IN any study of entrepreneurship, should success be measured by longevity or resilience?¹ One way to answer this question is to see how Mumbai’s leading business families have coped with upheavals between 1964 and 1999. Let’s start by looking at the top 50 business houses of India from 1964 to 1999, and then drill down to the Mumbai groups in that list (see Tables I and II). What are the key findings?

Size matters: Bigger family groups either take longer to wither away or are more resilient. Mumbai’s shooting stars of the 1964-1990, i.e., groups which dropped out of the ranking (Mangaldas Parekh, Scindia, Vissanji, Thackersey and Kilachand) are all from the bottom half of the list. Similarly, business families which dropped out of the list between 1990-1999 (Chowgule, Mehra, Ghia, Ashok Birla and Nirlon) are also from the bottom half of the list. It should be noted however that Godrej drops out because a substantial part of the group is privately held. On the other hand, though the performance of groups like Walchand, Kirloskar and Khatau (who were in the top half) was clearly sliding, they took longer to drop out of the list.

The list of survivors in this 35 year period is equally interesting: five of Mumbai’s business groups (Tata, Birla, Bajaj, Mahindra and Wadia) appear to have taken the huge changes in the competitive environment in their stride with remarkable dexterity. J.R.D. Tata was group chairman in 1939, Ratan Tata, his nephew, heads it today. G.D. Birla’s great-grandson, Kumar Mangalam, presides over India’s sixth biggest business group. Nusli Wadia grafted a petrochemical-to-biscuits business on the textile inheritance created by Sir Ness Wadia while Anand Mahindra and Rahul Bajaj are expanding on the base inherited from their grandfathers.

Taking the entire sample, the activity at the lower end of the two tables is more hectic than at the top as new groups thrust upwards. The large number of new groups in the 1990-1999 period could also be because of the change in calculation from assets to market capitalization.

Family splits effect: Of the drop outs among Mumbai business houses between 1964-1999, there have been family divorces in almost half the business groups: Thackersey, Kilachand, Ghia, Walchand, Khatau. Would they, could they, have remained in the top 50 league had they stayed together? It’s a moot point. Table II also shows splintered Mumbai groups: Aditya Birla, Ajay Piramal, Harsh Mariwala, Rajen Raheja and Vijaypat Singhania. Would they, could they, have made it to the table had they not split up?

 

 

Focus and diversification: One key change taking place – today’s family groups are more likely to be running one large company while the earlier business houses were diversified conglomerates. For example, in the 1964 list, we see that almost every group has a finger in several pies. Kilachand and Khatau were perhaps the least diversified, in the sense that though they had large financial interests in several companies, the family managed only a few companies, largely in cotton textiles. Bajaj in 1964 was a fairly diversified group: work on launching Bajaj Auto had begun. Mukund Steel (a joint venture with Viren Shah) was up and running, the sugar mill which was the basis of their industrial activities was humming away as were numerous smaller concerns.

The 1999 list however is radically different. Leaving aside the Tatas and the Birlas, the 1999 list presents a completely different picture with as many as seven of the new Mumbai groups being tightly focused on one business, and very often operating though just one company.

 

 

This move away from diversification and conglomerates can partly – but not wholly – be explained by changes in government legislation. Earlier, markets were small and highly entrepreneurial businessmen would enter another market as growth flattened in a particular business or segment. In the 1960s and later, the main routes open for groups hungry for growth were acquisitions or growth outside India. There were limits to organic growth and entrepreneurship with government restrictions on size strait-jacketing business families, forcing them to diversify into unrelated business.

In 1991, many of the draconian provisions of the MRTP Act were discarded releasing a surge of energy. More important perhaps was the Dhirubhai Ambani factor. The size and scale of the Patalganga, Hazira and Jamnagar complexes encouraged Indian business families – and Indian bureaucrats and politicians – to shed their ‘small is beautiful’ mindset. Financial results were another factor and the visible success of companies such as Bajaj Auto who refused to diversify was not lost. Difficulties in managing several companies in different businesses in an increasingly complex environment became another reason for groups to stay focused. By 1999, only 18 family groups were conglomerates. And even out of these 18, for many groups such as Ambani, Bajaj, Wadia and Mahindra, their market cap was dominated by one flagship company. Core competency became the new buzzword and 31 of the new family groups appear to swear by it.

Another reason could be the change in calculation. It is no secret that fund managers prefer to invest in focused companies – they prefer their portfolio to be diversified than the companies they invest in, thereby pushing up the market cap of companies which are focused and downgrading companies which are in several businesses. Indian business families are reacting to this change by restructuring their holdings. The Aditya Birla group headed by Kumar Mangalam, for example, is merging its cement interests into one large company instead of being divisions in half a dozen firms.

However, it should also be noted that of the 31 family groups which dropped out of the Top 50 between 1990-1999, quite a few were in fact focused in their particular areas, such as the Singhanias of LML, the Mehras of Orkay, the Seth’s of Garden Silk, and the Shroffs of Facor, to name just a few.

 

 

Quality of management: The composition of the family groups in the two tables suggest that external factors are important but internal issues are perhaps more important. After independence, Indian family groups indulged in furious asset-building and created several mega-empires. As we have seen, a few survived but most crumbled into the ashes of rusting plant and machinery. An inability to withstand the zephyrs of change, outdated technology, outright mismanagement, over-stretched resources, poor labour-management skills – the reasons for failure are myriad.

 

 

A comparison between Scindia and Inchcape may be in order. Both Scindia and Inchcape have dropped out of the lists. Scindia Steamship used to be Indian entrepreneurship’s proudest achievement. From the moment of its birth, it faced the hostility of the world’s biggest shipping firm, the British India Steamship Corporation (otherwise known as the BI) and its doughty chairman, Lord Inchcape. Inchcape used every trick in the trade to try and destroy Scindia but failed. From a single liner firm in 1919, Scindia became India’s flagship carrier in 1947 and was a Top Twenty company until well into the ’60s. Or until its gerontocratic management achieved what Inchcape could not. By the 1990s, it had sunk without a trace. The Inchape group wound up its affairs in India at the end of the Raj and continues to function in the UK.

 

 

The dropouts are broadly of two types: (i) Older groups who founded or acquired their businesses in the 1950s and 1960s such as Mafatlal, Shriram, Kirloskar, Walchand, Lalbhai, Khatau, Sahu Jain, G.V. Naidu, and Parry. (ii) Newer groups which were active in the 1980s such as the Delhi-based, highly diversified Modi group; Deepak Singhania of LML; the Mumbai-based Mehra brothers of Orkay; Praful Seth of Garden Silk Mills with his state-of-the-art design room which forced Indian mills to upgrade textile design; Virenchee Sagar and Manhar Bhagat of Nirlon; and the Shroffs of Facor.

Both sets of groups faced very different challenges. In the second cluster, in several cases, new entrepreneurs challenged them in their businesses with larger and better run facilities. In the first cluster, internal managerial issues seem to be the bigger challenges.

 

 

Sometimes, as in the case of the Mafatlal group, both factors came to play with disastrous effect. The group was founded by Mafatlal Gagalbhai (1873-1944) when he acquired a small defunct mill in Ahmedabad in 1905. By 1930, the group was running nine mills, and had a pie in insurance, retail, financial services, textile trading and for brief moments, a jute mill and a shipping company. The group’s most ambitious foray however was in petrochemicals and in 1963 it pioneered Nocil, a project large enough for Time magazine to fly a reporter from New York to Bombay. By the 1990s however, low investments in technology and the growth of the powerloom sector had sapped the Mafatlal group’s textile business. Nocil became a pygmy in front of the Ambani’s Reliance group. And internecine family dynamics contributed further to the group’s decline.

Industry sector: So is success simply a question of being in the right business at the right time, as the cliché goes? Maybe so. In the 1930s, businesses which did well were cotton textiles, jute, sugar, cement, shipping, engineering, and tea. By the 1960s, the horizons had expanded and families engaged in paper, cotton textiles, construction, pharmaceuticals, and chemicals started doing well. In the 1990s, favourite sectors appear to be IT, petrochemicals, pharmaceuticals, two wheelers, jeeps and tractors, biscuits, cement, and electronic entertainment.

 

 

The brown burra sahebs: In some cases the family has disappeared, but the company has survived through a change in management. In the post-independence period we therefore see the rise of the brown burra sahebs. These families presided over the disintegration of the British commercial raj. In 1939, 32 of the leading 50 managing agency firms were owned by the British. After independence, the British gradually withdrew their capital out of these firms and the brown sahebs acquired the giant orphans and nursed them to health – sometimes.

Thus B.M. Khaitan acquired MacLeod and Williamson to cobble together a group which by the 1990s controlled almost 5% of the world tea market. The Goenkas acquired the Armenian-owned Duncan Brothers in the 1960s. The family split in the late 1970s, leading to the birth of RPG Enterprises. In 1999, Spencer and Harrisons contributed to RPG Enterprises’s Rs 740 million market cap. Meanwhile the takeover tycoon of the 1980s, Manu R. Chhabria, acquired rich old groups of the 1930s such as Dunlop, Shaw and Wallace. Finlay became Tata Tea which passed from Leslie Sawhney (JRD’s brother-in-law) to Darbari Seth for nurturing while Freddie Mehta was asked to look after Forbes and Nani Palkhivala headed ACC. Parry was taken over by the Murugappa Group.

The private sector seems to have done a better job than the government which tried to resuscitate the tattered elements of former British groups such as Martin Burn and Andrew Yule with limited success.

Geography: Curiously the biggest survivors – Tata and Birla – are based in western India. Any pre-1947 analysis would typically be heavily tilted in favour of Kolkata (the big British groups) and Mumbai (a miscellaneous collection of textile dynasties). However, by the 1960s, southern and northern groups have begun to make their presence felt and by 1999 there is a much more rounded, all-India character.

This quick look raises some interesting questions. The 1960s saw Kolkata’s jute groups tumbling. The 1970s saw a decimation of the Gujarati textile aristocracy in Mumbai and Ahmedabad. The 1980s saw a surprising erosion of the northern groups. The 1990s have seen the upsurge of the IT sector and pharma-based groups.

Equally, in the period 1990-1991, no new family group emerged from eastern India. There are 18 family groups from western India (Premji here has been clubbed in the western India group as he started out in Mumbai though the group’s headquarters are now in Bangalore). The north has contributed nine new groups while five have come from the south. Ironically, if 18 new business family groups from western India made their mark in 1990-1991, 16 groups from western India dropped out.

 

 

Community: In his 1977 study on the effects of industrial licensing, Ravi K. Hazari, a leading economist and bureaucrat, had pointed out that the Marwaris were India’s most aggressive business community. By 1999, while their dominance continued, the clout has begun to fade. The family groups in the 1999 list come from varied communities, several of which are not traditionally commercial ones. Some of the obvious trends include the dropping out of Maharashtrian groups such as Kirloskar, Garware and Walchand from the 1999 list, as well as the entry of Muslim groups such as Premji, Hamied and Khorakhiwala.

At the same time, the relevance of business communities today has diminished to virtually zero. In an era when information trickled in slowly, community networks were a source of competitive advantage. The community, with its unique referral system, was also a helpful way of hiring managers when head-hunting was unheard of. The network also provided seed capital at a pinch. These were important and tangible benefits but by the 1990s and 2000s, most of these functions had been taken over by other institutions and entrepreneurs no longer need to rely on their membership to a business community for financial and managerial aid.

 

 

Some notes on the data

Why 1964 and not 1947? The year 1964 is a turning point because this was when the Monopolies and Restrictive Trade Practices Commission was established. By that year, the MRTP Commission had finished collecting and sifting information on Indian big business and hence reliable data is available. (See Table I: Family Business Groups 1964-1999). The next interesting turning point is 1991, when the P.V. Narasimha Rao administration introduced the New Economic Policy, hence MRTP Commission data for March 1990 is used. The advantage lies in that it permits comparison between 1964 and 1990 given that data for both years is based on a common platform.

Strictly speaking the data for 1990 and 1999 is not comparable. The 1990 data uses assets as the basis for ranking the top 50 business families of India while the figures for 1999 are based on market capitalization. One could have calculated market cap for the top 50 groups in 1990 or their assets for 1999. However, by taking the popular yardstick of the time, the comparison yields some interesting trends. Using these three types of data also helps somewhat in measuring the effect of change.

 

TABLE I

Top 50 Business Groups 1964-1999

 

	1964		1990		1999
	GROUP	Assets	GROUP	Assets	GROUP	Mkt C
1	Tata (incl ACC)*	369.11	Tata (excl ACC)*	7546	Tata (excl ACC)*	22345
2	Birla	290.24	Birla	7235	Premji (Wipro)	18439
3	Martin Burn	108.72	Ambani*	3241	Ambani*	16060
4	Thapar	70.61	JK Singhania	1829	Singh (Ranbaxy)	7970
5	Bangur	65.29	Thapar	1763	Bajaj*	7667
6	Sahu Jain	61.06	Mafatlal*	1297	Aditya V Birla*	7204
7	Shriram	59.85	Bajaj*	1228	Munjal (Hero)	3715
8	Bird Heilgers	58.29	Modi	1192	Mohan (Punjab Tractors)	3173
9	JK Singhania	54.43	MA Chidambaram	1032	Raju (Satyam computers)	–
10	Sarabhai	54.29	TVS	909	Wadia*	2985
11	Walchand*	54.02	Shriram	800	Mahindra*	2910
12	Surajmul Nagarmul	44.83	UB	716	Hamied (Cipla)	2824
13	Goenka	43.56	Bangur	674	Pentafour	2742
14	Mafatlal*	43.11	Kirloskar*	633	Dr Reddy’s	2723
15	Andrew Yule	34.30	Walchand*	626	Sekhsaria (Guj Ambuja Cement)*	2719
16	Amalgamations	33.43	Mahindra*	620	Subhash Chandra*	2258
17	Jardine Henderson	31.42	Goenka	570	TVS	1986
18	Bajaj*	29.25	Nanda (Escorts)	537	Vinay Rai (Usha Rectifiers)	1876
19	BIC	29.05	Lalbhai	479	Burman (Dabur)	1859
20	Macneill & Barry	26.98	Ruia (Essar)*	437	Khorakhiwala (Wockhardt)*	1315
21	Lalbhai	26.20	Garware*	437	Anil Agarwal (Sterlite)	–
22	Binny	25.40	Sarabhai	384	Ruia (Essar)*	1278
23	Killick	24.45	Wadia*	366	Ajay Piramal*	1261
24	Rallis	24.45	Khaitan	354	Nambiar (BPL)	1225
25	Kilachand*	24.30	Bhiwandiwala	345	Patel (Nirma)	1159
26	Swedish Match	23.92	Chowgule*	335	MS Oberoi	1135
27	TVS	23.33	Godrej*	331	Asian Paints*	1032
28	Balmer Lawrie	21.68	Khatau*	329	Hinduja	969
29	GD Kothari	21.55	Singhania (Lohia)	326	Harsh Mariwala (Marico)*	–
30	Kirloskar*	21.46	MS Oberoi	301	India Cement	886
31	A&F Harvey	21.14	Mehra (Orkay)*	267	Rajan Raheja*	880
32	Mahindra*	21.11	Raunaq Singh	247	Chhabria (Finolex)	879
33	Modi	20.82	Seth (Garden Silk)	245	Khaitan	879
34	Scindia*	20.62	Raasi Cement	243	Square D	874
35	Vissanji*	20.62	V Ramkrishna	233	Mapillai (MRF)	822
36	BN Elias	20.44	Muruggapa	230	Thapar	798
37	Turner Morrison	19.25	Sahu Jain	230	Sun Pharma	794
38	Jai Dayal Dalmia	19.07	R Mody (Hind Dev)	223	RP Goenka	740
39	Parry	18.91	GV Naidu	217	Jindal	647
40	Wadia*	18.09	Ghia*	211	Sheth (GE Ship)*	642
41	Thiagaraja	17.96	Mapillai (MRF)	201	KK Birla	618
42	Jaipuria	17.78	Apeejay	193	Murugappa	612
43	Ruia	17.20	Ashok Birla*	191	Vijaypat Singhania*	611
44	Bhagirath Kanoria	16.78	Dalmia (GTC)	180	Kalyani	598
45	GV Naidu	16.05	Nirlon*	174	Torrent	590
46	Thackersey*	15.00	India Cement	167	Dhoot (Videocon)*	573
47	Khatau*	14.23	Shri Ambica	164	Parekh (Pidilite)*	572
48	Mangaldas Parekh*	13.90	Shroff (Facor)	145	Balaji (Reddy)	572
49	Amin	13.31	Parry	140	Adani	551
50	Seshasayee	13.22	Kothari	138	UB	543
Source: Compiled from Monopoly Inquiry Report 1964-65, 75 Largest Business Groups in Indian Private Corporate Sector; The MRTP Commission, The Economic Times, 5 August 1991; CMIE and company reports for 1999. * – Mumbai Business Houses.

 

1964			1990			1999
Rank	GROUP	Assets	Rank	GROUP	Assets	Rank	GROUP	Mkt C
1	Tata (incl ACC)	369.11	1	Tata (excl ACC)	7546	1	Tata (excl ACC)	22345
11	Walchand	54.02	3	Ambani	3241	3	Ambani	16060
14	Mafatlal	43.11	6	Mafatlal	1297	5	Bajaj	7667
18	Bajaj	29.25	7	Bajaj	1228	6	Aditya V Birla	7204
25	Kilachand	24.30	14	Kirloskar	633	10	Wadia	2985
30	Kirloskar	21.46	15	Walchand	626	11	Mahindra	2910
32	Mahindra	21.11	16	Mahindra	620	15	Sekhsaria (Guj Ambuja Cement)	2719
34	Scindia	20.62	20	Ruia (Essar)	437	16	Subhash Chandra	2258
35	Vissanji	20.62	21	Garware	437	20	Khorakhiwala (Wockhardt)	1315
40	Wadia	18.09	23	Wadia	366	22	Ruia (Essar)	1278
46	Thackersey	15.00	26	Chowgule	335	23	Ajay Piramal	1261
47	Khatau	14.23	27	Godrej	331	27	Asian Paints	1032
48	Mangaldas Parekh	13.90	28	Khatau	329	29	Harsh Mariwala (Marico)	–
			31	Mehra (Orkay)	267	31	Rajan Raheja	880
			40	Ghia	211	40	Sheth (GE Ship)	642
			41	Ashok Birla	191	43	Vijaypat Singhania	611
			42	Nirlon	174	46	Dhoot (Videocon)	573
							Parekh (Pidilite)	572