Indian Family Business

The Murugappa Group:

This is the case of a family that has built a successful business empire over four
generations. Started in the early 1900s by Dewan Bahadur Murugappa Chettiar as money
lender and trader, the family-governed Murugappa Group is the one of the largest
business groups in India, with over Rs 35 billion in sales and over 23,000 employees as
of 2004. The third and fourth generations of the family are successfully managing the
loose confederation of several companies and a number of SBUs that form the Group.
The family believes that business is a means to serve the society and have contributed
immensely to the society.
Headquartered in Chennai (Madras), the Group has a diversified portfolio with strong
presence in Sanitaryware, Fertilizer (Phosphatic), Abrasives, Automotive Chains,
Cycles, Steel Tubes, Car Door Frames and Neemazal (Bio-products). Apart from this,
portfolio consists of IT enabled services, Financial Services including Insurance and
Plantations. It has 38 manufacturing locations spread over 12 Indian States. Family
ownership of the companies ranges from 34% to 100%. It has several overseas
technology collaborations.
Each of the seven flag-ship companies of the group was headed by a family member as
CEO, with no formal interaction among the companies as a Group, but only informal
consultations among family members. Male family members (women do not join
business) start their career as junior executives, and depending on their performance,
move up in the organisation. They are mentored by senior family members, both on
business and family values.
In 1991, with the opening up of the Indian economy, the family felt it advantageous to be
a Group in a more formal way and officially constituted a Murugappa Corporate Board
(MCB), composed of family members. The new competitive environment required
speedier and more flexible Group business portfolio decisions than could be made when
individual family members were emotionally involved in separate business units and
focused on their individual company’s day to day management. It was hard for the
Group to make a business decision to restructure, downsize or sell a division or unit, if
that entity was a favourite of a brother or cousin running it. Even when all family
members wanted to make positive business decisions for the Group as a whole, they
could not make decisions as nimbly as required in the new faster-paced global economy.
In September 1999, ownership and operational management of the companies were
separated for the first time. The process of restructuring was not easy, the cousins came
together and successfully transformed the Group. CEO leadership of the seven individual
companies switched from family members to professional non-family managers, all
promoted from within. The five family members who had headed the seven different
companies moved into a shared office suite at headquarters and became full-time
directors of the newly reorganized nine-member MCB. They were joined on the MCB by
three appointed independent outside board members and the Group’s non-family CFO.
The Chairman of the restructured MCB was M V Subbiah. However, after leading the
process of transformation and stabilisation of the new governing structure, Subbiah
stepped down to bring in the first non-family Group Chairman. While the reorganization
of the business was complete, cousins of the fourth generation are grappling with the
challenges of creating a family constitution and process for deciding future leadership of
the Group.

Dabur Group:

One of the oldest business groups in India, Dabur was started in 1884 by Dr Burman to
manufacture and sell traditional; Indian medicine called ayurveda. However, it was only
in 1986, almost a century later, that it became a public limited company. Retaining its
core values and traditions around healthcare products, the group has grown in the past
two decades. The turnover in 2004 stood at Rs.16 billion compared to Rs.11 billion in
1999. Its networth also has grown substantially during this period (Table 2). Dabur
owns several well known brands in ayurvedic medicine and healthcare space.
The group, in its efforts to shed its image as a family business in the traditional medical
system, went for a rash professionalisation process in the late 1990s, and got into trouble.
The experiment was not successful with the owners moving out of operations completely,
and the professionals pushing for change at great speed. Although, the entire team that
joined in this batch went out in a year’s time, the experiment had several long term
benefits to the group. The family realized that introduction of business restructuring and
introduction of new systems definitely improved turnover and profits. They also realized
the scope and limits to managerial involvement of the family. The group CEO is a nonfamily
member, and five out of nine members on the Board are non-family professionals.
As a part of the reflective exercise, they created a Family Business Council and provided
for venture capital funding for new business ideas.
Corporate governance and transparency in action is high priority for Dabur. It has not
only followed all the legal and regulatory requirements, but also developed corporate
governance guidelines for itself. For instance, it constantly looks for efforts to introduce
professional approaches to management.
Dabur believes that the family has a trusteeship role to follow both in terms of
perpetuating the family business and in preserving and growing the business. For Dabur,
the family and the business are institutions to preserve.

Wadia Group:

Compared to the other four business families studied here, the Wadias have all along
been a small family. Started in 1879 is a textile company by Nowrosjee Wadia, this
diversified group has registered a turnover of Rs.26.31 billion in 2004.
The Wadias have been a Mumbai (Bombay) based business group since inception. They
belong to the elite Parsi community that is mainly known for great industrialists and
intellectually oriented professionals. The group continued as a textiles and textiles
machinery manufacturing company for over 70 years. It was in 1954 that they entered
inorganic chemicals business and in the mid-80s further diversified into engineering
products. The business activities of the group cover plantations, trading, foods,
laminates, healthcare and real estate too. However, Bombay Dyeing, in the textiles
business, continued to be the major brand and revenue source. The group’s acquisition of
Britannia Industries, one of the market leaders in biscuits manufacturing and marketing,
in 1993 marked a major growth push for the group. It was able to move into a higher
growth orbit clocking a turnover of over Rs. 20 billion in 1994-95, up from Rs.12 billion
in 1992-93. They have announced the launch of a family funded low cost new airline
(Go Air) in 2005.
The Wadias have all along been a small family with one son in each of the generations
except the current generation of Nusli Wadia. His two sons have recently joined the
business. Nusli Wadia continues to be the Chairman of the two flagship companies,
Bombay Dyeing and Britannia Industries, among others.
The small size of the family meant absence of succession issues in the family, but it also
meant lack of stakeholders to provide checks and balances in decision making. This is
reflected in the decision to enter airline business in 2005 by Nusli Wadia’s younger son
Jeh Wadia. The two sons belonging to the young generation have been apprenticed in
Bombay dyeing, the family’s flagship company. However, the process of grooming is
not as systematic or rigorous as some of the other families, such as the Murugappas.
The growth of the group in recent years can be attributed largely to Britannia Industries.
Around 50 percent of the group turnover, PAT and network came from it in 2004. To
Wadia’s credit, the family has remained a major investor in the company, and has
interfered in its management only once, to expel its highly successful CEO in 2002.
After a drop in performance in the next two years, the Company has a totally new team of
non- family professionals at the helm of affairs. The fact that the family did not install
the young Wadias to fill any of the positions in a clear indication of the role it has defined
for itself. At the same time, Jeh Wadia’s entry into airlines business is a reflection of the
entrepreneurial bug biting the young generation. Indeed, the risks are high in this
business, and the family needs counseling to channelise the entrepreneurial resources to
attractive ventures. This is reflected in the trend negative networth growth recorded by
the family in the past five years (Table 2), while the group turnover has grown by 30
percent during 1999-2004, and Profit After Tax (PAT) has gone up four fold.

Godrej Group:

Into the fourth generation, the Godrej group is over a century old, having started by
Ardeshir Godrej to make locks. The three generations that built the group added several
products to the portfolio. From locks in 1887, to soaps in 1918 and refrigerators in 1958,
the group has steadily grown over the years.
It is highly diversified group, present in industries ranging from food, soaps and
detergents, consumer durables, electronics, insecticide, veterinary products and
engineering. The group has acquired brands such as Fiskars, Jet and Banish and has
forged alliances with several transnationals such as GE, P&G, Pillsbury, and Sara Lee.
The group turnover grew from Rs 28 billion in 1999 to Rs.33 billion in 2004. The group
holds a majority shareholding in most of its companies ranging from 50% to 100%.
The Godrej was awarded the Citizen of the Year in 2003 by the Economic Times for its
contribution to social development. The family strongly believes in the trusteeship role
of each member in perpetuating the family and the business. In its 100-year old history,
the group has never experienced a single split. Although the group’s titular head is still
the patriarch, S P Godrej, all the group’s businesses are managed by the third generation.
The fourth generation has just commenced entry into the business.
The young generation has to join at the lowest executive rings and be trained and found
good before climbing up the hierarchy. There exists a strong and systematic grooming
process for them under the guidance of the family members and outside professionals.
Group companies are chaired by family members, but as Adi Godrej, the group Chairman
put it, it is mainly on paper, and each company CEO has maximum freedom to decide the
strategy of the company. Obviously, there is consultation, both at the family and
business levels. It is to note that the group has recorded steady growth in the past five
years on sales, PAT and networth front.

Kirloskar Group:
It was in the mid-1920s that Laxmanrao Kirloskar started manufacturing world class
diesel engines for the first time in India. Sticking largely to engineering related products,
it has grown over the next three generations. A majority of its revenue comes from its
core businesses of castings and forgings, pumps, engines, electric motors, power
equipment, and compressors. During 1956-80, the group was led by SL Kirloskar. The
group has been conservative in growth and has closely held ownership within the family.
In fact, the group turnover has come down from Rs.9.50 billion in 1999 to Rs.7.45 billion
in 2004, with the networth also depleting simultaneously.

Group Turnover (Rs billion) PAT (Rs billion) Net Worth (Rs Billion)
1999 2001 2004 1999 2001 2004 1999 2001 2004
Dabur 10.69 13.22 16.28 0.48 0.65 1.13 2.78 3.61 4.62
Wadia 20.36 22.74 26.31 0.40 0.64 1.78 8.95 8.34 8.38
Godrej 27.93 28.47 33.22 0.08 0.24 1.66 6.02 6.72 7.97
Murugappa 24.80 33.59 35.03 1.04 1.57 2.01 10.32 11.43 12.02
Kirloskar 9.50 8.62 7.45 -0.04 -1.05 0.22 2.63 1.90 2.07