Unlisted companies shine

by Mahesh Vyas

CMIE’s Prowess database houses the performance metrics of over 50,000 companies. This may be small in count a mere 3.3 per cent compared to the 1.5 million active companies registered with the Ministry of Company Affairs. But these 50,000+ companies in Prowess contain the more active firms in India. Prowess companies are not limited to listed companies. About 90 per cent 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 per cent 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 per cent, or higher. The variation is within a relatively narrow range of 67-77 per cent.

Therefore, the less-than 3 per cent companies in the Prowess database account for about 70 per cent of the total corporate taxes collected by the central government. It may not be incorrect to assume that 3 per cent of the companies account for 70 per cent 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 per cent was much higher than the corporate taxes accounted for by both, listed companies (4.7 per cent) and the unlisted companies (7.2 per cent).

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 per cent. 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 per cent, corporate taxes paid by listed companies declined by only 3.4 per cent. And, corporate taxes paid by unlisted companies in the Prowess dataset increased by 1.4 per cent. 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 data set has been rising. The share of listed companies in total corporate taxes collected by the central government had peaked at 64 per cent in 2002-03. Since then, it has declined steadily to fall to 36 per cent 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. The share of unlisted companies in total tax collected has increased correspondingly. The flip is quite sharp.

But, in 2020-21, when Covid-19 struck the fortunes of non-Prowess companies, the share of listed companies in total corporate tax collection rose to 42 per and the share of unlisted companies in the Prowess dataset increased to 34 per cent. Collectively, the Prowess set of companies accounted for 76.5 per cent of total corporate tax collection in 2020-21. Listed companies retained their 42 per cent share in 2021-22. It is likely that the unlisted companies in Prowess also retained, if not raised their share in total corporate tax collection by the central government. We will know for sure in a few months when the data collection for 2021-22 is more complete than it is now.

During the first half of 2022-23, profits by listed companies increased by around 7 per cent compared to the year-ago period. But, corporate tax collections by the central government grew by nearly 22 per cent. This implies that unlisted companies grew much-much faster than listed companies. We expect profits of listed companies to grow by 5 per cent in the second half of 2022-23. The government had budgeted corporate tax collections to grow by about 14 per cent but is headed to see a much larger growth. This again implies that unlisted companies are growing their profits faster than listed companies.

CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
7.3 +0.7
Consumer Sentiments Index
Base September-December 2015
84.9 0.0
Consumer Expectations Index
Base September-December 2015
84.0 0.0
Current Economic Conditions Index
Base September-December 2015
86.4 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Mar 22 Jun 22 Sep 22 Dec 22
New projects 8.68 5.20 4.42 6.68
Completed projects 1.33 1.18 1.36 1.62
Stalled projects 0.43 0.53 0.07 0.01
Revived projects 0.33 0.29 0.12 0.32
Implementation stalled projects 0.09 0.29 0.26 0.11
Updated on: 08 Feb 2023 9:28AM
Quarterly Financials of Listed Companies
(% change) Mar 22 Jun 22 Sep 22 Dec 22
All listed Companies
 Income 20.8 40.1 25.1 19.2
 Expenses 19.8 41.4 27.1 20.0
 Net profit 31.6 21.1 -1.5 3.2
 PAT margin (%) 8.8 7.2 7.8 9.7
 Count of Cos. 4,686 4,704 4,585 1,628
Non-financial Companies
 Income 24.8 50.1 27.9 17.8
 Expenses 25.7 52.9 31.5 19.8
 Net profit 10.1 8.4 -21.1 -14.2
 PAT margin (%) 7.6 5.7 5.6 7.1
 Net fixed assets 2.0 4.1
 Current assets 15.0 19.1
 Current liabilities 11.6 10.4
 Borrowings 3.6 12.8
 Reserves & surplus 11.2 7.6
 Count of Cos. 3,398 3,424 3,375 1,200
Numbers are net of P&E
Updated on: 08 Feb 2023 9:28AM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -1.4 26.0
 Expenses 0.3 -3.6 24.9
 Net profit -3.0 74.5 63.3
 PAT margin (%) 2.0 4.5 7.2
 Assets 8.9 10.7 9.9
 Net worth 4.8 12.0 14.0
 RONW (%) 3.4 6.9 11.5
 Count of Cos. 31,839 30,688 14,155
Non-financial Companies
 Income -1.1 -2.5 30.7
 Expenses -0.9 -4.4 30.4
 Net profit -20.5 62.4 61.3
 PAT margin (%) 2.3 4.0 6.2
 Net fixed assets 11.4 2.4 2.1
 Net worth 2.1 10.6 14.5
 RONW (%) 4.7 7.6 12.7
 Debt / Equity (times) 1.1 1.0 0.8
 Interest cover (times) 1.9 2.5 4.0
 Net working capital cycle (days) 73 82 59
 Count of Cos. 25,106 24,021 11,477
Numbers are net of P&E
Updated on: 04 Feb 2023 5:32PM