Mukesh Ambani has company. It’s not just the chairman of Reliance Industries who is considering shifting the company’s registered office from Mumbai to Gujarat, where the bulk of its manufacturing units are located (Reliance declined to comment when the report appeared in a newspaper early last week). Many other companies have preceded India's largest private sector giant in shifting their registered offices for administrative and managerial convenience.
In the past three years, more than 150 companies shifted their registered offices, many moving from one state to another. Textile maker Alok Industries is moving its registered office from Mumbai to Silvassa. ‘‘This was a logical thing to do, as Silvassa is where 70 per cent of our investments and 70 per cent of our employees are located, and all review meetings are held,’’ said Alok CFO Sunil Khandelwal.
Typically, companies shift their registered offices for administrative convenience or to centralise activities pertaining to income tax assessment, so that they have to deal with one income tax office and registrar of companies (ROC), said Subba Rao, CFO, GMR Group. With this in mind, GMR has shifted the registered offices of all its companies to Bangalore, so that it has to deal with only one ROC and one income-tax office.
Companies need to file all statutory returns, including income tax, where their registered offices are located. Companies are also driven by economic considerations, as it sometimes does not make sense to have two concurrent establishments. Once a project is completed, it makes sense to shift the registered office to a factory, to explore synergy, proximity and rationalise costs, said Karvy Group chairman C Parthasarthy.
Sometimes, if a state provides fiscal incentives to a project, they insist a company locate its registered office in the state. The state and its people benefit from the local employment the company generates. The state makes money through stamp duty on transactions (including hypothecation of any loan a company takes), and on mergers and acquisitions.
| MAKING A MOVE | |||
| Year | Company | Moved its registered office... | |
| from | to... | ||
| 2005 | Advanta India | Bellary, K’taka | Mumbai |
| 2006 | Esab India | Mumbai | Chennai |
| 2006 | Jindal Drilling | Raigad, Maha | Gurgaon |
| 2007 | GVK Power | New Delhi | Secunderabad |
| 2007 | Sterlite Industries | Aurangabad | Tuticorin, TN |
| 2008 | Binani Metals | Mumbai | Kolkata |
| 2008 | Gayatri Projects | Mumbai | Hyderabad |
| 2009 | Advanta India | Bangalore | Secunderabad |
| 2009 | GMR Industries | Hyderabad | Bangalore |
| 2009 | HFCL Infotel | Punjab | Mumbai |
| 2009 | Pashupati Acrylon | New Delhi | Moradabad |
| 2009 | Zandu Pharma | Mumbai | Kolkata |
| Compiled by BS Research Bureau | |||
In the past, there was a tendency among companies not doing well to shift their registered offices to a manufacturing location, where small shareholders and trouble-makers would find it difficult to travel, said Parthasarthy, whose company, Karvy Computershare, serves as a registrar for many of these companies.
‘‘Companies are not driven by one factor when they shift their registered offices. There could be different drivers for different companies,’’ said Parthasarthy. Pratappur Sugar & Industries was renamed Bajaj Hindusthan Sugar & Industries after the latter was acquired by Bajaj Hindusthan Ltd, and it shifted its RO from Kolkata to Mumbai.
Emami shifted the registered office of Zandu Pharmaceutical Works from Mumbai to Kolkata, after it acquired Zandu. GVK Power & Infrastructrure had its registered office in Delhi when it was implementing the Jaipur Expressway, its first project in the North. This enabled it to avail of the low stamp duty in Delhi. In 2007, it shifted the registered office to Secunderabad for administrative convenience, said a company official.
‘‘We are based in Hyderabad. It did not make sense for us to have our annual general meeting (AGM) in Delhi,’’ said a GVK official. ‘‘Crowds in North India could be unruly, which can put off people. They are abusive, violent and aggressive, while shareholders in South are docile, passive and not aggressive,’’ explained a CFO.
(With research inputs from Ashok Divase, BS Research Bureau)
