Almost half Indian family-run businesses not banking on scions to takeover

Bengaluru: India’s family businesses see shifting succession trends, with about 45 per cent of Indian entrepreneurs not expecting their children to take over the family business. Of this, 55 per cent are first-generation and 35 per cent multi-generation, according to a report by HSBC Global Private Banking out on Tuesday.

Interestingly, this is not due to any trust deficit as 88 per cent of Indian entrepreneurs have faith in the next generation’s ability to manage family wealth.

In fact, India is on the brink of a significant intergenerational wealth transfer, the report pointed out. According to Hurun data, in 2024 India had 334 billionaires with the number rising 29 per cent year-on-year. Nearly 70 per cent of the list are on the cusp of a $1.5 trillion intergenerational wealth transfer that equates to more than one third of India’s GDP.

As it happens, family-owned businesses in India contribute to approximately 79 per cent of the country’s GDP, one of the highest ratios globally.

Succession of family businesses has its own set of complexities. Only about 7 per cent of second and third-generation Indian entrepreneurs surveyed felt a sense of obligation to join their family business when it was passed on. This is against almost 60 per cent in China.

Still, 79 per cent of Indian entrepreneurs plan to pass their businesses to family members. This is slightly higher than some global trends (77 per cent in the UK and 76 per cent in Switzerland). On the other hand, fewer than half of the respondents in Hong Kong share this intention (44 per cent), along with just 56 per cent in mainland China and 61 per cent in Taiwan.

Therefore, entrepreneurs in mainland China (25 per cent), Hong Kong (29 per cent), Taiwan (27 per cent), and Singapore (22 per cent) show the most interest in selling their business as an exit route among the 10 surveyed markets. The sector most favoured for sale globally is electronics (21 per cent), a sector in which Asia accounts for almost two-thirds of the world exports.

Another trend observed was that entrepreneurs in Asia, with the exception of India, are not planning ahead to the same degree as elsewhere.

Some of India’s largest family-owned businesses are more than a century old, most notably Tata Sons, which was established in 1917. Like mainland China, many family-owned businesses in India were only established in the 1990s when the government shifted away from a controlled economy. So, India is still in the throes of an unprecedented business transition from the first to second generation.

1,798 high net worth business owners were surveyed for the report from mainland China, France, Hong Kong, India, Singapore, Switzerland, Taiwan, UAE, UK and US.