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Context is everything.
Detailed stories on technology startups, business and economic current affairs.
Detailed stories on technology startups, business and economic current affairs.
Uday Kotak says heirs are choosing to manage family money rather than run real businesses. This lament doesn’t stand scrutiny.
Editor's note: “Even today, I firmly believe that the next generation must work hard and create businesses rather than becoming financial investors too early.”
That was Uday Kotak, one of India’s leading bankers, lamenting the role of the next generation of business families at the “Chasing Growth 2025” investor event last month.
His concern likely stemmed from the proliferation of family offices and the full-time involvement of an increasingly large number of scions in running them. According to a report by PwC, there are currently over 300 family offices in India, managing assets worth more than $30 billion, compared to just 45 in 2018. This number is expected to rise exponentially as promoter wealth in tier-2 and -3 cities increases. Catamaran Ventures, Premji Invest, Subhkam Ventures, Narotam Sekhsaria Family Office, Sharrp Ventures, B2V Ventures and Nadathur Holdings are some of the better known names among family offices.
On the face of it, other trends also corroborate Kotak’s stance. Promoter stakes have been reducing in the NSE-listed universe lately. Moreover, between 2020 and now, promoters have offloaded over Rs 1.43 lakh crore of equity through offers for sale in a booming IPO market. It appears that not only are promoters not investing in their businesses, they are also actively cashing out to invest their wealth in other assets. According to Kotak’s contention, this is at least partly driven by the next-gen's propensity for “taking the easy way out”.
“Uday Kotak’s lament is the frustration of a founder generation,” says Sougata Ray, executive director of the Thomas Schmidheiny Centre for Family Enterprise at the Indian School of Business.
Is there any truth to Kotak’s contention then?
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