Splits spawn entrepreneurs: Hiranandani

Real estate developer Niranjan Hiranandani is clear that separations in family businesses are going to happen more regularly in India. Having lived through tough multiple court battles with his daughter Priya Hiranandani Vandrevala and son Darshan Hiranandani on opposite sides, he is clear this will happen because ?at a younger age, people are going to demand their rights in a much more vociferous manner?.

Speaking to FE, Niranjan broke his silence on the battles. According to him, while his group has enough projects to sail through till 2024, a 20% annual growth rate and more, ?the reality is that differences are going to happen (and) separations are going to take place?.

The London Counsel of Indian arbitration is hearing a case between him as the patriarch of the family and his daughter over the family business. A final verdict is expected by June. He refrained from speaking on the arbitration as it is confidential, but sees such fights creating more entrepreneurs.

The best part of this (family splits) is that has led to individual entrepreneurship among the second generation which is much higher than before, says Hiranandani, 62, whose family stepped into the real estate business in 1978. ?This is indeed going to affect the way businesses are done, rather than businesses per se.?

?The command or control of heads of businesses was much more earlier,? says professor K Ramachandran, Thomas Schmidheiny Chair Professor of family business and wealth management, Indian School of Business, Hyderabad. ?Now, there is a decline in emotional bonding as people have started living separately.?

The fight in the Hiranandani family turned bitter after reports that Priya tried to scuttle her brother Darshan?s plans to start a power plant in Thane district of Maharashtra. ?Police told me that my daughter was behind it,? says Hiranandani. ?It is sad.?

At the heart of the dispute are the allegations of violating the Business Association Agreements signed between Hiranandanis and Priya Vandrevala in 2006. Under it, they floated Hirco Plc in London and launched a subsidiary Hirco Developments to develop townships in India. Relations turned sour in 2009 when Priya alleged that fresh acquisitions of properties was not translating into profits for her. Niranjan said many of the buys were outside the agreements which led to the full-fledged battle.

One of the most celebrated cases of splits in family run business occurred in June, 2005 when Reliance group, founded by late Dhirubhai Ambani, was divided between brothers Mukesh and Anil. In 2007, Bajaj family split its business between patriarch Rahul Bajaj and younger brother Shishir.

?It is happening now more than earlier, though such issues have always existed,? says Ramachandran of ISB, Hyderabad. ?Very often, family-run businesses do not have a clear road map as to why they are together… Also, there are no governing rules or policies on small matters like credit card spending or larger issues like employment, remuneration, retirement etc, which lead to troubles within family members later on,? he added.

But, Hiranandanis have a past of amicable split. Niranjan and his brother Surendra split their real estate business in 2007 and decided to pursue business on their own, keeping the joint venture business intact. ?We have separated and yet we are together,? says Hiranandani. ?We said that we will do our new businesses separately while we will not separate the old businesses.?

?Today, we have what I call as Yours ? which is Surendra?s, Mine ? which is my family?s side of the business and Ours ? which is our common business, and which we still continue to grow,? he added. Niranjan started Hirco Plc, a London Stock Exchange AIM-listed company, while his son deals with Hircon in Dubai and Surendra has started Hiranandani Realtors.

?It is bound to happen that bigger families will trend towards nuclearisation, so these issues have to be managed well,? Munish Thakur, chairperson, strategic management area at business school XLRI, Jamshedpur, said.

?We have changed from eastern mentality to the western mentality with more of ?I,? rather than ?we?,? says Hirannandani. ?In ?we?-centric mentality, even the weaker members of the family were carried with you.? But now, that is totally gone,? he added.

In India, first generation entrepreneurs are so attached to their businesses that they cannot imagine its division, says Thakur of XLRI. ?But it is important that the paths of all family members, and in fact, professionals in the company too are made distinct so that that differences can be avoided later on.?

The family fight and arbitration do not cross relations between daughter and father.

?We talk about our grandchildren on a regular basis,? says Hiranandani, who built 23 Marina, Dubai?s tallest residential with 90 floors. ?She even asks me to visit her London house.?

Many family businesses could avoid such fights if they plan their successors well in advance.

?It is important that heads of businesses chalk out their succession plan and groom the candidate in their own life time through education, training etc rather than leaving it to next generation to take hard decisions of separation,? says Thakur of XLRI.

Hiranandani also believes that separations or fractions in corporate houses, if handled and understood amicably can create more value for the business, an area he failed to bring between his siblings.