Newer Indian family business offices which have started working in the last few year, have not been a part of a bear cycle, and therefore have a different notion when it comes to returns coming from investments, according to Abishek Laxminarayan, Strategic Advisor, Sharrp Ventures.
Speaking at the Moneycontrol Global Wealth Summit on 'India’s Family Office Boom,' Laxminarayan highlighted that newer family businesses may be in for an awakening when it comes to the return on investment family business are able to make during a bear cycle, adding that despite fluctuating returns in the short term, family businesses should look at take advantage of their ability to look at the long term horizon for return on investments made.
"Family business have ability have the ability to have long term horizons, to bring operational insights to investing and the ability to leverage synergies of their parent companies. I think that has actually contributed to boosting returns in some cases," Laxminarayan said.
Sharing the example of Sharrp Ventures, he added that at Sharrp Ventures the investments made in direct-to-consumer (D2C) opportunities have delivered outstanding returns due to the understanding of the D2C ecosystem by parent company Marico Ltd.
"I think its very important that family offices find what differentiates them from other investors and that will help them get better returns over time," Laxminarayan said.
He added that family business in India are now looking to invest with entrepreneurs who have the stamina to sustain and tide through correction in the equity markets, unlike a few years ago when family business were looking as investments as a short term way to boost returns.
Similarly, Rahul Goswami, Co-founder & Managing Partner, Greenstone said that in order to boost returns from their investments family business need to become more sophisticated and mature to approach asset allocation as well as short-term and long-term returns.
He added that while there are different approaches families can take to manage wealth, accountability and capability are key in managing risk and returns.
Goswami also said that the skillset required to create wealth in the first place may not be transferable into managing wealth and investment allocation to generate substantial return-on-investment in the short and long term.
He also said that the notion of risk is also viewed differently by different generation in family offices.
Indian family offices collectively manage an estimated $30 billion in assets under management (AUM) across approximately 300 family offices. This number is expected to reach $45 billion over the next three years, reinforcing the shift towards domestic wealth deployment.
As per a June 2024 report by PwC India, there are over 300 family offices in India, as against 45 in 2018, and the number is set to rise exponentially, with promoters building impressive businesses in Tier 2 and Tier 3 cities.
According to experts, the uptick in family offices in India is replicating the trend that has happened in the developed markets.
As per PwC India, family offices are transforming into one-stop solutions, offering a wide range of services beyond wealth management. “They provide professional guidance on compliance, legal issues, taxation, investment strategies, and strategic decision making. This trend helps families streamline their operations and achieve their long-term goals,” PwC said.
While there is no standard portfolio size for creating a family office, some experts put the minimum investible sum at least at $100 million (around Rs 850 crore), while others put it at Rs 2,000 crore.
Some of the notable family offices include Burman Family Holdings, Premji Invest, Ajay Piramal SFO and Catamaran (Family Office of Narayana Murthy).
Last year, speaking at the Indian Family Business Awards in New Delhi on December 3 Sunil Kant Munjal, chairman of Hero Enterprise, emphasised the vital role family businesses play in the global economy, highlighting their growing influence and contribution. Munjal remarked that family businesses are often misunderstood despite their critical economic impact.
Munjal noted that family offices are now a significant source of funding for startups and early-stage companies. However, he pointed out that they are not the sole financial resource, with angel networks, venture capital funds, and private equity also playing vital roles. “Family offices bring not just capital but also valuable expertise and mentorship, which are crucial for the success of emerging enterprises,” he added.
Amitabh Kant, G20 Sherpa had also echoed these comments saying that India's ambition to have a $30 trillion GDP by 2047 cannot be achieved without family-owned businesses.
Kant said family-owned businesses are critical for the country growth because they have good governance and effective succession which ensures sustained success.
"For India to grow at high rates of 8-9 percent per annum over three decades, or if India should become a Viksit Bharat, meaning its GDP has to grow from $4 trillion to $30 trillion - the country’s GDP has to grow to 9x. Its per capita income has to grow 8x and manufacturing has to grow 16x. That is the challenge for India," Kant had said.
"My belief is that this cannot be done without family-owned businesses, because they contribute over 75 percent of India's GDP," he added.
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