Tariff Storms: Are Promoter-Led firms built for the rough?

By Dr. Neha Gosain, PhD, Assistant Professor, IILM New Delhi

While the world is going through a dramatic rise in geopolitical shifts and tariff battles, there is a class of shareholders in the Indian Inc. that is holding the ground for their firms. Corporations with promoter ownership of more than an average 50% are termed as promoter-owned firms. Indian firms like Reliance Industries Ltd., the Tata Group, Adani Group, and Bajaj Auto are among a few that have shown a surprising resilience against the global upheavals. These firms are seen to acquire many structural advantages compared to other firms, helping them ride the tariff shock waves. But can their defining advantages become their Achilles’ heel?  

Due to their concentrated ownership and centralized decision-making, promoter-led companies are more agile in global crises. Tata Steel’s swift response to the US’s 25% steel tariff in 2018—selling its declining US arm and expanding in Europe in three years—is a good example. Reliance Industries also anticipated trade tensions by reducing dependency on Chinese petrochemical imports and building a large integrated petrochemical and refining complex in Jamnagar by 2023. Because they can make bold, long-term bets without the quarterly earnings pressures that publicly traded companies encounter, these businesses have a clear advantage in volatile tariff environments.

Geopolitical Shifts and the Resilience of Promoter-Led Firms

In India, many of the leading promoter-led businesses have established vertically integrated business models that act as natural trade barriers. This is best demonstrated by the Tata Group, whose power division supports manufacturing and whose automotive division sources steel from its own mills, protecting it from fluctuations in import prices. The Adani Group’s ownership of ports, power plants, and coal mines provides natural tariff protection throughout its infrastructure empire, while Sun Pharma’s in-house API production facilitated transitions during the trade tensions between China and India.

Instead of using quarterly reporting cycles, promoter-led businesses frequently follow generational timelines. This patience is demonstrated by Bajaj Auto’s decades-long effort to enter the high-end European motorcycle markets. The business continued with its internationalization strategy despite major import duties and trade barriers in essential markets, eventually becoming a major player in the two-wheeler market on a global scale.

Strategic investments that might be unpopular with more short-term-oriented competitors are made possible by this long-term orientation. For example, due to energy transition policies and possible carbon tariffs, Adani Green Energy made significant investments in renewable infrastructure, hoping these assets would eventually become priceless. Even though these wagers are risky, if trade policies develop as expected, they can result in significant competitive advantages.

Vertical Integration as a Natural Trade Shield

However, promoter-led businesses can be vulnerable due to the same characteristics that make them strong. Some groups have suffered due to their excessive devotion to outdated, less adaptable businesses and their resistance to necessary change. Vedanta Resources was particularly negatively impacted when trade restrictions and environmental regulations started to rise sharply because it relied heavily on mining and aluminum as its main revenue streams.

Promoter-led businesses thrive when they maintain flexibility while maintaining strong governance, as demonstrated by the Tata Group’s Chandrasekaran-led balance of professional management and family control and Bajaj Auto’s ability to withstand challenging trading conditions by combining family leadership with capable executives. Those who combine the flexibility and vision of family leadership with the discipline and openness of professional management will influence their futures and India’s place in the world economy in an era of growing trade barriers and economic nationalism.