The unicorns and tech start-ups continue to grab the eyeballs, even as the increase in institutionally owned (- defined here as the absence of an Indian promoter) and controlled companies, is taking place virtually unheralded. This development too will transform the corporate landscape in equal measure as the unicorns and deserves attention.

There have been atleast 183 control transaction between January 2017 and December 2020. Remove real estate and infrastructure - primarily roads, this number still adds upto 142. The numbers have steadily gone up, from 28 in 2017, to 49 in 2018 and 62 in 2019. Even in 2020 when economic activity slowed on account of the pandemic, there have been 44 transactions. The current calendar year have already seen 21 transactions up until May.

As family ownership gives way to ‘institutionally owned and controlled companies’ there are many questions that need to be asked, including what the implications on investment and growth are? Will businesses become more short-term and less long term in outlook? Will these businesses re-invest in India five or ten years out? Will managements have the same risk appetite? Will they be imbibed with animal spirits in the same measure as the crop of Indian families? Will the institutions prefer to take money out and chase the next growth opportunity outside India? If India suddenly becomes a less attractive investment destination, where will risk capital come from? As business families have a charitable streak, how will philanthropy change? How will changed ownership impact our society and polity and policy making?

Regulations for long have focused on the ‘promoter’ being present in the room. From the role of the independent director as an arbitrator between the promotors and minority investors, to related party transactions, to majority of minority vote, to promoter guarantee for loans. Regulations assume that family business or the presence of a ‘promoter’ is the norm with ‘institutionally owned and controlled companies’ being the exception.

True, today such ‘institutionally owned and controlled companies' occupy a small corner of India Inc. But it is not difficult to envisage a future where they tower. This trend will only accelerate as the younger generation exit the family businesses to focus on family offices. Ironically, in the process many will transfer wealth from families to new generations entrepreneurs and professionals. India’s corporate landscape is changing, and the economy is set to change with it.

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