Unlocking Growth, Compliance and Wealth Management in India's Corporate Ecosystem The Entrepreneur India Summit 2024 provided deep insights into how India's business ecosystem is evolving.

Industry leaders converged to discuss the evolving landscape of India's business ecosystem, focusing on compliance, innovation and wealth management. The insightful panel featured a range of speakers, each addressing the unique challenges and opportunities faced by MSMEs, multi-generational businesses and corporates striving for sustainable growth. From the necessity of compliance to the rise of family offices, the discussion was both informative and eye-opening.

Aman Goel, managing director at PwC, opened the conversation with innovation and growth, emphasizing their interdependence. He argued that growth without innovation is unsustainable, especially in today's fast-evolving business environment where disruption can come from unexpected quarters.

"Growth and innovation kind of start becoming intertwined. Growth everybody hunts for, but innovation is what keeps the business alive," he said. Goel stressed that innovation must become a boardroom priority. Too often, innovation is delegated to middle management, when it should be driven by leadership at the highest levels. He also discussed the importance of fostering diverse thinking within organizations. Companies that embrace diversity in thought, gender and perspective are more likely to sustain innovation over time.

Goel tied these ideas to cash flow management, a topic of crucial importance for SMEs. He highlighted a worrying gap in understanding among many businesses:

"If you ask anybody on the street, what is the definition of free cash flow? What is working capital? What is the difference between the two? 80 per cent of the people guaranteed will not know this," he said. This lack of financial literacy can cripple businesses, especially smaller enterprises that already operate with tight margins.

Sumit Verma, chief sales officer, Metal Power Analytical, added a risk factor to the dias. "The risk of not doing anything is the bigger risk," he declared. Verma acknowledged that collaboration and risk go hand in hand. He is well aware of the risks involved when collaborating with huge corporations because the margin of error is zero to minimal. "We're working with lots of automotive steel giants, even not only in India, across the globe, but with these calculative risks, it comes from the collaboration only. We talk to our customers, speak with them, what's their need, how we can address it," Verma revealed.

Yashraj Vakil, CEO of Captain Biz, addressed the challenges faced by India's 64 million MSMEs, especially regarding taxation and compliance. Many of these businesses operate on outdated systems, relying heavily on pen-and-paper methods. Vakil highlighted the precarious situation many MSMEs face when they receive tax or GST notices:

"They get GST notices. They get tax notices. The moment they get a tax notice, they probably have to shut down their business. They don't know if they will open their doors the next day."

Vakil pointed out that the fear of compliance is widespread among MSMEs, particularly concerning GST. However, his company has taken on the mission of digitizing MSMEs, helping them shift from traditional operations to more streamlined, digital processes. Initially, MSMEs resisted these changes, perceiving GST as a threat to their survival. But as businesses adopted digital tools, they began to see transformative benefits.

"What we realized is, all of these MSMEs would start shivering the moment you tell them GST. So we said, okay, GST, what we will do is help you raise digital bills and digitize your business... then they realized this is the way I can manage the business. This is the way I can innovate."

The results were remarkable. MSMEs were now able to create formal sales and purchase invoices, access working capital, and bring their operations in line with the demands of the modern economy. For Vakil, this digitization at the grassroots level is key, as these MSMEs contribute a significant portion—30 per cent—of India's GDP.

A Non-Negotiable Business Pillar

Balaji Srinivasan, executive director of Dream Folks, emphasized that compliance should never be an afterthought. For Dream Folks, the compliance burden increased dramatically when the company went public, particularly in terms of data security and governance. According to Srinivasan, compliance is critical for long-term success:

"Being compliant is not an option. I think if that clarity is there with your leadership and as well as your teams, then everything starts to follow."

He stressed the importance of having a compliance-first mindset from day one, noting that proper compliance mechanisms help a business mitigate risks, especially in fields like data security, where breaches can have catastrophic consequences. Srinivasan's experience underscores that strong compliance isn't just about meeting regulatory requirements—it's also about creating a foundation for sustainable growth and reducing risks at every stage of business development.

Adding to this, Dulles Krishnan, vice president of Avalara, drew attention to the complex landscape of US tax compliance, particularly for businesses exporting to the US. The 13,000 different tax jurisdictions in the US pose a formidable challenge, and many smaller businesses cannot afford the professional services of firms like PwC. Krishnan highlighted how technology and automation are becoming essential tools for reducing costs and improving accuracy in compliance. "The cost of non-compliance is always 10 times more than the cost of compliance," he said.

This point resonated with the audience, reminding them that non-compliance is a far costlier gamble than many businesses realize, especially in international markets.

The Rise of Family Offices

Himanshu Kohli, Co-Founder of Client Associates, shifted the conversation by bringing a fresh perspective on the rise of family offices in India. What was once an obscure concept is now becoming essential for high-net-worth individuals (HNIs) looking to manage their wealth separately from their business operations. Family offices provide structured systems for wealth management, particularly for entrepreneurs who have diversified beyond their traditional businesses.

"Today an entrepreneur wants to create three or four businesses during their lifetime... They are less attached to the emotions of the business. They are more pragmatic about value creation."

Kohli highlighted that HNIs in India are growing at an astounding rate of 16 per cent per year, which is driving the need for professional wealth management structures. Entrepreneurs today are focusing not just on their core businesses but also on asset allocation, often distancing themselves from day-to-day operations. For those with 100 crores or more in liquid wealth, setting up family offices has become an efficient way to manage and grow their assets.

Kohli's discussion also touched on how compliance and governance within family offices are becoming just as crucial as in traditional businesses. He cited the example of a former classmate preparing for an IPO, who shifted his entire approach to governance and taxation, "He separated from his family, started from day one that I have to pay taxes, I have to put full governance in place... governance or compliance actually adds a premium."

Audience Asks: Financial Literacy and Resource Management for SMEs

The panel also addressed a question from the audience, who raised concerns about the lack of financial awareness among SMEs. Priyendu Jha, head of treasury at Patanjali Foods, agreed, noting that many SMEs lack an understanding of basic financial concepts, such as the cost of capital and tax compliance. This often limits their access to financing and prevents them from scaling their businesses:

"SMEs are mostly uneducated about finances. It becomes very difficult to tell them that there is a value of capital." Jha stressed the need for financial education to help SMEs understand the benefits of compliance and tax-paying, which are critical for accessing credit and growing their businesses.

Vikas Arora, EVP & business head at Shriram Finance, added that Indian businesses are moving from a traditional "Lala" mindset, where decisions were made informally, to a more structured approach. He pointed to the rise of SME IPOs as a sign of this shift towards more professional financial practices.

The Entrepreneur India Summit 2024 provided deep insights into how India's business ecosystem is evolving. From the digitization of MSMEs and the rising importance of compliance, to the growth of family offices and the need for better financial literacy, the panel made it clear that compliance is non-negotiable, innovation must be a top priority and wealth management is becoming essential as entrepreneurs diversify their portfolios. Businesses that embrace these principles will be better positioned for long-term success in India's dynamic economic landscape. Read more