Why Conglomerates Refuse to Die in India
Around the world, investors have increasingly preferred focused companies that do one thing exceptionally well. The logic seems straightforward. A car company should make cars. A technology company should build technology.
Vidit Garg
5/23/20263 min read
If business history taught us anything, it is that conglomerates are supposed to be a thing of the past.
Around the world, investors have increasingly preferred focused companies that do one thing exceptionally well. The logic seems straightforward. A car company should make cars. A technology company should build technology. A retailer should sell products. The era of giant business empires spread across unrelated industries was expected to fade away.
Yet, India seems to have missed that memo.
Some of the country's biggest and most valuable companies continue to be conglomerates. The Tata Group operates businesses ranging from software and automobiles to hotels and steel. Reliance has interests in petrochemicals, telecom, retail, media, and renewable energy. The Adani Group spans ports, airports, energy, logistics, and data centres. Larsen & Toubro has built a presence across engineering, technology services, defence, finance, and infrastructure.
Far from disappearing, conglomerates in India continue to grow larger.
The obvious question is why.
Part of the answer lies in the way India's economy developed.
In mature economies, companies can rely on highly efficient external ecosystems. Capital is easily accessible, supply chains are well established, and specialised service providers exist for almost everything. A company can focus on its core business and outsource the rest.
India's development journey has been very different.
For decades, businesses often had to build capabilities themselves because the supporting ecosystem either did not exist or was unreliable. If logistics were weak, companies invested in logistics. If financing was difficult, they created financing arms. If supply chains were fragmented, they integrated backward and built their own.
Over time, these capabilities evolved into entirely new businesses.
The result was the birth of diversified business groups that were not necessarily driven by ambition alone but by necessity.
Conglomerates also offer something particularly valuable in a country like India: resilience.
Economic cycles rarely affect all sectors equally. When one business slows down, another may continue to perform well. A diversified portfolio of businesses allows groups to absorb shocks better than single-industry firms.
The pandemic was a good example. Different sectors experienced varying degrees of disruption. Businesses with multiple engines of growth were often better positioned to manage uncertainty than those dependent on a single line of business.
Another advantage lies in execution.
Large business groups have relationships with governments, access to capital, strong brands, and decades of operating experience. These capabilities become transferable assets.
When a new opportunity emerges, whether it is renewable energy, digital services, or semiconductor manufacturing, conglomerates are often among the first to enter. They possess the resources, credibility, and risk appetite needed to undertake projects that may take years to become profitable.
There is also a trust factor involved.
Consumers may be willing to try a new offering simply because it comes from a familiar business group. Investors may provide capital more comfortably because they know the parent company's history and reputation.
Trust, although difficult to measure, can be an enormous competitive advantage.
Of course, conglomerates are not without challenges.
Managing businesses across multiple industries is complex. Capital allocation mistakes can become expensive. Decision-making may slow down as organisations grow larger. Investors often apply a "conglomerate discount" because they believe the sum of individual businesses could be worth more if separated.
These concerns are valid.
Yet the repeated predictions about the decline of conglomerates in India have not materialised.
Perhaps the answer lies in understanding that economies do not evolve in identical ways.
India is still building infrastructure, formalising markets, and creating entirely new industries. The opportunities are enormous, but they often require long-term investments, deep execution capabilities, and patience. Conglomerates are uniquely positioned to provide all three.
In many ways, India's growth story itself favours business groups that can think in decades rather than quarters and build ecosystems rather than standalone companies.
So, while the rest of the world may have moved towards specialisation, India continues to place its faith in business empires.
And as the country's economy becomes larger and more complex, it would not be surprising if these conglomerates become even more relevant.
Sometimes, what looks outdated from the outside is precisely what fits the realities of the market.