Company registrations decline in April while LLPs reach new heights

Ongoing Lok Sabha elections and high base effect from record registrations in FY24 were attributed as reasons for the April drop

Following a surge in incorporations during FY24, company registrations experienced a 3.7 per cent year-on-year (Y-o-Y) decline in the first month of FY25 (April), partly attributed to the high base effect, The Economic Times reported. However, the incorporation of limited liability partnerships (LLPs) saw a remarkable 36 per cent year-on-year increase, as per the latest data from the Corporate Affairs ministry.

In April of the current financial year, 15,982 companies were incorporated, compared to 16,599 the previous year. Conversely, LLP registrations surged to 5,896 from 4,335 in April of the preceding year. Notably, April 2023 had witnessed a 4 per cent rise in company incorporations compared to its previous year, while LLP registrations had experienced a substantial rise.

Over the FY24 period, the country saw over 185,000 company registrations, surpassing the count from the previous year, a growth of 16.3 per cent more companies and 62.7 per cent more LLPs than its previous year. In March of the current year alone, nearly 16,600 companies were established, according to official data.

ET cited officials as saying that the trend of record incorporations was due to efforts aimed at reducing compliance burdens and fostering an environment conducive to business. They noted that the exceptional number of company incorporations in FY24 could create a high base effect for growth calculation in the current fiscal year. Additionally, with elections underway, some entrepreneurs might have postponed incorporation, suggesting a potential rebound in company registrations post-election, as reported by ET, citing an unnamed official.

The International Monetary Fund (IMF) recently revised India's growth forecast for 2024-25 upward by 30 basis points (0.3  percentage points) to 6.8 per cent. While the pace of expansion may decelerate from the estimated 7.8 per cent in the previous fiscal year, India is projected to retain its position as the world's fastest-growing economy this year, according to the IMF.

Based on the second advance estimate released by the statistics ministry in February, India is expected to have grown at a faster-than-anticipated rate of 7.6 per cent in 2023-24.

Company registrations in India in FY24

At the end of March 2024, the country had a total of 2,663,016 companies, of which 1,691,495, or 64 per cent, were active. As many as 931,644 registered companies were closed, 2,470 were dormant entities, and 10,385 were under liquidation.

A total of 27,022 companies were in the process of being struck off from official records. Out of them, 71 per cent were in the services sector, followed by 23 per cent in the industrial segment and 6 per cent in agriculture.

According to the corporate affairs ministry's March information bulletin, 185,312 companies were registered during FY24, with a collective paid-up capital of Rs 30,927.4 crore. In contrast, 159,524 companies were registered with a collective paid-up capital of Rs 18,132.16 crore in FY23.

In terms of state-wise distribution, 17.6 per cent of the new companies were set up in Maharashtra last fiscal.