In a riveting panel discussion on succession planning within family-owned businesses, the second edition of the Indian Family Business Awards 2022, presented by Moneycontrol in collaboration with Waterfield Advisors and Grant Thornton, provided a unique insight into the evolving landscape of family enterprises in India. Moderated by Ashwin Mohan, Editor (Deals) at Moneycontrol, this discussion delved into several key aspects of family businesses, unveiling compelling trends in this sector.
One of the standout themes of the discourse was the surging interest in the concept of the family investment fund. Esteemed speakers explored the dynamic forces steering succession planning within family offices, scrutinizing both transformative shifts and enduring traditions. A spotlight was cast upon India's pioneering International Financial Services Center (IFSC) - GIFT City, a haven that empowers family offices to establish an innovative fund management entity known as the Family Investment Fund (FIF) within its boundaries.
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Soumya Rajan, Founder & CEO of Waterfield Advisors, offered several noteworthy insights during the discussion. “The Family Investment Fund announced for GIFT City has garnered interest from family businesses,” she said, adding that the average investment of family businesses in private markets have risen from 1 percent in 2011 to around 12 percent now.
Family businesses are increasingly looking to set up shop overseas in countries like Dubai and Singapore, and other countries are also welcoming Indian investment. However, market regulators are not too keen on developing an overseas investment regime for family offices yet. Being asked about her thoughts on it, Soumya said, “You have to be on the right side of the law and whatever you do has to be regulatory-wise correct. However, one interesting new space that they introduced recently in GIFT City was the family investment fund…..to, in some sense, diversify the investment portfolio (of family businesses).” She added that although the development is still in nascent stages and is yet to get approval from regulators, the fact that this has been thought of gives room for a regulation that will help family businesses invest in diversifying their portfolios beyond the borders.
“A number of family businesses now also opt to have an office outside India because it gives much more exposure - be it about sustainability or long-term wealth,” said Soumya.
Rishabh Shroff, Managing Partner, Cyril Amarchand Mangaldas, who was also a speaker on the panel, said, “India has this Hotel California syndrome, which means it is very hard for family businesses to go outside India, which is why when the small opening came in the system in the new ODI (overseas direct investment) guidelines to take money outside, there was a huge flood of money.” However, the RBI later revoked some of the investments made outside India in order to contain the massive flow of money in overseas investments. Rishabh thinks this is possibly why the regulators are hesitating.
The third speaker in the panel discussion, Pallavi Bakhru, Partner and Leader - Private Client Services, Grant Thornton Bharat, said that currently, no approvals have been granted for investments in the Family Business Investment Fund for GIFT City. However, once a handful of investment opportunities receive the green light within the Family Investment Fund, a surge of capital inflow is anticipated.
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