The MCA-21 website has many flaws but none of these take away the fact that it is a great resource developed by the Government of India for the public good. Today, current and potential lenders and investors as also researchers use the website to understand the performance of Indian companies. MCA-21’s utility comes from the public availability of most of the filings that companies registered under the Companies Act are required to make with it.

We exploit a change in the availability of annual financial statements on the MCA-21 website to understand corporate distress in India. We assume that a failure to file financial statements is implicit evidence of effective corporate mortality. This is used to estimate the recent corporate mortality rate and the excess mortality in the Covid-19 year, 2020-21.

We use the sample of Prowess companies for the study. This includes all listed companies and most of the large and medium sized companies registered and operational in India. We study the five-year period 2016-17 through 2020-21. The focus is on 2020-21 which was the year of the Covid-19 pandemic and the consequent lockdown.

We know from the annual financial statements filed by companies that the Indian corporate sector made very large profits during the Covid-19 year, 2020-21. Listed companies saw their total income shrink by 3.4 per cent but their net profits soar by 176.5 per cent in this year. Net profit of listed companies reached Rs.5.6 trillion. This was 44 per cent higher than its previous historical peak in 2013-14. Listed companies have never seen profits like they saw when their business shrunk in the face of the Covid-19 crisis. This is the story of around 5,270 listed companies.

The story of the much larger sample of 28,386 Prowess companies that provided their financial statements for the 2020-21 year is no different. Total income shrunk by 1 per cent but net profits increased by 131 per cent. The total net profit of these companies was Rs.7.5 trillion. This is a whopping 79 per cent higher than the previous peak of Rs.4.19 trillion in 2016-17.

This is the story of the larger companies. Of the Rs.7.5 trillion profits clocked by these companies, Rs.6.8 trillion, or over 90 per cent of the total profit was made by the top ten per cent companies. This is not unusual. This just shows that the large companies are structurally so immensely large in terms of size as well as profitability that the rest don’t add much to the total profits. This is also just the story of the survivors. It does not tell us the story, if there is any, of the losers those companies that did not survive the pandemic and the lockdown.

This is where the MCA-21 website becomes particularly useful.

We track the availability of the financial statements of a company over two consecutive years to measure the proportion of companies that fail to provide annual financial statements for a year although they did provide them for the previous year. The sample for each year is the set of Prowess companies for which financial statements are available.

For fiscal 2015-16, Prowess contains the financial statements of 33,368 companies. Of these, financial statements of 523 companies, or 1.6 per cent of the total, are not available for the next fiscal year 2016-17 on the MCA-21 website. Implicitly, 1.6 per cent of the companies operational in 2015-16 did not survive to file their financial statements for 2016-17.

For the year 2016-17, Prowess contains financial statements of 33,054 companies. But, the 2017-18 statements for 620 companies or 1.9 per cent of the total companies, are not available on MCA-21. The attrition rate seen in the two years 2016-17 and 2017-18 therefore is of the order of 1.7 per cent. This rose marginally to 1.9 per cent in 2018-19, i.e. 1.9 per cent of the companies that provided their financial statements for 2017-18 did not provide them for 2018-19.

The attrition rate rises significantly in 2019-20 to 3.2 per cent. Perhaps, this is a reflection of the stress building in the economy in the year just before the pandemic.

The real stress of course was in 2020-21. Attrition shot up to 6.3 per cent. The Prowess database contains the financial statements of 28,462 companies. Of these, as of April 9, 2022, the MCA-21 website did not contain financial statements of 1,780 companies. It’s over a year since the year 2020-21 ended and so the expectation is that companies should have filed their financial statements with the MCA-21 system by now. A failure to do so is likely to be the result of some financial stress, or possible mortality.

It may be a bit early to say that about 6 per cent of the companies failed during the pandemic year in India. We say this because it is possible that some companies may file their financial statements with the MCA-21 system in the coming months.

But, it is unlikely that the picture would change dramatically to show a mortality of 2-3 per cent as in the previous years. Corporate mortality in the year of the pandemic is more likely to be close to 6 per cent and excess mortality, around 3 to 4 per cent.