Business

A Brief History of Company Registrations in India – Data & Trends

This guest column is authored by Lokesh Sharma, Marketing Manager at QuickCompany.in

So much has been said and written about rising India and the start up revolution. Let’s explore this and the ever-changing landscape of Indian companies using company registration trends based on data gathered from data.gov.in (MCA ) As I write this, there are more than 1.63 million companies registered with the MCA(Private Limited, LLPs, OPCs and Foreign Companies combined).

Contrary to some reports citing April 2016 data, this number is growing at a healthy rate of about 300 companies a day on an average. That anomaly in April was due to the MCA site malfunctioning and not a decrease in company registrations!

Based on this data, I have classified the time period into four phases – Pre-Independence, 1947 – 1980, 1980 – 2006 and 2006 – 2015.

Analysis

Identifying the phases.

 

As you can see from the graph above, post-independence, we are looking at four phases.

  • 1947-1969: Protectionist Phase
  • 1970-1984: Relaxation of regulation of industries
  • 1985-2005: Reforms Kick In
  • 2006-2015: Product Frenzy

Before I plotted this data, my lack of knowledge on Independent India’s history notwithstanding, I intuitively expected the company registration growth rate to be divided into three phases – Pre-Liberalization, Post-Liberalization and Late 2000s -15.

Like most of us mortals who aren’t seasoned economists or historians, I expected to see a bump in the early nineties as a result of the big ticket reforms and again at sometime in the far end of 2000s owing to the eCommerce rage picking up steam – around the time of either eBay’s entry point or Flipkart’s coronation point or I don’t know the time around which product companies that screamed quality like FreshDesk started popping up.

The graph turned out to be very much in line with my expectations, except for the Curious case of the growth rate in mid 1980s matching that of the early 2000s and to a very reasonable extant with even that of the 90s. Absence of a significant uptick in 2015, given how deep startups penetrated the mainstream mindshare last year, be it in pub discussions or enquiries of inquisitive landlords and wary matchmakers. We even had a web series made on the startup phenomena that captured the nation’s imagination.

Not being a seasoned economist myself, I consulted my partner at QuickCompany, who eats and drinks this kind of stuff. He then explained me how, contrary to popular perception, the reforms have been kick started in 1980s itself, 1985 to be precise and the big ticket reforms of 1991 were but an extension of the 1985 reforms, albeit on a much larger scale and executed systematically. Some minor reforms were introduced during the early 70s too apparently which accounts for the second phase in the graph. We will deal with the question of 2015 results later.

*If you are interested in reading more about the role of reforms introduced in the 80s and 70s, I suggest you this excellent paper by none other than Arvind Panagariya.

In each of these phases, except for the 1971-84 phase, growth appears to be fairly linear. In case you are curious, R-squared values for all the phases are over 0.99 except for the 1971-84 phase, which is around 0.92. The data from 1985-2015 it’s snugly in an exponential graph with an R-squared value of greater than 0.994.

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You and I are of course smart enough to know that we can over it data to see what we  want to and make grandiose statements, so let’s just refrain from it.

 

Tidbits

  • The first ever company to be registered in India is Jhunjhunu Commercial Company Limited, in the year 1857.
  • The oldest registered company that is still active is Cheviot Agro Industries Private Limited, which was registered in 1863!
  • At the time of Independence, India had about 15000 companies registered in total.
  • Kobay Silk Mills Limited and Mysore Resin and Starch Products Limited were the first two companies to be registered in independent India on 15th & 18th August 1947 respectively.
  • Gansons Limited, registered on 19th August 1947 is the oldest company to be still active among those registered after India’s independence.
  • Over the next 23 years, till 1970 i.e., on an average, 1000 companies were being registered every year.
  • It was in the year 1982 that India registered it’s 100,000th company.
  • During the 1971 – 84 phase, 6000 companies were being registered every year, on an average.
  • Coming to the 1985 – 05 phase, we had about 30,000 companies being registered every year on an average.
  • During 2005 – 15, about 80,000 companies were being registered on an average every year.
  • India registered it’s millionth company in the year 2010.
  • The year 2012 registered the highest number of companies so far, about 1.07 lakhs.
  • 29th March 2012 recorded the highest number of companies registered on a single day, 801.
  • Banjara Hills, Hyderabad (PIN: 500034) has the highest number of companies  registered at a PIN Code that corresponds to a single post office.
  • Following is the top five addresses at which maximum number of companies are registered. The Jubilee Hills address that leads the list with more than 250 companies registered has seven companies that start with the name Maytas #JustSaying #Conspiracy Much
  1. Fortune Monarch Mall, 3rd Floor, # 306 Plot No.707-709, Jubilee Hills, Road # 36 Hyderabad Telangana INDIA 500033
  2. M-62 & 63, First Floor Connaught Place New Delhi Delhi INDIA 110001
  3. 2/A Palit Street 2nd Floor Kolkata West Bengal India 700019
  4. LGF-10, Vasant Square Mall, Plot-A, Sector-B, Pocket-V, Community Centre, Vasant Kunj New Delhi Delhi India 110070
  5. 266 Dakshindari Road, Flat NO 2B Block A, Lake Town Kolkata West Bengal, India 700048

Business Categories

 

Every company that is registered in India falls under one of the following categories:

  • Finance
  • Manufacturing
  • Business Services
  • Trading
  • Construction
  • Agriculture and Allied Activities
  • Real Estate and Renting
  • Community, personal & Social Services
  • Transport, storage and Communications
  • Mining & Quarrying
  • Electricity, Gas & Water companies
  • Insurance

Manufacturing comprises of 9 categories. For the sake of convenience, I have grouped them all under the Manufacturing umbrella. All technology related companies are registered under Business Services category.

Until 2006, except for two years in 1999 and 2000, most of the companies that were being registered fell under the Manufacturing category. As you can see from the graph, about 42% of all the companies that were registered before 91 reforms are Manufacturing companies followed by Business Services and Finance at a distant 13%.

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It was in the year 1999 that the number of Business Services companies registered overtook that of Manufacturing for the first time. 2000 followed a similar trend but Manufacturing took the lead back in the years 2001-06. From the year 2007 onwards, it has been Business Services all over. As of 2015, we have almost one half of all the companies that are being registered fall under Business Services.

State-Wise Distribution & Growth rates

  • Maharashtra and Delhi put together account for more than 35% of all the companies ever registered.
  • Uttar Pradesh, Haryana, Karnataka, Bihar and Telangana have registered the highest  growth rates in the span of 2005-15.
  • Growth rate of UP and Haryana has much to do with the establishment of satellite cities Gurgaon and Noida.
  • West Bengal has had a huge dip in the yearly number of company registrations from 2013 onwards.



Startups

All this is well and good. But how come it looks as if the
company registrations peaked in 2012, as opposed to what you and I have experienced over the last couple of years? Didn’t the startup buzz hit its peak in 2015? We’ve even had a web series, made on the startup experience last year. I personally felt the start up buzz captured a lot of attention in 2015 and have seen a good number of people within my circles quitting jobs in pursuit of crafting their own product.

But the data doesn’t seem to support it though. Let’s see if we can figure this out. What the data tells you is that the total number of companies registered, though increased substantially compared to 2014, is still a tad less than the numbers in 2012.

What we need to explore is the number of startups that are being registered over the past few years as opposed to all types of companies that are being registered.

What makes a company a startup anyway? According to the U.S. Small Business Administration:

In the world of business, the word “startup” goes beyond a company just getting off the ground. The term startup is also associated with a business that is typically technology oriented and has high growth potential.

At the expense of sounding like an exclusivist pig, in the Indian context, I would like to define a startup as a technology based company that operates with bare minimum resources. By this metric, we would be ignoring all the startups in categories other than Technology and those founded with a higher paid up capital.

Technology based company Authorised capital less than Rs. 10 lakhs

 

There are some other interesting things I investigated like semantic analysis of the company names, clustering of companies into networks based on connections, distance between company directors etc but discussing them over here would be stretching it.

The entire analysis has been done using Python, Jupyter Notebook, Pandas, Numpy and Scikit

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