Small firms outpacing larger peers in GVA growth: Citigroup

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Mumbai | Published: May 6, 2016 10:10:22 PM

Smaller firms are outpacing their better capitalised and larger peers by two times in gross value addition (GVA) growth, a report said today.

Union budget 2015, 2015 union budget, Chinese marketCiti said the derived GVA growth from the RBI data matches with the Central Statistics Office’s (CSO) numbers on the non-farm uptick. (Reuters)

Smaller firms are outpacing their better capitalised and larger peers by two times in gross value addition (GVA) growth, a report said today.

“Our estimates reveal that the smaller private limited companies’ GVA was growing at roughly twice the rate of larger public limited companies,” financial services major Citigroup said in a note.

The 17,000 large public companies have higher paid-up capital than the 2.37 lakh smaller privately-run companies, it said, adding the GVA of the smaller companies was a fourth of that of large companies and only 2 per cent of national GVA.

It further said the Reserve Bank’s data also suggests larger firms have a slower GVA growth compared to their smaller peers.

The RBI recently released financial data for 2.54 lakh non-government and non-finance companies, which included 17,000 large public companies, which is a subset of 7 lakh companies registered with the Corporate Affairs Ministry.

Citi said the derived GVA growth from the RBI data matches with the Central Statistics Office’s (CSO) numbers on the non-farm uptick.

“In support of the new GDP series, the overall nominal GVA growth derived from the RBI dataset matches the non-farm GVA growth quite closely for both FY14 and FY15,” it said.

It noted that the correlation between GVA growth and earnings or profitability of a company is weak.

It said even though there is a correlation between the RBI and CSO numbers, the market perception of economic activity is relatively modest because of the slower growth of larger companies and lack of correlation between earnings/ profitability and GVA.

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