Mumbai : The growth, which was seen in the Indian economy between 2014 and 2016, is reflected in the growth of the family business enterprises, stated PricewaterhouseCoopers (PWC) in its latest report- ‘PwC India Family Business Survey 2016’. It further stated that Indian family businesses feel confident in the existing market and there is openness with respect to growth strategy in terms of market, sectors and acquisitions.
Notably, 96 per cent of those anticipating growth of over 10 per cent annually over the next 5 years said that the growth of core business in existing markets would enable them to reach their targets. The report was based on the output received by 2,802 family leaders across 50 countries and in India. It also spoke to 102 family business leaders for this year’s report. These interviewees also revealed that they were looking to expand into new sectors or new countries and would consider inorganic growth.
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PwC India Family Business Survey 2016: Aligning with India’s growth story
Based on an analysis of the interviews done and the in-depth discussions:
• 75% of Indian family businesses have grown in the last 12 months;84% expect to grow either steadily or quickly and aggressively over the next 5 years.
• 56% of family businesses feel the need to innovate will be a key challenge in the next 5 years.
• Only 15% of family businesses have a robust, documented and communicated succession plan in place.
• 35% of family businesses plan to pass on management to the next generation while 48% plan to pass on ownership but will bring in professional management.
Over last 12 months, these family business enterprises have seen growth. Around 75 per cent of interviewees agree to this growth which is better than global standards. It also stated that firms in India are more likely to use external finance than their global counterparts. Those planning to grow at 10 per cent or more annually will rely on banks as well as different equity and debt financing options. Eighty-nine per cent of Indian respondents said they would explore these options. However, this did not hugely impact the reliance on own capital, with 80 per cent still sticking to this option.
These family businesses are expecting the market conditions to pose as the biggest challenge in the next one year—customers and clients, price fluctuations, availability of cheaper substitutes and cheap imports, heavy discounting (including through online discounts), demand supply mismatch, etc. One of the biggest challenges that family businesses face is the one around succession. About 40 per cent of family businesses across the globe will be passing on the business to the next generation in the next five years. “Succession of the business and putting a plan in place are instrumental to ensuring business continuity and keeping the family legacy alive,” PWC added.