Why more South Indian firms aren’t on Sensex

North versus South is an evergreen theme to explore for newspapers and magazines and, of late, some TV stations too.

For decades, journalists, historians and pop-sociologists (all usually South Indian) have compared and contrasted politicians, filmstars, cricketers and others from either side of the Vindhyas to drive home their point (usually that the South is somehow better for the reasons they listed).

In most such scorecards, the South gets good marks for “culture”, simplicity, frugality, artistry, education, filter coffee and the masala dosa. Routinely, south Indians are accused of being docile, decent and civilised but lacking in drive and ambition unlike their thuggish, loud-mouthed northern counterparts, whose cut-throat killer instinct is blamed on their survival mechanisms evolved while combatting brutal invaders and an even more brutal climate.

Etcetera.

The February issue of the newly launched edition of Fortune India looks at businessmen from peninsular and heartland India. And the piece (written by a North Indian and a South Indian), like most previously published pieces, is replete with the usual sweeping generalisations about the South that leaves you wondering as always, “Gee, are they really talking about us?”

It says:

# “Companies in the South are seen as generally conservative, non-aggressive and reactive, while their counterparts in the North are considered aggressive risk-takers. The differences are sometimes so stark that they seem like two different countries. That’s an outcome of history, tradition and cultural ethos.”

# “The Bombay stock exchange was set up in 1875, while the Calcutta stock exchange was incorporated in 1908. The oldest exchange in the South, the Madras stock exchange, was established only in 1937. Perhaps because of their historical familairity with, and proximity to, the stock market, the average North Indian business is more willing to raise funds from the stock market than a southern company.”

# “Only two south Indian companies find a place on the benchmark 30-stock BSE Sensex. Both these are IT companies and both were moved to the South. Wipro was founded in theNorth by a North Indian business family belonging to the Ismaili community. Infosys, started by a Kannada Brahmin, was set up i Poone before it moved to Bangalore.”

# “Southern business houses are not in favour of chasing stock markets for better valuations and leverage and do not want to be driven by quarterly expectations…. Even when there is a need for funds, the first option would be internal accruals. Raising money from the market is the most expensive form of fund-raising.”

# “The stark difference between businesses on either side of the Vindhyas is a product of the way they look at growth. Businesses in the South behave like the tortoise in the fable. They move slowly but steadily. Companies are legacies to be inherited and passed on, not just cash cows to be milked dry.”

# “The North which has seen several invasions has provided fertile ground for entrepreneurs and risk takers. For those who have witnessed periodic destruction, being aggressive and acquisitive and living for the moment comes naturally. The mayhem following Partition only strengthened that feeling, especially among those who had to abandon flourishing businesses in what is now Pakistan.”

# “Diversification is more common in North Indian companies, while core competence is valued down south…. When it comes to growing inorganically, North Indian businesses lead.”

# “The ability and willingness to risk capital means that North Indian businesses are more open to going global. South Indian firms are content to grow organically and in their home territory. Fiscal prudence and frugality in the scale of operations prevents South Indian companies from making expensive global plays. Even when they have matching resources they are reluctant to enter the global arena.”

# “It’s not just global forays; companies in the South are often unwilling to cross the Vindhyas. Slow and steady growth has its advantages but the focus on stability could cost a group in terms of missed opportunities.”

# South Indian businesses are generally seen as legacies, so importance is given to succession plans, and handing over begins during the patriarch’s lifetime. Lack of this has dragged down many North Indian businesses. Bitter, open battles led to court battles that lasted for years.”

The only concession the Fortune India piece makes to “Madrasis” is in doffing the hat to the GVKs, GMRs, Satyam and Maytases of manna Andhra Pradesh.

“Andhra guys are an aggressive bunch, says the Fortune India piece. Most of these companies are promoted by families that made their fortunses in farming. They are comfortable taking risks because they know that they can always fall back on agriculture if all else fails. Like most traditionally agrarian communities, they have a feudal mindset. They typical Andhra-backed business hosue is seen as more corrupt than its other South indian business counterparts, an impression fostered by tis willingness to go to any lengths to get its work done.”

Photograph: courtesy Seattle Examiner

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