The Indian Economy Blog

June 14, 2007

Anything Unique About Indian MNCs?

Ravikiran Rao asks more questions than he answers in the June issue of PragatiThe Indian National Interest Review.

Advocates for Indian family businesses claim that they can teach a thing or two to the rest of the world, both about family values and about running a business. But family values are not unique to Indians. And family businesses have disadvantages which come from having to put trust over competence. It is interesting to speculate over why there isn’t an Indian Taco Bell—a chain of Indian franchises offering standardised Indian food abroad. Is it because running a franchise model requires the ablility to manage control through arms-length contractual relationships—something that Indians, relying too much on trust-based relationships, are unable to do? Or is it just a matter of time before we have a completely different kind of franchising model, one which relies on all the franchisees being, say, Patels? What will be the impact of the often caste and clan-based cliques that exist in Indian family businesses – especially in the top management- on a world that expects meritocratic hiring?

Increasingly, the rest of the world’s relationship with India will move beyond buying things or getting services performed by them to working for Indians as employees and vendors. To the extent that market transactions involve hierarchy, Indians will increasingly move from playing a subordinate to peer and superior roles. How will this transition play out? We don’t know yet. Countries, as much as people, show their true character when they gain power, and in that sense, India’s true character is yet to be revealed. [Ravikiran Rao/Pragati]

Also in this issue, you will find Salil Tripathi’s argument for global Indian news channels, extracts from Niranjan Rajadhyaksha’s new book, ‘The Rise of India‘, and Chandrahas Choudhury’s review of Discordant Democrats.

(This post is not complete without the lodging of a strong protest against Ravikiran Rao calling himself a lapsed blogger. In the land of Amitabh Bachchan, Chandu Borde and Sivaji – The Boss, such lapses are unacceptable)


  1. How can I get to recieve future blogs for this site? I am a Professor and working on a book on India and China. I would like to be included in your mailing list.

    Thank you.

    Comment by Inderjit Singh — June 19, 2007 @ 6:28 pm

  2. Inderjit,

    You can subscribe to this blog’s feed. If it is Pragati that you’d like to subscribe to, you can sign up here

    Comment by Nitin — June 23, 2007 @ 4:00 pm

  3. Good one Nitin… I am sharing an article which recently appeared in Businessworld. You will find it interesting.

    Five companies that would be worth $1 billion each



    Going public is the inflection point for most entrepreneurs and companies. While there are notable exceptions, the public listing of an enterprise is what allows it to get the capital, goodwill, managerial talent and prudential oversight necessary to become great. As importantly, public listings are what allow society at large to share in the success of the company. This fulfils its social obligation of fostering greater public participation in the economy, and ensures that commerce is encompassing and not extractive.

    After wading through data on hundreds of private firms, here are five that we would love to see go public. Listing these firms, we believe, would give them a market capitalisation of $1 billion (Rs 4,100 crore) each, plus the leverage to achieve their vertiginous growth targets.

    Sankalpan Infrastructure

    Within a decade of its inception, Sankalpan has emerged as one of India’s fastest growing integrated realty and infrastructure service providers. The company provides end-to-end services to real estate companies — ranging from acquiring land for clients, to dealing with arcane regulations, creating project plans, architecting, construction, interior design, and finally delivering the finished building to the customer.

    So far, Mumbai-based Sankalpan has executed more than 600 projects worth $200 million (Rs 820 crore). This year, it has already booked projects worth Rs 90 crore — remarkable growth for a company whose revenues in 2004-05 were Rs 4.5 crore.

    If listed, Sankalpan could command a market capitalisation of about Rs 1,000 crore. Given its long-term plans, this figure could quadruple and the company scrip could become a real estate bell weather. Founder Ninad Randive is building up anticipation for the move. “We may go public sometime in 2009-10,” he says.

    Bharat Hotels

    When founder Lalit Suri passed away last year, the management of this hotel group fell to his wife, Jyotsna. Given her untested abilities, a public listing and the introduction of professional management seems much needed. The Dubai Investment Group recently paid $40 million (Rs 164 crore) for a 5 per cent stake in Bharat Hotels. But the company will need more capital, as it plans to add 3,800 rooms at a cost of Rs 1,000 crore. Bharat has also announced its first international foray — the construction of The Grand Fort Dubai — in partnership with the Dubai-based Nakheel Group. Based on a comparison with its listed peers, we believe Bharat Hotels’ current market capitalisation would be about Rs 2,000 crore, a figure that could well double as the company’s plans fall into place.

    Vijai Electricals

    Vijai was founded 30 years ago by D.J. Ramesh and is one of India’s largest power equipment companies. Given India’s massive energy needs, Vijai is investing $70 million (Rs 287 crore) in expanding its product range.

    To fund this expansion, the company has raised $25 million (Rs 102.5 crore) from UK-based private equity firm 3i Capital. But the capital-intensive nature of Vijai’s core business and the high multiples commanded by power companies make listing an attractive option.

    Given the valuations enjoyed by peers such as Bharat Bijlee, EMCO and Indo Tec., Vijai could command a market capitalisation of Rs 2,500 to Rs 3,000 crore if it listed today. Continuing growth in the power sector means that over the next few years, Vijai’s domestic market growth will probably be even faster than it has been in the past, and its valuation could touch Rs 5,000 crore by 2010.

    Mahanagar Gas

    Mahanagar Gas is the largest gas distribution company in India, with more than 300,000 households and 850 commercial units as its clients. It is investing Rs 1,200 crore over the next five years to expand its pipeline and needs a massive cash infusion.

    Sister company Gujarat Gas has been favourably valued by investors and we believe Mahanagar Gas would be shown the same favour. With revenues of Rs 513.5 crore, the company could command a market capitalisation of Rs 1,500 crore. Since Mahanagar Gas is also expanding into neighbouring cities, such as Pune, its customer base and revenues are expected to double. This, along with the spiralling demand for delivery of piped gas in India, will ensure strong growth prospects for Mahanagar Gas, whose market capitalisation could touch Rs 4,000 crore by 2012.


    Being named after two billionaires could help Rustom Godrej Pallonji Joshi become one himself. VVF, the oleochemicals and personal care products company his father started in 1939, is one of the largest FMCG contract manufacturers in India. VVF has plants in Dubai, Canada and the US. VVF also owns personal care brands, such as Doy, Doy Care Aloe Vera, Shiff and Jo, and will spend Rs 200 crore to build up its own FMCG business. If all goes as planned, the company’s revenues could cross Rs 1,000 crore by 2008.

    Listing would be a good way for VVF to fund its growth plans. If the company gets itself listed today, its market capitalisation would be in the region of Rs 2,000 crore to Rs 2,700 crore, a figure that could double over the next five years.

    Comment by Krishna Kumar — July 20, 2007 @ 5:32 pm

  4. Hi,

    Nice post. I think there is no huge restaurant chain like Taco Bell in India because of the size of the menu. Please see my article discussing the potential problems of indian restaurants at

    Ranjit kumar

    Comment by Ranjit kumar — August 7, 2007 @ 3:01 pm

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