Ambani is just the start of India’s Great Succession
In 2029, Mukesh Ambani will likely yield executive control of India’s most valuable company to one or more of his children.
By then, he’ll have been chairman and managing director of Reliance Industries Ltd. for some three decades, having grown the company from a net profit of $665 million in 2002, to well over $9 billion today.
Those are some big shoes to fill.
The tycoon’s three kids will be appointed to the company’s board this year, but it’s not yet clear who will be first among equals.
While Reliance is almost always in project mode, the shift comes at a delicate time. The conglomerate is trying to turbocharge its new-energy business, and beating China — the king of renewable value chains — will be tough.
Without Mukesh Ambani at the helm of what will be a costly and long-in-gestation venture, investors may rightfully become skittish. And it’s not just succession atop Reliance Industries they have to contend with.
This decade marks a generational shift in the leadership of India’s best known companies.
The men (and a few women) who have come to be recognized as the architects of modern industry in India are retiring, or nearing it. Many will be replaced by as yet untested professionals or younger family members — ala Ambani.
L&T’s AM Naik (81), HDFC’s Deepak Parekh (78) and Uday Kotak (64) of Kotak Mahindra Bank are among those hanging up their executive boots this year — for varied reasons.
They will join the ranks of Ratan Tata (85), Adi Godrej (81), Azim Premji (78), and Shiv Nadar (78), all whom retired over the last 10 years.
In the years to come, Dr. Prathap Reddy, RC Bhargava, Nusli Wadia, Baba Kalyani, Harsh Mariwala, Venu Srinivasan, Kiran Mazumdar-Shaw, Pawan Munjal, Anil Agarwal, Anand Mahindra, Nandan Nilekani, Ajay Piramal, Dilip Shanghvi and Sunil Mittal will likely retire fully or cut back on supervisory or managerial responsibilities. Bhargava and Reddy are the oldest at 89 and 91, but the others are also well into their 60s and 70s.
Given the scale of the turnover underway, investors should prepare for concurrent bouts of volatility as even the best intended succession plans can go awry — like the battles at Tata Group and Infosys have shown.
The leaders on their way out are iconic and larger than life, many of them founders who built their businesses in a hardship economy, short on resources but big on post-liberalization hope. Their successors will take over established enterprises but in a hypercompetitive economy, the fifth-largest in the world.
The old guard has weathered several storms — the Asian crisis, the dot-com bubble, globalization, the 2008 financial crisis, an era of unprecedented monetary easing and an unparalleled technology boom. The new guard’s abilities are yet to be proven, with a few exceptions.
More importantly, the Naiks and Parekhs built their businesses at a time when global scrutiny of India was milder, and foreign investment small. Now, the stakes are at least 10 times higher with foreign investors owning about a fifth of India’s $3.7 trillion equity market.
Around the world, the outcomes of succession are hard to predict — even on hit TV shows.
Heirs can unexpectedly become unavailable as Samsung found when the founder’s grandson, Jay Y. Lee, was jailed before eventually being pardoned. Dynasties like the Redstones and Murdochs have faced their own upheavals. LVMH founder Bernard Arnault is trying to head off a succession battle.
India’s Great Succession, too, will have varying outcomes as evident from recent developments.
At the Tata Group, the choice of a non-Tata to lead the fabled empire turned ugly at first. At Mahindra Group, the choice of outside, executive leadership has been gradual and purposeful. Asian Paints, Marico and Godrej Group have put a mix of family members and professionals in charge.
At Bajaj, Apollo and Bharat Forge, second- and third-generation family members are firmly in the management saddle. In others, like Cipla, media reports indicate the heirs may want out.
Even in a company set up by professionals, like Infosys, the transition to an outside leader failed, prompting a board coup and the return of founder Nandan Nilekani.
For Mukesh Ambani, the potential pitfalls of succession are all too real. His bruising battle with brother Anil after their father died intestate is likely a major reason why he’s putting so much into crafting a clear and methodical succession plan.
Family shareholdings, multiple claimants of varied capabilities, non-compete agreements among heirs, large institutional stakes… these are all variables that investors will have to consider as they make their bets on an India Inc. sans its superstar leaders.
The Shah Rukh Khans of Indian business are being replaced. Will Ranveer Singh as the new Don command the same fanfare?
Building India: Over budget and over deadline
Half of all central government infrastructure projects are running behind time — by an average of 37 months. A fifth are running over on cost, amounting to some 4.65 trillion rupees more than budgeted. That’s almost as much as this year’s combined capital investment budget for roads and railways. And it’s four times this year’s federal expenditure on education.
And that may not be the worst of it. A statistics ministry report found cost revisions and commissioning schedules are yet to be submitted by the authorities on many projects, so the real situation may be much more severe.
Reasons for delays range from hurdles acquiring land to inadequate manpower. The problem covers the infrastructure spectrum, from roads and railways to airports.
It speaks to the challenges for a country with lofty ambitions but limited resources to burn on building the future. Go slow, there’s speed bumps ahead.
(Maneka Doshi is a Bloomberg Opinion columnist covering businesses and policy decisions behind India’s rise as an emerging economic powerhouse.)
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