From Overseas Press

No longer all in the family: India Inc steps out

(Agencies)
Updated: 2010-08-16 10:17

SKIN IN THE GAME

It is not all a cakewalk: India has a fair share of failed family businesses and heirs who ran firms into the ground. An admission of fraud last year by the chairman of Satyam Computer Services shook the deep-rooted faith in family-owned businesses.

As did the Ambani feud, which was peppered with lobbying, public outbursts and court fights that prompted a top judge to tell them to go back to their mother to settle their differences.

Others, including the Godrej Group and the Munjals of Hero Group, a joint venture partner of Honda Motor, have drawn up succession plans to avoid such a spectacle.

Infrastructure-focused GMR Group even has a forum for spouses to air grievances and spells out a clear role for professionals.

Others, like the Bajaj Group, still do it the old-fashioned way, hashing out differences over dinner at home, as they did recently when the third generation of owners fell out over succession and ownership of the group, one of India's largest, with interests in autos, financial services and appliances.

"We were able to reach an amicable settlement. It took time, but we did it without involving merchant bankers or middlemen. It was just us," said patriarch and chairman Rahul Bajaj.

Slowly, Indian firms are following the path of European and American firms of yore such as the Rothschilds, Rockefellers and Vanderbilts, who relinquished management.

There are also a few rare instances of families selling out: apparel exporter Gokaldas sold to the Blackstone Group, and brothers Malvinder and Shivinder Singh, after years of running drugmaker Ranbaxy Laboratories, founded by their grandfather, sold out to Japan's Daiichi Sankyo.

There will be more such instances, Barclays' Hancock said.

"Cultural changes will lead to exits. The new generation is much less focused on the family business. They're not necessarily beholden to daddy. They're eager to strike out on their own."

Still, there is some merit to having the family involved.

"They have more skin in the game because it's their capital, their name and their children's future at stake," said Anjali Bansal, managing partner at consultancy Spencer Stuart India.

"There is value to having family in the business if they are the right people with the right skills for the right job."