The future of family owned businesses in India

The dominance of family owned businesses in India is well known. However, has what Malvinder Singh done with Ranbaxy shown us what’s to come in years ahead?

For those not watching, Malvinder Singh was the Chairman & CEO of Ranbaxy, India’s largest pharmaceuticals company, who decided that he’s had enough and stepped down.

Ranbaxy was bought by Malvinder’s grandfather, who saw the opportunity in the generics market of India for low cost drugs. Malvinder’s father took charge and grew the business to spectacular levels and took it to a global platform. Malvinder was initiated into the business when his father was diagnosed with cancer. He took on various minor roles in a short span and then emerged as the CEO.

During his apprenticeship, the role of leading Ranbaxy was instituted in a professional CEO – one who wasn’t a member of the family – and at that time, the general public saw this as a positive move and various commentators suggested that the future had arrived. Little did they realise that Malvinder would take charge and sweep aside the same professional management that they had put in place. In fact, Malvinder went that step further and argued that just because his family owned a majority stake didn’t mean he wasn’t “professional” or “qualified” to lead the firm.

Yes, he also brought success to the firm and vindicated his convinction of leading the firm to new heights – most notably, with the sale of his family stake to a Japanese firm for approx $5bn. He may have retained his position as CEO of the firm, but I suspect that after various issues related to the US drugs regulator and also their huge losses, he would’ve had no choice but to walk.

In one way, this seems to complete the story. With the sale of their stake, Malvinder hung in there and still talked of Ranbaxy as an Indian firm. With his exit, Ranbaxy can move on.

So, has Malvinder shown us the future of family owned businesses? Please post your comments.

India this week: Advani, Sonia, Blair, and India Inc.

Quite a week in India as far as the interplay of politics and business are concerned. Let me explain:

LK ADVANI & INDIA INC

With a number of state elections taking place as we speak, and the prospect of a general election within the next six months, LK Advani, Prime Ministerial candidate, brought business leaders together, on Thursday, to advise him on the options available to take control the impact of the financial crisis in India.

It’s been reported that the good and great of Indian commerce advised him to work with the Congress to help India weather the storm, knowing fully well that with elections pending, it was a tough commitment for Mr Advani to make. The BJP have been quick to point out that comments such as those of Mr Chidambaram, equating Mr Advani to John McCain, have made it impossible for the two sides to work together in a bipartisan manner.

SONIA GANDHI – BANK NATIONALISATION IS GOOD

Reacting to the press coverage of Mr Advani meeting the ambassadors of India Inc, UPA Chairman, Sonia Gandhi’s gone out and made remarks of her own that support her mother in-law, Indira Gandhi’s decision to nationalise banks four decades ago.

Sure, India’s prudence and protectionist attitude may shield her from some of the turmoil being witnessed today, but I believe that India stands to gain from a more open economy. I’m not just talking about the burgeoning middle class, but also of the most vunerable sections of society.

TONY BLAIR

Mr Blair’s delivered a speech at the Hindustan Times leadership Summit and and excerpt from his speech struck me as being spot on. He said:

On India’s role, he said, “India has to decide its future path. One thing is for sure, India will demand its rightful place in the councils of the world…no wonder it was the G-20 that met in Washington and will meet in London, not the G-8. A UNSC without India as a permanent member is an anachronism. An IMF or a World Bank without a proper role for India, will no longer do. Across the world’s agenda, India will demand and will receive the position due to one of the world’s major powers.”  

But, he cautioned: “Beware one thing: with the power will come the responsibility. All of a sudden, you will find the expectation that, just as you will, in partnership with others, lead the world, so you will be able to solve the problems. People will knock on your door not to give opinions, but to hear answers. It is an exciting prospect but also a daunting one.”