The distinct flavour of Indian entrepreneurship

Please note: Barclays Private Bank does not endorse any of the companies or individuals referenced in this article.

Whether you drive a Mahindra SUV, make Nimbu Pani with Dabur Hommade Lemoneez, scare away mosquitos with Godrej Goodknight repellants, or snack on Wadia Group’s Britannia biscuits, one thing is clear: in India, big family businesses are part of life.

Then there are the titans of Indian industry, such as the Ambani family’s Reliance Industries, the Bajaj family’s Bajaj Group, and the Birla family’s Aditya Birla Group. Which is not to mention powerhouse software developers such as HCL Technologies, owned by the Nadar family, and Wipro, owned by the Premji family.

The outsized role that multi-generational family businesses play in Indian society has helped them to build trust with customers for decades, and in some cases, more than a century. Today, family businesses are the powerhouse of the Indian economy, accounting for almost 80% of gross domestic product, a larger proportion than any other leading nation¹. And Indian family businesses are outperforming their global peers: some 83% reported substantial growth in 2022-23, far more than the 71% global average².

The distinct flavour of family-centric entrepreneurship in India, imbued with heritage and legacy, has helped the country’s economy to grow rapidly across generations. India, now the world’s most populous country with 1.4 billion inhabitants, has the fastest-growing economy in the G20³ and its expanding middle class is expected to account for 41% of its population by 2031⁴. 

Building for the next generation of entrepreneurs 

Entrepreneurship has become part of the social and cultural fabric of India. Millions of Indians tune in every week to watch Rahul Dua send budding entrepreneurs to their fate in Shark Tank India, with audience demand for the show said to be nearly nine times that of the average TV series in the country⁵.

Government policy towards entrepreneurship has been, and remains, favourable. Among other things, the government formed Startup India during its G20 presidency of 2023 to provide entrepreneurs with advice on fundraising, marketing, and other skills they need to build their businesses. Government initiatives are also helping to cultivate entrepreneurship among young Indians through schemes such as Atal Tinkering Labs. The stated aim of the scheme is to “foster curiosity, creativity, and imagination in young minds” and to teach design, computational, adaptive learning, and physical computing skills, and claims to reach more than 11 million children in 10,000 locations⁶.

It is perhaps no surprise, then, that India has a growing reputation as a hotbed for entrepreneurship. Indeed, India is said to be one of the best countries in the world to start a business. It ranked second in the latest Global Entrepreneurship Monitor report, which praised the country’s high levels of long-term business ownership, as well as social and cultural factors that support entrepreneurship⁷. 

Indian family businesses have proportionately more women on their boards than their global peers, and more board members under the age of 40⁸. For several years now, the largest Indian family businesses have been deleveraging historically debt-laden balance sheets and diversifying into new industries.

Challenges for now and the future

However, there is more work to be done on modernisation. For one, a tradition remains of conveying family business values informally — often orally — rather than creating written governance policies. Environmental, social and governance issues, and targets for diversity, equity and inclusion, are often not given due consideration despite their importance to the emerging Gen-Z consumer base and workforce.

Formalised succession plans are also missing from a large proportion of Indian family businesses, which is perhaps surprising given the weight attached to family legacy. This is problematic. Bumpy leadership transitions risk creating a Game of Thrones scenario, whereby family conflict upsets businesses operations and hinders the smooth transfer of wealth from one generation to the next. 

Then there is the digital sales gap. Incredibly, nearly two in five Indian family businesses report no digital sales whatsoever, according to a recent survey⁹. For three in five, digital sales are at or below 20%. Yet only about a quarter of Indian family businesses see digital adoption as a top priority, the same survey found. As the Indian economy continues to open up, competition from digitally-savvy foreign businesses will increase domestically and internationally — so India’s family businesses will need to close this digital sales gap.

A new mindset for managing wealth

Increasingly, for large Indian family businesses, modernisation strategies are falling under the remit of the family office. Whereas once they focused solely on managing family wealth, they are now taking charge of matters such as corporate governance, succession planning, diversification strategy, and philanthropy.

Even so, wealth management remains the central responsibility of the family office, and we are seeing significant disruption to the traditional model. 

The defensive mindset, which often involved a founder retaining their company’s stock and perhaps buying a little real estate and gold, is making way for a more sophisticated approach. This might involve ownership of public shares and private debt, partnering on deals with venture capital and private equity firms, buying distressed assets, buying high-yield and performing credit, buying infrastructure assets, investing in private fixed income, and taking stakes in start-ups in high-growth sectors such as technology, healthcare, and renewable energy.

The contemporary approach to wealth management is also being adopted by super-rich Indians, of which there are rapidly growing numbers. According to one estimate, the number of ultra-high-net-worth Indians — those with personal assets of $30 million or more — will grow by 50% to nearly 20,000 between 2023 and 2028¹⁰.

I would estimate that family offices and super-rich Indians now invest as much as 30% of their wealth in private assets, compared with just 5% a generation ago. That is a big shift. Presently, we are seeing rising demand from the younger generation to invest in overseas assets — but growing strength in Indian capital markets, helped by the rise of Gujarat International Finance Tec-City, is helping to level the scales.

As we have seen with several blockbuster liquidity events of late, some family leaders are seeking to unlock wealth from their businesses though stock market floats, mergers or sales — perhaps because younger members of the family want to chart their own courses in business. We see this trend continuing, creating new scions of Indian family business imbued with the heritage and legacy of generations past. 

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