Indian family companies

Hi everyone

India has by many been seen as THE new country for business. Many people do expect them to overtake USA and together with China lead the world in the next century or so. Will it be that easy? The Economist had an article about India back in October. The article was quite balanced, and told about both possibilities and threats for India’s rise. One thing that was pointed out as a potential issue is the fact that most of the biggest companies in India are run by families, and that they are into almost everything. It is difficult for others to establish themselves new business.

The “big 6” are Tata & Sons, Mahindra & Mahindra, Reliance Industries, Reliance Group, Aditya Birla and OP Jindal. All of these are run by their respective families and have been so for some decades now. Some of them have been run like this for a number of generations. What that are the same for all of these companies / groups are that they are into almost every different business. The income they generate in one area is pumped into starting up new companies in other areas. Companies like Airtel and HCL boomed in the 1990s when the telecom industry boomed. After that they have spread into other sectors.

How does this affect the business life in India? Well, one thing is that the new up comers are fewer and farer between then what they were some 10-15 years ago. We don’t have companies like Wipro and Satyam that just accelerates into the market with a huge pace. If some of the big family companies see an opportunity in a new market, they will immediately move into that market. We have seen that the banks are reluctant to give loans to newcomers, which have made this different between “small and huge” even bigger.

In an upcoming article, I will write more about this issue, and also write about the one newcomer that have managed to establish themselves into the market and which seems to have a very bright future.

Talk to you soon

Karsten

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