As the Indian economy recovers from COVID-19 pandemic and the impact of subsequent lockdown, it is larger companies that have managed to stage a 'smart' recovery even as small companies continue to face tough times, the Centre for Monitoring Indian Economy (CMIE) said.
"MSMEs have suffered as they are unable to survive the sudden and prolonged lockdown and the consequent shrinking of overall business. Large companies are not only better placed to ride out of the storm but also gain by cannibalising markets of the withering smaller companies," CMIE Managing Director Mahesh Vyas said.
CMIE studied 3,220 listed non-finance companies for which quarterly financial statements were available for three quarters of 2020-21, and divided them into 10 equal groups as per their size. The size of the company was determined by a combination of their assets and turnover.
It compared the growth in net sales, wages and profitability of these companies.
The largest companies by size saw their sales shrink by 1.5 per cent in the December 2020 quarter, which was the lowest decline, CMIE said. "This group registered a decline because of the dominating presence of two industries that did not perform well, petroleum refining and aviation. If we remove the impact of these industries, this size-group shows positive growth. Sixty-two per cent of the companies in the first decile reported growth in net sales."
While companies in second decile registered a growth of 6.6 per cent, those in third decile saw their sales stagnate.
"The relatively outstanding performance of decile 2 and decile 3 companies demonstrates the discriminating nature of the recovery. Size mattered in the recovery. Each of the seven smaller deciles recorded a fall in sales. And the extent of the fall in sales was inversely proportionate to the size of the companies," CMIE said.
Similarly for growth in wages, barring the top two deciles, other companies saw a reduction in their wage bill. The decline in wage bill increased as the size of the companies became smaller.
Profitability was also higher for the top three decile companies, while it dropped sharply for the next four deciles. "And, the last three deciles saw losses in increasing proportion of their sales."
Using this data, CMIE said growth and profitability discriminated based on the size of the company. "So far, the evidence points in the direction of tough times for small companies but a smart recovery for the large companies," it said.