Succession: Kin of Indian family business owners not keen on taking reins, shows survey

Indian Express

20-05-2025

A mere 7 per cent of the next generation of India's family business owners feel a sense of obligation to take the reins, indicating a significant lack of interest in succeeding their parents, says an HSBC report. This raises questions about the future leadership and succession planning for these family businesses.
While 88 per cent of Indian entrepreneurs surveyed by HSBC trust the next generation's ability to manage family wealth, 45 per cent of surveyed entrepreneurs (55 per cent of first-generation and 35 per cent of multi-generation) do not expect their children taking over the family business, according to HSBC Global Private Banking's report titled 'Family-owned businesses in Asia: Harmony through succession planning'
The HSBC report has highlighted the preparedness of family-owned businesses in India and across Asia for the future of their enterprise and their wealth, offering key insights into succession planning and intergenerational dynamics.
HSBC said this trend highlights a shift in the traditional approach to succession planning, even as family-owned businesses continue to play a pivotal role in India's economy, contributing approximately 79 per cent of the country's gross domestic product (GDP) — one of the highest ratios globally.
Interestingly, only 7 per cent of Indian respondents felt obligated to take on the family business when the business was passed on, reflecting a growing openness to exploring opportunities outside the family enterprise, it said.
Kotak Mahindra Bank founder Uday Kotak had recently advised the next generation of business heirs to step into building real-world businesses and flagged concerns regarding the increasing inclination of young business heirs to run family offices and investments instead of starting businesses of their own.
According to the HSBC report, this sentiment is supported by strong feelings of encouragement within multi-generational families, with 83 per cent of respondents stating they felt empowered to pursue other interests when they first took over the business.
Despite this shift, the report said that 79 per cent of Indian entrepreneurs still plan to pass their businesses to family members, aligning closely with global trends (77 per cent in the UK and 76 per cent in Switzerland). Notably, Indian second- and third-generation entrepreneurs feel a strong sense of trust from their predecessors, with 95 per cent reporting they felt trusted when taking over the business — significantly higher than the global average of 81 per cent. India is on the brink of a significant intergenerational wealth transfer, it said.
According to Hurun data, in 2024 India had 334 billionaires in US dollar terms 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. This underscores the importance of robust succession planning to ensure the seamless transition of wealth and business leadership.
Sandeep Batra, head, international wealth and premier banking, HSBC India, said: 'India's family-owned businesses are balancing legacy preservation with modernity. While there is trust in the next generation to uphold the values and culture of the family business, there is also need for open communication and robust succession planning.'
Longevity of Indian businesses
India's family-owned businesses are unique in their longevity, with some thriving for over a century. However, many of these businesses were established in the 1990s, following the government's economic liberalisation, ushering in a generational shift. Second-generation entrepreneurs, often educated abroad and raised in cosmopolitan settings, bring new perspectives to the table.
Unlike the humble beginnings of many first-generation entrepreneurs in India, the second generation has grown up in cosmopolitan urban environments. However, family-business owners do trust the ability of the next generation to maintain the values and culture of the family business, the HSBC report said.
Multi-generational family businesses accord a high value to extended family and kinship. Second- and third-generation entrepreneurs in the Indian subcontinent almost unanimously acknowledge the faith that their predecessors placed in them when they took over the business. Like India, second- and third-generation entrepreneurs across the rest of Asia trust the next generation to maintain the values and culture of the family business.
Of those who have succession planning in place, India has the highest percentage of entrepreneurs who intend to pass their business on to a family member, with 79 per cent intending to do so, which puts Indian business owners on a level with their counterparts in the UK (77 per cent) and Switzerland (76 per cent).
However, 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.
Entrepreneurs in Asia, with the exception of India, are not planning ahead to the same degree as their counterparts elsewhere. Entrepreneurs in mainland China (25 per cent), Hong Kong (29 per cent) and Taiwan (27 per cent), plus to a slightly lesser extent Singapore (22 per cent), show the most interest in selling their business as the exit route of 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 world exports.