Here’s how heirs of India’s biggest tycoons are into own entrepreneurial path.
By ET Bureau | 7 Feb, 2016, 07.58 AM IST.
Heirs of some of India’s biggest tycoons are not joining the family businesses yet. They prefer to first chart their own entrepreneurial path.
By Megha Mandavia & Baiju Kalesh Social network in the outback.
Two years ago, a woman named Sanjana Bonde was looking to buy better equipment and grow her beauty salon at a small town in Maharashtra.
She turned to a microfinance venture called Svatantra Microfin and received a loan of Rs 10,000. Bonde was the first customer of Svatantra, set up by Aditya Birla Group scion Ananya Birla. The loan not only helped grow the salon’s business but also enabled Bonde to hire three women to meet the rising demand. Ananya is radiant when she talks about such stories.
When Ananya, heir to a group that dates back to the 18th century, became a social entrepreneur it surprised many in the industry.
“I like to come up with new ideas and see them grow. Getting into an already setup system does not excite me too much at this stage,” she told ET. “There is so much more to learn and there is so much more that I want to do.”
The seed capital of Rs 5 crore for Svatantra came from Ananya’s father Kumar Mangalam Birla – she is the eldest offspring — three years ago when she was an undergrad at Oxford University in Economics and Management. The beginning wasn’t easy. “I used to have days when I’d feel this is just not working out,” says Ananya.
On many occasions, Ananya came close to giving up but the strength to persevere came from her mother Neerja. “My mother said there is no looking back now.” The gamble paid off. Today, Svatantra has a loan book of Rs 147 crore, which is expected to grow to Rs 500 crore during the next financial year. The venture’s workforce has grown to 400. It has 63,362 customers across Maharashtra, Madhya Pradesh and Rajasthan.
In the early days, Ananya travelled to the hinterland to meet clients at least thrice a week. Those visits have dwindled to twice a month at present because of the increased needs of the growing venture. Ananya says she returns refreshed after every visit because she sees happy clients.
“I don’t like it when people say we are helping them. Our clients are rural women entrepreneurs who are helping themselves.”
Ananya wants to grow her company to become a small finance bank and eventually a national bank. But now she is focussed on growing the portfolio by leveraging more technology. From cashless disbursement, her microfinance is moving towards cashless collections too.
There are occasions when she feels she hasn’t done enough in life, according to her. “But then I realise the industry is challenging and initial growth is slower compared to other industries.” Ananya also has others plans up her sleeve. “This venture doesn’t limit me. There’s a lot more to come.”
By Megha Mandavia
When Ananya Birla came of age three years ago, she had the choice of joining a $40 billion group that does business in sectors ranging from mining and telecom to financial services.
Ananya, 21, is the daughter of billionaire Kumar Mangalam Birla, chairman of the Aditya Birla Group, one of India’s largest conglomerates. Instead, she started a microfinance firm named Svatantra. In 2012, Kavin Mittal was faced with a similar choice. His father is Sunil Bharti Mittal, chairman of Bharti Airtel, India’s largest telecom operator. But he launched messaging app called Hike that has attracted investments from the likes of investment company Tiger Global and Japan’s Softbank Corp. Entrepreneurial spirit? Yes. Lots. Also, youthful zest.
If one were to chronicle the history of Indian business houses, it would be filled with examples of scions following their fathers to the family business. That is changing.
Young scions of business groups are raring to build businesses by themselves. They have the brains and DNA. Only 3.5% of all next generation members globally want to take over their parents’ firm directly after college graduation; 4.9% plan to do so five years later, according to a study ‘Coming home or breaking free’ published by EY in 2014.
“The next generation has new ideas and they are pushing and expanding frontiers,” says Ashish Iyer, global leader, strategy practice, sen- ior partner, Boston Consulting Group, India. Examples are many.
Parth Jindal was only 23 years old when he rushed JSW into the world of football and Olympics in 2012. Last year, Parth, son of steel magnate Sajjan Jindal, founded a venture capital fund of `100 crore to invest in tech startups. Parth wants to diversify his father’s commodity business — to shield it from the wild fluctuations of the market.
Rishabh Mariwala had two choices as an apprentice. His dad Harsh Mariwala’s `29,000 crore consumer goods company Marico or his mother’s, Archana Mariwala, startup called Soap Opera N More that sells premium handmade soaps. He joined the latter. Some years ago, pharma industrialist Ajay Piramal’s son Anand toyed with rural healthcare and tele-medicine. He is now blazing a trail in real estate.
Indian family business houses, some dating back to the 18th century, grew rapidly post liberalisation in the early 1990s, expanding to newer geographies and ventures. The Indian business scene has transformed incredibly since then. India is witnessing an unprecedented startup boom. Startups have ended the dominance of conglomerates in many sectors.
Young giants like Flipkart command valuations many times greater than generation old businesses. Scores of graduates at premier engineering and business schools prefer startups to big brands, choosing the experience of building ground-up over a fat pay packet. Business heirs have the same urge.
“I like to get my hands dirty, I like to build things. I want to make my own mistakes, build my own team and see my ideas come to light,” Ananya Birla told ET. “Aditya Birla group will also allow me to do it but it will be more limited than a startup environment.”
“The biggest difference in India right now versus 15 years back is opportunities have grown manifold in every field. That is opening up the minds of the younger generation,” says Pranav Sayta, partner, family business services leader at global consultancy EY. “What brings success today is different from what brought success earlier.”
It could mean the new Indian industry will resemble the old US tech industry where teen stars like Steve Jobs founded Apple in his parents’ garage at 21 and Facebook cofounder Mark Zuckerberg started the company while still in undergrad college. Not surprisingly, several of the Indian business heirs have been exposed to the west thanks to Ivy League education.
Vimal Bhandari, CEO, Indostar Capital Finance, says the majority of the next generation members in family business are motivated by a deep desire to pursue their own dreams and create businesses from the scratch, leading to multiple opportunities for learning and showcasing their business building skills. “These experiences equip them with substantial skills to effectively navigate the fortunes of a large conglomerate at a later stage.”
Parth Jindal believes the next generation of wealth in India is not going to be created by brick and mortar business. “It is going to be very internet dependent,” Parth told ET in an interview last September. These scions of course have the luxury of falling back on their family businesses should things go wrong. But they should be credited with seizing opportunities and proving their worth.
“Taking on a status-quo in business may not be enough to satisfy this entrepreneurial spirit. Young leaders also want to answer the existential question — what is my contribution?” says Nishchae Suri, Head of People and Change Advisory, KPMG in India.
Rishabh Mariwala says the entrepreneurship bug runs in the family. “I work with minimum resources, make my decisions and learn from my mistakes just like any true entrepreneur.” The huge scale of family businesses is also a deterrent, according to consultants. The young guns love fast decision making. The many layers of corporate structures are a big turnoff.
Tightening corporate governance standards could also be fuelling the trend. Data show more than two-thirds of listed companies on Bombay Stock Exchange are family run. But more professionals are expected to take senior positions in these companies over the next decade due to tighter corporate governance standards and the scrutiny of proxy advisory firms.
ISB professor Kavil Ramachandran, who specialises in family businesses, says it’s an interesting phase now. “Earlier children just joined the family business… families decided the fate of children’s career. But today families realise that you cannot run the business with only family members.”
Fathers too don’t want it any other way. “I am not old. I am going to run the group for 20-30 years. Parth is not going to get anything. He has to chalk out his own path,” Sajjan Jindal told ET recently.
By Megha Mandavia,Tech disrupter
Parth Jindal would one day hold the reins of the Rs 75,000 crore JSW Group, but at the headquarters in Mumbai now he does not even have a cabin. Parth sits with other employees whenever he is on a break from Harvard Business School, where he is pursuing an MBA.
Insiders say it is a sign that he wants to earn their respect. “Parth wants to show I am like you,” says a senior
manager. “He is building a culture of transparency and accountability.”
Parth says he is at work during the winter and summer breaks. “When at Harvard, I do video conferences with the teams once in a week and sometimes do a call with the teams once in 3-4 days,” Parth told ET in an interview last year.
Last year, Parth started the commodityfocussed group’s first technology venture capital fund of Rs 100 crore. The venture arm has two aims. One, to usher in new technology in the group — Parth believes technology will disrupt the existing ecosystem of steel and energy — and two, diversify the group’s interests areas that are not vulnerable to business cycles. JSW Venture Fund is expected to make its first investment this month. Parth was also the driving force behind the creation of JSW Sports inception in 2012. The company manages the Bangalore Football Club and trains athletes for international sports events like Olympics.
Parth started working with JSW three years ago and will join the group in full capacity after finishing his MBA this year. Insiders say he has already left a mark. It was Parth who selected the top management of the businesses he wanted to lead. He brought in outsiders to the group instead of turning to veterans in the group.
Parth personally hired CEO of JSW Group’s cement business Anil Kumar Pillai and the head of the sports venture Mustafa Ghouse. He was instrumental in changing the management at its loss-making steel plate plant in the US. “JSW is starved of talent and Parth is fixing that,” says another senior employee, who declined to be named.
Parth shares his father Sajjan Jindal’s trait of making quick decisions but they have different interests. “He is an engineer and a complete technocrat. I am more interested in human resources, marketing, finance…,” says Parth. Even during his under graduation, Parth started an internship programme at JSW. Parth oversees the cement, sports and venture fund of JSW while his father and his team drive the flagship steel, energy and infrastructure businesses as well as a foundation arm.
The share of revenues of the businesses controlled by Parth is still small. But these are early days.
By Baiju Kalesh
Building a $5b dream
Anand Piramal did not follow Ajay Pirmal’s footsteps into the pharma business, but he did borrow a page from his father’s rulebook.
The family had inherited a textile mill in Mumbai but Ajay Piramal built from scratch Piramal Healthcare, one of India’s largest drug makers.
Through 12 acquisitions in the late the 1990s and early 2000s — labelled “‘string of pearls” by pharma analysts — Ajay Piramal became the first billionaire drugmaker in India.
Two decades later, Anand returned to India armed with a degree from Harvard. Soon after, his father sold most of the drug business to pharma giant Abbot Laboratories for around Rs 18,000 crore. Anand had three choices. Inherit the wealth and live off it, join his dad and run the rest of business, or start afresh.
Anand opted for the third. He launched a real estate business. Piramal Realty was born, drawing ideas from discussions Anand had with his father over dinner at home.
”After the Abbott trade, I teamed up with five of my B-school friends to study what could be the next $5 billion opportunity for us in five years. It had to be a scalable operation with a 70% chance of success,” Anand told ET in an earlier interview.
By then, Anand had already tried his hand at creating something new. For two years in 2011, he ran rural health care and tele-medicine startup but with mixed success. It was finally subsumed as one of the Piramal group’s CSR initiatives in Rajasthan in 2013.
Piramal Realty started by accumulating land parcels in Mumbai. It is now shifting to execution. Last year, Piramal Realty received Rs 1,800 crore and Rs 900 crore in separate transactions from Warburg Pincus and Goldman Sachs for a minority stake, the largest FDI in the sector.
”Acquiring land is easy if you have money,” says the managing director of rival real estate company. ‘The key issue now for Anand is to develop, deliver and sell and join the big league of Oberois and Rahejas who are differentiators of the real estate market with repeated delivery.” Anand dreams of a $5 billion real estate company in five years. He wants to be the TCS of real estate. But delivery will be the key.
He draws inspiration from the words of billionaire Mukesh Ambani, which changed his career path. “Being an entrepreneur is like playing cricket and being a consultant like watching it as a commentator,” Ambani told the young Piramal. “Play the game, make mistakes, but pad up.” The game is on.
By Kala Vijayraghavan
Sparkling clean start
News of heirs moving out of their fathers’ shadow usually receives much ink. But when Rishabh Mariwala, son of Marico founder Harsh Mariwala, chose to carve out his own path in 2011, it was hardly a surprise.
For one, Harsh Mariwala has played mentor to several hundred budding entrepreneurs. For another, Rishabh was an entrepreneur waiting in the wings.
Rishabh, an alumnus of Frank G Zarb School of Business, Hofstra University, New York, spent three years developing business at Marico’s beauty salon services arm, Kaya Skin Clinic. He then joined Soap Opera N More, a venture that sells niche handmade soaps. The venture was the brainchild of his mother Archana Mariwala.
Parallelly, Rishabh also took charge of the Family Office that is engaged in investments, private equity, and startups. Rishab is known to have a keen interest in any venture that is sustainable and gives back to society.
Soap Opera took off with support from family funds. “Soap Opera N More, which started due to my mother’s interest, is today an evolving bath and body brand. We are now focused on building a sustainable profitable brand,” says Rishabh. Insiders say Rishabh is working to expand the portfolio of products.
“I guess the entrepreneurship bug runs in the family. Soap Opera is something my mom started and I saw great potential in the idea,” he says. It has been a roller coaster ride so far, says Rishab. But he has no complaints.
“Just like any entrepreneur, I have got my hands dirty across all aspects of the business and understood the business from ground up. The learning has been immense. I work with minimum resources, make my decisions and learn from my mistakes.”
Stil l , Rishab’s parents continue mentor him. “The support of my parents and wife are key to my growth. I do take a lot of inputs from my father,” says Rishabh.
Harsh Mariwala is pleased with Rishab’s progress. Mariwala senior was keen that Rishabh gain the experience of setting up an organisation from scratch.
“I think he has evolved a lot in the last few years as an entrepreneur. I have stopped mentoring him on a day-to-day basis and he takes decisions independently.”