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Blood still runs thick in India Inc

July 16, 2008 15:43 IST

Corporate India, which has grown globally in stature, is still a far cry from the professional management as family-owned monoliths in the country still prefer insiders and relatives over better qualified outsiders and squabble unproductively, says US magazine Newsweek.

Commenting on the bitter battle between Ambani siblings, the publication said in its latest issue that the feud further underscores the need for the businesses to outgrow from their mostly family-run setups.

"Nor are such tantrums limited to the Ambanis -- many family-owned Indian monoliths still favour insiders, hire relatives over better-qualified outsiders, squabble unproductively, and ignore independent director's advice," the magazine said, attributing the views to a managing partner at a private equity firm which invests in such companies.

Pointing out that Indian firms have been growing in competitiveness globally, the magazine said that "conventional wisdom has also been that subcontinental powerhouses are getting sophisticated."

Newsweek cited the recent merger of country's largest drug maker Ranbaxy Laboratories with Japanese pharma major Daiichi Sankyo as an example.

"Management is becoming more professional, too; bullish analysts point to the recent merger of Ranbaxy with Japan's Daiichi as a sign of a new willingness among India's CEO scions to move beyond the walled garden of family firms and team up with smart outside companies."

Apart from Reliance, other family-run businesses in the country, include diversified conglomerate Tata Group and Aditya Birla Group companies.

"Now a very public fight between Mukesh Ambani's Reliance Industries Ltd and Anil Ambani's Reliance Anil Dhirubhai Ambani Group -- the billon-dollar refineries to telecom rivals created when the brothers divided the family assets after a soap-opera-style split in 2005 -- underscores how much work remains," the Newsweek report said.

Elder brother Mukesh has "effectively stymied the deal by invoking his right of first refusal on any sale or transfer of Anil's shares in the company," it added.

The feud between the two brothers broke out again over younger sibling Anil's efforts to merge his flagship company Reliance Communications with South Africa-based MTN.

The move, which would create one of the 10 biggest telecom entities in the world worth about $70 billion, has run into uncertainties after the opposition by Mukesh Ambani group.

Still, there have been quite some instances of family-run businesses growing into a professionally managed entities in the countries.

In June, Ranbaxy announced that Japan's Daiichi has agreed to acquire 34.8 per cent stake held by the promoters -- Singh family in the company. The deal estimated to be worth $4.6 billion, once completed, would make Ranbaxy a subsidiary of the Japanese firm.

However, industry observers believe there are not too many such examples and the family issues still matter a lot when running a company.

"The bottom line: don't look for the next Jack Welch on the subcontinent anytime soon," Newsweek said.

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