Around 700 small and medium businesses possessed by people with roots in coastal Andhra Pradesh and Rayalaseema have moved their registered offices from Hyderabad to truncated Andhra Pradesh state over the last few months.
The shift is seen as indicating a worry among businesses about their prospects in Hyderabad, which will become the one and only capital of Telangana in 10 years, and may hurt revenue collection in India’s newest state.
According to a senior official at the ministry of corporate affairs, some of those who have shifted all their production and manufacturing facilities located in Andhra and find no motive to continue their registered offices in a place that no longer belongs to their state.
“They cite administrative ad vantages in shifting registered offices to a location close to their manufacturing facility,” the official said on condition of anonymity.
Telangana, which was created on June 2, enjoyed revenue surplus. This was mostly because of large tax revenue from businesses with registered offices in Hyderabad, the economic growth engine of what used to be India’s fourth-largest state.
From June 2, 118 new companies have registered in Andhra Pradesh compared to only 12 companies in Telangana state.
Since there is no clarity yet on the exact tax benefits, Andhra Pradesh will get to make up for losing Hyderabad, the companies shifting their registered offices may not gain much immediately. However, the Andhra Pradesh government will get the benefit of taxes paid by such companies, which will confirm an immediate loss to the Telangana exchequer.
For instance, Avanti Feeds, the Rs 1,100-crore shrimp exports, shrimp feed and wind mills company, is among the list of well-known companies that recently sought shareholders’ approval to shift its registered office from Hyderabad to Visakhapatnam.
According to a senior executive with a leading registrar and share transfer agent, Telangana could soon see impact on its tax revenue when the Andhra Pradesh-based infrastructure firms with large public-private-partnership projects where the government has equity stakes start shifting their registered offices.
“There are several projects including power, mining and seaports where the Andhra Pradesh government owns stakes and they will shift their base to pay taxes to the truncated state. These companies have been paying taxes in Hyderabad all these years.”
A number of large infrastructure firms promoted by Andhra Pradesh entrepreneurs are also looking at changing their base but waiting for the property market to improve so that they can liquidate their assets in Hyderabad at better valuations.
“Telangana Rashtra Samithi continues to target and harass Seemandhra businessmen,” said the promoter of a large infrastructure firm requesting that his identity be protected.
Telangana Industrialists’ Federation president K Sudheer Reddy said Telangana leadership has assured an affable business environment for entrepreneurs regardless of their origin and describe allegations of harassment by Seemandhra businessmen as overstated.
“There could be stray incidents by some unscrupulous elements at certain industrial locations.”