India has third highest number of familyowned firms: report

MUMBAI: MORE THAN 50% OF THE COMPANIES IN THE BSE 100 ARE FAMILYOWNED. THAT INCLUDES RIL, DABUR INDIA AND EMAMI

At 111, India has the third highest number of publicly-listed family-owned companies in the world, according to Credit Suisse Research Institute’s latest CS Family 2018 report. China tops the list with 159 companies, followed by the US at 121.

For the report, Credit Suisse identified family businesses based on two criteria—direct shareholding by founders or descendants is at least 20%, and voting rights held by the founders or descendants are at least 20%. The survey looks at 1,015 family-owned companies around the world with a mini- mum market capitalization of $250 million. By that measure, over 50% of the companies in the BSE 100 are family-owned. That includes Reliance Industries Ltd, Dabur India Ltd and Emami Ltd. Almost 20% firms are government-owned.

The number of Indian companies in the report increased from 108 in 2017 to 111 this year, while in the case of China, the number declined to 159 in 2018 from 167 in the previous year. The average market capitalization of the family-owned companies in India was $7.6 billion compared to $6.5 billion a year ago, according to the report.

In terms of market capitalization, in Asia, excluding Japan, the family-owned com- pany segment is dominated by China, India and Hong Kong. China accounts for around $1.4 trillion, India for around $839 billion and Hong Kong is approximately $633 billion. The average family-owned company in China and Hong Kong has a market capitalization of $8.7 billion, compared to $7.6 billion in India. Based on financial performance, Indian and Chinese family-owned firms dominate the list of success stories, the report notes.

“This year we find familyowned businesses are continuing to outperform their peers in every region, every sector, whatever their size,” said Eugene Klerk, head analyst, thematic investments at Credit Suisse and the report’s lead author. “We believe this is down to the longer-term outlook of family-owned businesses relying less on external funding and investing more in research and development. Our research on a global scale also suggests family-owned firms with special voting right structures perform relatively in line with those with ordinary shares, contrary to the fears expressed by many investors.”

For instance, family-owned companies in China, Indonesia and India have been among the fastest growing companies in Asia excluding Japan on a one-year and 10-year basis. Also more than 50% of the top 30 family-owned firms in Asia are from India.

“There is a case to believe that family-owned businesses do well because they have the skin in the game and the involvement is extremely high. The owner is far more passionate,” said Srikanth Subramanian, senior executive director, Kotak Wealth Management.