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Indian family businesses accelerate overseas investments

Growing confidence among Indian family businesses to be able to compete with the best in the world has accelerated their investments abroad, according to Kavil Ramachandran of the Indian School of Business.

Growing confidence among Indian family businesses to be able to compete with the best in the world has accelerated their investments abroad, according to Kavil Ramachandran of the Indian School of Business.

The Thomas Schmidheiny Chair Professor of Family Business and Wealth Management told CampdenFB that overseas acquisitions and investments is a rising trend.

“Over the last five to eight years, Indian family businesses – not just big ones like the Tata Group, but also mid-sized businesses – are upping their investments outside India. Their high performance growth since 2001 has given them the confidence to realise they are capable of moving out,” he said.

His comments underline the recent announcement by family-controlled motorcycle maker, Hero MotoCorp, to invest around $1 billion to expand internationally in south-east Asia, Africa and Central and Latin America.

The expansion plans follow another family business conglomerate, the Godrej Group, which acquired a company operating in 14 countries in Africa in June – Godrej already has operations in Nigeria, Indonesia, Argentina, Britain and South Africa.

New Delhi-based Hero MotoCorp, 52% controlled by the Munjal family, said on 9 August that it wants to increase its annual revenue to $10 billion in the next six years. It recorded sales of around $3 billion for fiscal year 2011.

Ramachandran reckons that Hero MotoCorp, which is the world’s biggest producer of motorcycles and scooters, has big international ambitions. “The group’s presence in India is already very strong and this is the time to look outside the country for more opportunities,” he said.

The company, formerly called Hero Honda, broke its alliance with Japan’s Honda Motor late last year, with the Munjal family buying the Japanese group’s 26% stake in the business. Ramachandran said this could have laid the plans for further expansion.

“The family has to think of new strategies and have access to advanced technology, research and development, and manufacturing facilities to expand. And many Indian family businesses have realised they have the wherewithal to invest and even raise funds abroad.”

Hero MotoCorp is part of the Hero Group, co-founded by Brijmohan Lall Munjal and his three brothers in 1923. Brijmohan is currently chairman of the company and has an estimated wealth of around $1.7 billion, according to Forbes.

His three sons are also involved in the business – Pawan is managing director and chief executive of the company, while Sunil and Suman are a part of the company board.

Brijmohan’s brothers manage other divisions of the Hero Group. The family, which runs around 20 companies, divided the business operations between the founders and their families in June last year to avoid a feud.

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