Ownership, Control, and Succession in Family Businesses: A Study on Pharmaceutical Companies in India

Abstract

Through the study of top 100 pharmaceutical companies in India, an attempt has been made to identify the ownership pattern, control, and succession in familyowned pharma businesses in India. For identification of top 100 pharma companies, IMS TSA August 2022 database has been used. Results show that majority of pharmaceutical companies in India are family-owned, and family-controlled businesses except for foreign pharma companies which operate in India either as an associate or a subsidiary of their foreign parent company. There are 15 such pharma companies which are in existence from pre-Independence era, i.e., formed prior to 1947 or in 1947 only. The study throws light on various aspects of family-owned pharmaceutical business in India, i.e. extent of family ownership, control and succession in these family-owned pharmaceutical companies in India. Family-owned businesses in India dominate top 500 companies in India, be it in terms of number of companies owned, or in terms of market capitalization. Pharmaceutical Sector in India is not expected to be an exception. In contrast to this, it is also said that wealth is created by the first generation, 2nd generation stewards it, and the third generations destroys it. Multiple versions exist on three-generation myth, i.e., Non “From shirtsleeves to shirtsleeves in three generations”, Brazilian saying states - “Rich father; noble son; poor grandson”, and Chinese saying refers it as - “Wealth never survives three generations” (Chinese expression - “Fu bu guo san dai”). There are numerous reasons which are attributed for giving this saying a ‘near-truth’ status. These reasons include ‘no emotional bonding among siblings resulting into sibling rivalry’, ‘overcrowding of family members in family business’, ‘familybusiness fails to accommodate all’, ‘performance challenges’, ‘governance challenges’, ‘non-suitability of successors for specific businesses’, ‘lack of succession planning’, among others.