Small enterprises big on new firm registrations

livemint.com:

₹1 lakh for farm-sector registrations, ₹27 lakh for new manufacturing units and ₹4.2 lakh on average for services firms, indicating the small size of the new firms. More than 13,300 firms were formed in November, the shares of which were sold to investors for ₹1,232 crore, showed the ministry’s data.

Industry representatives say while the expansion of the corporate sector is typically characterized by growth in small businesses, there are certain practices by large corporations that tend to skew the data. “Growth in small businesses is good for India’s efforts to become a developed economy.

However, it has also been observed that several large corporations set up small companies to secure their interests in terms of compliance of timely payments to their small business clients," said Chandrakant Salunkhe, president of SME Chamber of India. As per the MSME Development Act, a business that has procured goods or services from a micro, small and medium enterprise (MSME) and has outstanding payment for more than 45 days, must disclose it to the Registrar of Companies in a half-yearly return.

Industry observers say that starting smaller subsidiaries to engage with MSMEs allows large companies to sidestep this disclosure requirement in their own names. Small companies have dominated registrations in other recent months, too.

In the current financial year, May witnessed the most registrations with over 17,000 companies attracting initial investment of ₹3,204 crore, followed by 13,995 companies in September attracting ₹1,868 crore. In the April to November period of the current financial year, over 122,300 companies were registered with a total paid-up capital of just ₹12,988 crore, showing an average share subscription of about