A research study that analysed the trends in equity ownership by various classes of shareholders in over 4,600 firms listed on NSE and BSE found that promoters holding in family firms had increased.
Promoters of family firms increased their stake in their companies over the last decade. In contrast, State owned Enterprises (SOEs), Other Business Group Firms (OBGFs) and Standalone Non-family Firms (NFs) witnessed a decline in the promoter shareholding, according to the report of the study by Indian School of Business’ (ISB) Thomas Schmidheiny Centre for Family Enterprise.
An ISB release on the “Family Businesses: Promoters’ Skin in the Game 2001-2017” study said this shareholding pattern reinforced the pre-eminent role of family-controlled businesses in India.
“It seems to imply that the engine of growth of Indian businesses will not be dependent on overseas or other promoter categories. Instead, promoters of family firms will continue to play a major role,” the release said. The research study was conducted by Nupur Pavan Bang and Kavil Ramachandran and Anierudh Vishwanathan, Professor at the Thomas Schmidheiny Centre for Family Enterprise of ISB and IIM Calcutta professor Sougata Ray.
Stating that it was a first-of-its kind research study, the release said it found that while the concentration of promoters’ shareholding is decreasing in non-family firms, it is increasing in the family firms.
By steadily increasing their shareholding in the firm, the promoters of family firms, both family business group firms (FBGFs) and standalone family firms (SFFs), were signalling their growing confidence in the potential of their company thus instilling confidence among the investors.
Promoters of MNCs have also increased their stake in their Indian subsidiary, probably an indicator of their belief in the ‘India story’.
The promoter stake in State Owned Enterprises (SOEs) has been steadily falling over the past decade. This was in line with the policies of the successive governments in India to divest their holding in the SOEs. Other business group firms (OBGFs) and standalone non-family firms (NFs) have also witnessed a decrease in promoter shareholding, the release said.
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