to the Western corporate landscape where family control is rare, exemplified by the absence of family influence at companies like Microsoft and Apple.
In India, the dominance of family-run firms shapes the business environment uniquely. Succession disputes, such as the high-profile conflict between Mukesh and Anil Ambani, often result in conglomerates being divided into separate entities. Marital alliances among corporate families and the ease of collaborating with influential families have made it easier for foreign companies like Disney to operate in India.
Despite efforts by post-independence governments to prevent concentration of economic power through regulations and nationalizations, large family enterprises have continued to thrive due to their established connections and adaptability. These firms leverage their influence to attract capital, negotiate labour agreements, and shape government policies to their advantage. The absence of inheritance tax since 1985 has further facilitated the maintenance of family control across generations.
However, change is beginning to emerge. The Tata Group, once dominated by family members, saw the departure of the last Tata executive, Ratan Tata, in 2012, and the Mahindra Group transitioned leadership from Anand Mahindra to an employee in 2020. Similarly, Harsh Mariwala of Marico stepped down in 2014, passing leadership to a successor outside the family.
These transitions present opportunities for private-equity firms, with companies like Cipla and Haldiram’s potentially available for sale. The growing dynamism of India’s economy, marked by an increase in new business registrations and a vibrant tech scene, suggests that the grip of family dynasties might loosen over time.
In today’s rapidly evolving technological landscape, advancements such as AI are also contributing to shorter business lifespans and increased competition. For FOBs, this presents the dual challenge of sustaining their high growth rates while staying relevant amidst increasing disruptions. To continue driving growth for themselves and the broader economy, FOBs must be bold and innovative. It is crucial for their owners to grasp the factors that contribute to exceptional performance among FOBs in India.
Yet, change will be gradual. Gautam Adani, India’s second-richest individual and head of the Adani Group, is actively building a family dynasty, with his children deeply involved in the business. The steel giant JSW is preparing for its second succession, and the Bajaj Group has navigated two succession phases with indications of a third to come. India’s family-run empires appear poised to persist well into the future.
