Do Indian-owned tax advisory and audit firms have a future?

Experts share views to build Indian-owned and globally relevant professional services firms

Broadbase ownership, give up founder/owner mentality

One of the key beacons of success of the India story has been the success of its services sector. The IT industry, for example, has shown that Indians can build world-class organisations and scale them to global levels. Similarly, in the field of financial services, health care and hospitality we have been able to build world-class organisations. It is important to note that what we have built in these sectors we have competed with the global giants, built-to-scale and demonstrated success.

The world of audit, tax and advisory services has been dominated the world over by the global players, for obvious reasons. The largest global organisations earlier came from the USA and Europe and it was just logical that their service providers would grow with them, as both of them expanded their global footprint. Global players invested in relationships, technology, building up scale, research, etc., which provides them a head start compared to the local players.

It is critical to note that global players use local talent in each of the jurisdictions they operate from. The local talent is provided global skillsets and training and has the benefit of global investment in technology, research, and of course, the global brand. That said, it is the local talent, under local ownership and leadership which has built local businesses under a global brand.

The shift in the recent times has been that Indian businesses now have global footprint and, it stands to reason, that if Indian professional services providers can scale up, have global ambition and drive and invest in research and technology, and create a brand built on quality, they very much have a great future and can emerge as global players. The ‘Make in India’ concept equally applies to them!!

There are a few key ingredients to be successful in doing this. First, there is a material difference between rendering professional services, thereafter building businesses and finally in building organisations. Indian professionals need to realise this distinction and spend quality time building organisations as opposed to merely focussing on rendering professional services. As one starts building organisations, one needs to focus on building the right ecosystem for HR, IT, research, training, etc. The next area of focus is building culture and organisational ethos, which is the backbone of any organisation. Finally, to create a lasting organisation one needs to broad base ownership, give up founder/owner mentality and create a right platform for succession planning. As our experience in other sectors has shown, we have the necessary skillsets and the mindset. We need to bring them to bear in audit/tax/advisory businesses. With this approach, not only do local firms have a great future...they have a distinctive space in the global landscape. I, for one, am looking forward to that!!·

To be global, become strong within India first

This is a subject of national interest. Suffice it to say that it has now been recognised at highest levels that our national interest in this field has been harmed. ICAI’s Central Council approved two Reports, first in 2003, repeated eight years later in 2011, on operations of multinational audit firms. ICAI has damaging findings including FEMA, FIPB violations, cross sharing and the infamous “surrogate marketing”. The illegalities, said ICAI, tilt the “level playing field”. Two decades of inaction subverted this unsettling question – do Indian-owned firms have a future? Last week found Citizens Whistle blower Forum writing to the Finance Ministry. Inexpedient audit firm rotation imparted a gift: an insurmountable three-year downward spiral to our national interest, striking equivalently at the roots of credibility of its well-educated votaries. 

The embarrassing monopoly of a handful of foreign brands now zooms to unsurpassed levels in the top 500 companies. The concentration in the tax and consulting arenas is more lethal than in auditing – it is silent, since these are non-regulated entities. Indian-owned firms can have a bright future. With some stanchion could we not have accomplished in the last three decades, the vision our PM expressed at the 68th Founding Day of ICAI, of having four global Indian firms out of a Big Eight? Instead the plight recounted in our PM’s disconcerting expression is: “Sadly, there is no Indian firm there”. 

Slated to be among the top three countries globally in terms of GDP by 2030, should India gratify foreign powers and never have global Indian firms? This week’s news supplements this design with an Indian firm, probably our 51st, hunkering-down. 

The universally appealing idea of a global Indian firm has one prerequisite: become strong within India first. There is another factor than re-setting the “level playing field” through resuscitators, such as change of law requiring mandatory joint audit and resurrection of ‘swadeshi’ in company boards. Let’s patiently re-build our Indian brands by not comparing them at this forsaken juncture with foreign-brands. Foreign companies don’t miss any opportunity in appointing their own? Our mantra is ‘Make-in-India’. 

Dinesh Kanabar is CEO, Dhruva Advisors and Raghu Aiyar is CEO & senior partner, KS Aiyar & Co