You are here: Home » Markets » News
Business Standard

Why Premjis, Ambanis and Nadars beat non-family run companies

Family-owned businesses outdo peers in returns since 2006, suggests a Credit Suisse report

Credit Suisse | Indian companies | Mukesh Ambani

Puneet Wadhwa  |  New Delhi 

Representative image. Photo: Shutterstock
Representative image. Photo: Shutterstock

The return generated by family-owned businesses have been higher than the non-family owned ones since 2006, finds a study from Using its proprietary ‘Family 1000’ database of over 1,000 publicly listed family or founder-owned companies, the analysis suggests that since 2006, the overall ‘Family 1000’ universe has outperformed non-family-owned companies by an annual average of 370 basis points (bps).

The research house classifies a family-owned company where either the founder / family owns at least 20 per cent of the company’s share capital or where the founder / family controls at least 20 per cent of the company’s voting rights.

“Reasons for this include superior revenue growth and cash flow returns. Family-owned companies offer safety in periods of market stress – during the first six months of this year, they outperformed non-family-owned companies by 300 bps,” the report said.

Family-owned companies, the Credit Suisse findings suggest, tend to be more profitable. Since 2006, revenue growth generated by such companies has been over 200 bps higher than that of non-family-owned companies for both smaller and larger companies. That apart, they, on average, tend to have slightly better ESG scores than non-family-owned companies. CLICK HERE TO VIEW THE TABLE

Even Covid-19 has not dented their spirit even though 80 per cent of family-owned businesses saying that they have been negatively impacted by the pandemic. Despite the impact on revenue growth this year, family-owned companies surveyed viewed Covid-19 as slightly less of a concern to their firm’s future prospects with 21 per cent of such companies saying the pandemic had either not had a significant impact on their business or had even been a net positive. “Family-owned companies have also resorted less to furloughing their staff than non-family-owned companies (46 per cent versus 55 per cent),” the Credit Suisse report said.

Indian firms score high

Among regions, performance has been strongest for family-owned companies in Europe (470bps) and Asia (over 500bps) per annum since 2006. North America, on the other hand, family-owned companies showed a more moderate outperformance of around 260 bps per annum. The report covered 12 in APAC, including Japan, which continue to dominate and represent a 51 per cent share of the universe, with a total of 540 companies and a market capitalisation of over $5.56 trillion. CLICK HERE TO VIEW THE TABLE

The universe includes 111 Indian family-owned companies, with a total market capitalisation of $922.7 billion. Wipro, Reliance Industries (RIL), Dr Reddys Laboratories, HCL Technologies, Cipla, and Divis Laboratories are the six Indian firms that feature prominently in the top-ranked companies in the Asia ex-Japan region.

“Family-owned companies, including those from India in our proprietary database, continue to show signs of outperformance in growth and profitability as well as resilience to the ongoing Covid-19 pandemic,” said Mihir J. (Mickey) Doshi, Managing Director and Country CEO of Credit Suisse, India.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, September 02 2020. 14:47 IST