Hyderabad :

At least 700 small and medium businesses owned by people with roots in Rayalseema  and coastal Andhra Pradesh have shifted their registered offices from Hyderabad to truncated Andhra Pradesh state over the last few months.

The move is seen as indicating uneasiness among businesses about their prospects in Hyderabad, which will become the sole capital of  Telangana in 10 years, and may hurt revenue collection in India’s newest state.

A senior official  at the ministry of corporate affairs said that some of those who have shifted have all their manufacturing and production facilities located in Andhra Pradesh and find no reason to continue their registered offices in a place that no longer belongs to their state.

“They also cite administrative advantages in shifting registered offices to a location close to their manufacturing facility,” the official said on condition of anonymity.

Telangana, which was carved out from Andhra Pradesh on June 2, enjoyed revenue surplus thanks mostly to 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. As there is no clarity yet on the exact tax benefits Andhra Pradesh will get in lieu of losing Hyderabad, the companies shifting their registered offices may not gain much immediately.

source: http://www.articles.economictimes.indiatimes.com / The Economic Times / Home> News> Emerging Business> SME Sector> Andhra Pradesh / CR Sukumar, ET Bureau / June 24th, 2014