How much competitive it is to open an ITES subsidiary company in India

In previous article, I presented why it is "Competitive" to open development center in India for Global ITES companies. While in this article, I am going to provide more information about company, financials & cost structure for better understanding of the setup.

In India after 2013, in order to improve "Ease of doing business", there have been made many significant changes in company laws, direct & indirect taxes and compliance to attract global investments. Hence opening and managing fully/partially owned company in India has been very easy like never before. For Global ITES companies, company structure called "Pvt. Ltd." is the most suitable structure to start with. The advantages of having "Fully/Partially owned" subsidiary company in India are:

1. Key executives can resides in their own country and do no need to stay/travel in India frequently. Usually those who are in Board, will need to remain present to attend various meetings twice/thrice a financial year. For rest of time, they can focus on their regular work from home country.
2. Since it is requirement to appoint minimum 2 Directors in any Indian company, there would require to appoint at-least 1 director who is an Indian citizen (also known as Residential Director) to look after Indian company's operations. Hence with minimum 1 (or more) Indian director/s and 1 (or more) foreign director/s a Pvt. Ltd. company can be incorporated.
3. To give boost to economy, recently Corporate income tax has been reduced to 22% (effectively 25.X%) from 30% previously, hence company can save more from paying tax.
4. This profit can be remitted back to home country through declaring Dividend (by paying tax of 17.XX% on dividend amount) as and when needed, according to company laws.
5. The Indian company can receive foreign investments against issuing ownership shares. That is to say, stakeholders can be any foreign individual or even company as well.
6. The only concern to own subsidiary company in India is that Indian company has to keep profit margin of 17% to 20% over total operating cost incurred during a financial year.

As far as financial & cost estimations are concerned, following are illustrative figures (in USD) to open and operate a High-Quality ITES company having staff of upto 20 persons (including technical and non-technical) in tier 2/3 cities like Vadodara.

• Initial investment cost / Employee:

1. Approx 1000 $ - 1200 $ (to buy computers, furniture etc.); this cost repeats every 4/5 years;

• Monthly cost of operations:

1. Rental space = 1000 $ with sitting capacity upto 20 persons;
2. 1 Technical Employee cost = 1000 $ to 4000 $ for experience ranges from 2 years to 10 years (various profiles);
3. 1 Non-technical Employee cost = 500 $ to 1000 $ (various profiles like Residential Director, HR etc.);
4. Office general expenses = 1000 $;
5. Legal & Professional cost = 500 $;

Above monthly cost increases every year by approximately 10% - 15%. If interested, lets engage at [email protected]

Anirudh has proven track record of accomplishments in different roles in global delivery model of providing open-source Web & Mobile solutions to various industries (specially Media and Online Classified & Marketplace) with outstanding background of Development management, Product management, Team leadership and Project management since last 18 years.