India has the third highest number of family-owned businesses, with a count of 111 companies, behind China (159) and United States (121), according to a recent report. Indian family-owned companies generated a 13.9 percent annual average share price return since 2006, compared to six percent recorded by their non-family-owned peers, it showed.
“The Credit Suisse Family 1000 in 2018” study shows that family businesses have functioned as the cornerstones of a country’s economy.
“Indian firms on an average generated some of the highest absolute CFROIs (cash flow return on investment) across our non-Japan Asian nations,” it said.
The report by Credit Suisse Research Institute (CSRI), based on a study of 1,015 companies with $250 million or more in market capitalization, showed that India, along with China and Hong Kong (72), largely dominate the list of family-owned businesses in the non-Japan Asia region, followed by Korea (43), Indonesia, Malaysia, Philippines, and Thailand (all having 26 companies).
In terms of market capitalization, non-Japan Asia region is dominated by the same trio, with China accounting for around $1.4 trillion, ahead of India’s $839 billion and Hong Kong’s $633 billion.
The average family-owned company in China and Hong Kong has a market capitalization of $8.7 billion, compared to $7.6 billion in India. Korean family-owned companies tend to be larger, with an average market capitalization of $10.1 billion.
Overall, the study suggests that the family factor appears robust across the region, given that family-owned companies have outperformed their non-family-owned local peers in every country since 2006.
In 2017, non-Japan Asia-based family-owned companies generated 25.6 percent greater cash flow return on investment than their non-family owned counterparts, and delivered 4.2 percent outperformance in annual average share price return since 2006.
Countries where family-owned companies generated below-average outperformance include Taiwan and Singapore. Countries where family-owned companies outperformed their local peers in 2017 and so far this year are Malaysia, Singapore and India.
“This year, we find that the family-owned businesses are continuing to outperform their peers in every region and sector—whatever their size. We believe this is due to the long-term outlook of family-owned businesses relying less on external funding and investing more in research and development,” Eugène Klerk, head analyst of Thematic Investments at Credit Suisse and the report’s lead author, said in a statement.
While looking at the companies that have flourished from the Asian region, the study said that more than 50 percent of the top 30 are from India. The Asian companies collectively earned a total market capitalization of $748 billion, it added.
The list of 50 most profitable family-owned businesses in Non-Japan Asia included 12 Indian companies, such as Emami, Bajaj, HCL technologies, Hero Motor Corp and TCS.
“Family businesses in Asia outstrip their non-family-owned peers with superior financial performance and more robust share price returns, largely due to their longer-term focus,” CSRI said in a statement.