Consolidation of Companies

Benefits derived from Consolidation of Group Companies

Coming very close to the merger of Sterlite Industries and Sesa Goa, Aditya Birla group has also announced its plans for consolidation of group companies under a common centralised managerial team while keeping the group companies different entities. What are the reasons that companies have started the process of consolidation of businesses? Are we looking at a trend that shall pick up in times to come? 

Major benefits of consolidation of companies

Tax benefits

1. A host of tax benefits accrue to companies going in for consolidation. Tax credits from one company can be utilised for other group company.
2. Set-off of losses from inter-group companies.

Operational Benefits

1. Synergy of plans and operations among group companies.
2. Efficiency in decision-making and faster implementation.
3. Manpower and other resources sharing.
4. Higher value creation and market capitalisation
5. Allowing greater leverage of companies' equity base.

A host of companies in India are expected to follow the example of Sterlite -Sesa and Aditya Birla Group to bring in greater functional and operational synergies.