Will the shake up in old order bring about India Inc’s next wave?
explores how changes in traditional business structures and leadership dynamics could drive the next phase of growth for Indian corporations
The discussion also highlights whether emerging companies and new leadership styles can challenge established business houses, potentially leading to increased innovation and global competitiveness for India Inc.
India inc. is often used as a collective noun to describe the formal business sector comprising government-owned and corporate entities. It gained currency around the turn of the century as Indian firms gained scale and made their presence felt at home and abroad. As businesses start to get more complex, companies — both small and large — must revamp their game plan to remain relevant in a world characterised by disruption, say experts. And disruption is not a game determined solely by deep pockets, but ideas and innovation. Clearly, a new India Inc. is emerging at a pace that is quite unprecedented.
No status quo
The mindset that large companies would be around forever has changed, and by the looks of it, will continue to evolve. Ashank Desai, founder, Vice Chairman and Managing Director of software services company Mastek, says large firms will always benefit because of scale “but that can be easily disrupted by technology.”
One has to go back in time by no more than two decades to understand the veracity of the statement and sectors that have transformed most remarkably — retail, telecommunications, information technology (IT), manufacturing, and fintech are a few examples.
However, there is still some debate around the form and shape the new conglomerates will take. “A lot will be determined by nimbleness and adaptability. We are in a dynamic world marked by changing consumer preferences. The speed of decision-making could make all the difference,” says Desai. It is intriguing to imagine the new pecking order. “The ability to access capital may not be such a strategic issue. It is possible that single-business conglomerates become a dominant theme,” says Desai.
That is a significant change from the more traditional (and in many cases well-established too) structure of families owning and running a multitude of businesses. “Conglomerates’ traditional advantages have diminished. Access to capital is more democratised, infrastructure has improved and technology has made reaching customers easier,” says Dan Tennebaum, Managing Principal, India Capital, a firm focussed on public equities in India. A more level playing field, he says, is allowing sector-focused leaders to challenge sprawling conglomerates; access to funds is not a constraint anymore. “Plus, there are many more financing options available than in the past,” Tenenbaum says.
The evolving scenario
Growth opportunities are indisputable, and firms of different sizes have relentlessly pursued expansion in local and international markets. Tenenbaum brings in a perspective tinged with some apprehension. “I worry that chasing growth for its own sake will end badly. Undisciplined expansion and splashy international forays have led to a lot of corporate blow-ups,” he says.
Interestingly, a lot of businesses have gained by getting it right domestically. “These companies have grown swiftly and built world-class models that they now apply in global markets.” Citing the “brutally competitive” Indian auto ancillary space, he speaks of companies with world-class capital efficiency. “They are using that to outcompete incumbents in global markets but usually it (priority) should be excellence first and global growth second,” he adds. With constant disruption looming, a lot of other things need to be in place. “Perhaps the most important factor is governance. The firms must be on top of this all the time,” says Desai. That is a key component to determine the maturity of both small and large companies.
T for technology
By any token, the ability to use technology smartly ought to be among the more important ways to alter the course of a business. And now, almost anyone can get a slice of it and create the most disruptive phenomenon.
Subhabrata Sengupta, Partner, Avalon Consulting, says the next two decades will see a lot of investments in green tech, artificial intelligence, quantum computing, augmented and virtual reality and nanotechnology. “In many of these areas, India is quite behind, while in others, government-backed investments need to be monitored,” he says. He is bullish on fintech, pharma, biotech, and waste mining.
Of course, one needs to ponder about the potential impact of AI and new tech. Sengupta thinks AI agents could take over some functions like customer service. “Indian companies lag in pure R&D (research and development) spend and deep tech and hopefully, some of the start-ups originating from incubation ecosystems will address that.”
What will happen to conventional manufacturing? “Though there is a lot of focus on manufacturing, as a percentage of gross domestic product, it has actually shrunk in the recent past. However, we expect services sector growth to slow given the disruption caused by AI in not just coding but also testing,” says Sengupta. As the investment in electronics bears fruit with an increase in growth, “we expect some gain in manufacturing (maybe 3–4%) over the next decade,” he adds.
Going deeper
The emergence of smaller business centres is already playing out in a big way. Calling this “Bharat Inc.”, Rohit Berry, President (Strategy, Risk & Transactions), Deloitte South Asia, says it is a “rising force in family-driven businesses” from Tier II and III cities.
The numbers tell the story (see graphic Beyond Metros), funraising by firms from Tier II cities and beyond is on the rise and will get more pronounced over time. “The growth of Bharat Inc. is no accident. It is driven by multiple interlinked factors such as greater access to capital, generational shifts, formation of family offices and robustness of India’s public markets,” he says.
Over time, one has seen how several traditional businesses have reoriented themselves or just cashed out in favour of something more contemporary. This generational transition could well be a watershed moment. “Younger leaders from business families are taking charge and bringing in a fresh perspective on diversification. While the emotional connect with the legacy businesses remains, the next generation is making bolder decisions — divesting non-core operations, launching startups and leveraging technology to drive innovation,” says Berry.
All said, it can easily be India’s moment under the sun for many moons, subject to, of course, a focus on getting the small things right. There is a large population making the opportunity hugely attractive. Plus, discretionary spending is growing, with a very aspirational consumer base making for quite a heady concoction.
Tenenbaum speaks of tens of millions of new middle-class families looking for their first car or first home, or even affordable luxuries like cosmetics or life insurance to protect the wealth they have begun to build. “Car consumption in India lags the US by nearly a century, beauty consumption is 1/30th of developed markets and credit card penetration is 1/80th. India is evolving into an economy driven by aspirations,” he sums up.
