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*Indian Unlisted Companies Shine*
CMIE’s Prowess database houses the performance metrics of over 50,000 companies. This may be small in count—a mere 3.3% compared to the 1.5 million active companies registered with the Ministry of Company Affairs. But these 50,000 plus companies in Prowess contain the more active firms in India. Prowess companies are not limited to listed companies. About 90% of the companies in Prowess do not have their equity shares or bonds listed on the bourses.
A useful measure of the representativeness of the Prowess dataset is the share of these companies in the corporate taxes collected by the central government. For a long time—between 2004-05 and 2016-17, companies in the Prowess database accounted for about 70% of the total corporate taxes collected by the central government. Between these two years, the number of companies for which data is available in a year has varied from about 16,000 to 34,000. But, the share of these companies in the corporate taxes collected by the central government has been mostly close to 70%, or higher. The variation is within a relatively narrow range of 67-77%.
Therefore, the less-than 3% companies in the Prowess database account for about 70% of the total corporate taxes collected by the central government. It may not be incorrect to assume that 3% of the companies account for 70% of the profits generated, and by extension, the business generated by the corporate sector in India. This illustrates the concentration of economic activity and the concentration of wealth in India.
Usually, the yearly growth in corporate taxes paid by listed companies is lower than the growth in corporate taxes paid by unlisted companies. And, the growth in taxes collected by the central government is between the two. There are exceptions, but these are usually minor. Fiscal 2017-18 was one such exception. Growth in central government tax collections at 17.8% was much higher than the corporate taxes accounted for by both, listed companies (4.7%) and the unlisted companies (7.2%).
In 2019-20, all three—listed companies, unlisted companies and central government reported a sharp fall in corporate taxes—in the range of 14-19%. This adds to the long list of indicators that tell us that the Indian economy had slowed down sharply well before it was struck by the Covid-19 pandemic.
In 2020-21, the year of the pandemic, while corporate tax collections by the central government fell sharply by 17.8%, corporate taxes paid by listed companies declined by only 3.4%. And, corporate taxes paid by unlisted companies in the Prowess dataset increased by 1.4%. This has a serious implication. It suggests that the hundreds of thousands of unlisted companies that are not covered by Prowess did terribly during the Covid-19 year. We deduce from the available data that their profits halved. It is possible that large numbers from these could have incurred huge losses. They represent the hidden vulnerability of Indian enterprise. These will include the large numbers of small and medium-sized enterprises.
The central government had collected Rs 4.58 trillion corporate taxes. The 32,238 companies in the Prowess database that have data for 2020-21 account for Rs 3.5 trillion. Of this, Rs 1.93 trillion of taxes was contributed by the listed companies and Rs 1.57 trillion by the unlisted companies in the Prowess database. Companies that are not covered in the Prowess database accounted for the remaining Rs 1.1 trillion. They had contributed Rs 2 trillion in the previous year.
It is interesting that the share of listed companies in total taxes has been falling, while that of unlisted companies in the Prowess dataset has been rising. The share of listed companies in total corporate taxes collected by the central government had peaked at 64% in 2002-03. Since then, it has declined steadily to fall to 36% in 2019-20. This is in spite of the fact that a large number of loss-making companies were delisted during 2016-17 through 2018-19.
By: via Allies Fin Serve Stock Market
