How Your Indian Subsidiary Can Grow the Fastest Among Global Subsidiaries?

A subsidiary company is a business entity controlled partly or entirely by a foreign parent company—the registration process for such subsidiary companies is as per Companies Act 2013 guidelines.

As per the recent reports, the economic growth of India is estimated to reach 8.4%. This growth will be registered during the third quarter of fiscal year 2024.  The new records showed a 4.1% increase in GDP growth compared to the third quarter of FY23. This increase in economic growth provides a clear answer to how to grow the Indian subsidiary effectively.

Key Aspects to Note Before Forming a Subsidiary

The guide to setting up a subsidiary in India includes some key aspects that need to be kept in mind, they are:

1. Legal Structure and Company Registration

Indian subsidiaries can only choose from the following legal structures, after obtaining general approval from the RBI (Reserve Bank of India):

1. Private Limited Company
2. Public Limited Company
3. Limited Liability Partnership

Each of these structures is governed by specific regulations and the mindset or liabilities of the owners.

2. Regulatory Framework and Compliance

The companies that are trying to form a subsidiary need to follow the Companies Act 2013.

In addition to the provisions of this Act, if foreign investment is involved, compliance with the FEMA (Foreign Exchange Management Act, 1999) is also required for legalities in cross-border financial transactions.

4. Intellectual Property Protection

Securing your Intellectual Property Rights (IPR) is essential whether you set up a subsidiary in India or abroad.

It is always recommended to register trademarks, copyright patents, or any other IP assets within India.

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Understanding the Indian Market

Indian market is now in a comfortable stage to cater to the demands of the subsidiary companies. The real GDP growth as per the recent searched (2023-2024) analysis is showing a rise of 8.2%.

In the Ease of Doing Business index, India is ranking 63rd presently out of 190 countries. Apart from that, the Make In India report, shows that India is reducing 39,000 irrelevant compliance requirements. Such changes remove barriers for Indian subsidiaries to operate properly.

Strategies of Growth for Indian Subsidiary

Some essential strategies that answer how to grow Indian subsidiary among global subsidiaries are:

1. Local market knowledge

Local market knowledge helps businesses to understand the demands and supply changes. This data helps them to understand the shifts in patterns and accordingly plan their operations. Identifying clients in a business also seems a relevant way to increase vitality of subsidiaries.

2. Increasing Sales

When a person understands the trend in the Indian market then it automatically helps them increase sales. This is one of the essential Indian subsidiary growth strategies that one needs to focus on and enhance revenue. Boosting sales by leveraging digital marketing, including targeted social media campaigns and SEO can be significantly helpful.

Additionally, one can Utilise e-commerce platforms, and partner with local distributors to expand reach. Offer localised promotions tailored to regional preferences to enhance market presence and drive sales growth

3. Improve Brand Recognition

The more comfortable customers get with your brand the more they are going to buy it for their use. Even the word-of-mouth spread helps to be one of the best Indian subsidiary growth strategies which can be used.

Brand recognition can be enhanced by investing in culturally resonant branding. Create campaigns that celebrate local festivals or support social causes, aligning with Indian values. This approach fosters a deeper connection with consumers, increasing brand loyalty and visibility.

4. Enhanced Customer Support

Ensure that you are not using customer support only to resolve issues, a new subsidiary must work on it to make it a platform to build a connection.

When you can provide greater value to your customers then it automatically increases your connection and importance with your customers.

5. Compliance with Local Regulations

Forming a subsidiary company in India or abroad must comply with local regulations. Complying with local regulations invites fewer penalties thus maximizing the growth of the Indian subsidiaries.

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Viability of Indian Subsidiary in the Future

Features that support viability for Indian subsidiaries in future are:

1. Operational Flexibility

No business can grow with a fixed mindset there is a need for organisations to challenge the core systems of operations. As per research, the mix flexibility in operations significantly improves it by 40.7% and improves financial performance by 23.5% as well. The core functionality that is improved using flexibility is adapting to external and internal stresses.

2. Tax Benefits

Understanding how to grow Indian subsidiary requires a core understanding of the applicable tax benefits. With the Make In India scheme, there are several opportunities for businesses to start their production in India and get comprehensive tax-related benefits.

Apart from that, several production-linked incentives in place help improve the benefits that a company gets.

3. Financial Reporting and Performance Metrics

Additionally, financial reporting and performance metrics monitoring also help a business to understand leakages of their funds. When a company maintains a detailed insight into their financial reporting then it easily drives success.

Challenges to Indian Subsidiary in Future and How to Solve Them

Let’s take a look at some of the things to know before forming a subsidiary in future are:

1. Complexity in Management and Governance

There are a couple of challenges in the management of Indian subsidiary companies. Scams and illogical regulations still exist in the real market. Moreover, multijurisdictional laws might hamper the efforts which could have been invested in the right business processes.

Solution: Strengthening legal regulations and removing the leakages in the administrative systems.

2. Financial Challenges

The financial challenges may arise due to continuous fluctuations in exchange rates or sudden downfall in investments. These events arise due to political problems, or changes in the stock market derivatives.

Solution: Building up a considerable amount of capital primarily answers how to grow Indian subsidiary in changing exchange rates. Risk management officials may also be onboarded to handle challenging liquidity situations in subsidiaries.

3. Integration and Cultural Challenges

Integration and cultural challenges arise when a foreign subsidiary establishes operations in India. Additionally, it may also arise when Indian subsidiary growth strategies involve cross-border operations.

Solution: Adequate training and competence to understand the varied cultural differences helps. Additionally, the Human Resource personnel need to be adequately trained to understand differing cultural challenges.

4. Regulatory and Compliance-related Challenges

One must consider the legal aspects to understand compliance challenges when growing an Indian subsidiary.

Regulatory challenges might include testing-related legislation or production quality-related regulations. Either way, when the amount of compliance increases it leads to the downfall of operational stability.

Solution: Remove the additional compliances which hamper operations for most of the companies. Strengthen the labour laws and innovate on value-driven production efforts rather than restricting the growth of Indian subsidiaries.

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How Tecnova Can Help?

Tecnova is one of the best management consulting firms with more than 40 years of experience.  They offer vital strategies to enter Indian markets for clients trying to build a brand in India. The goal of Tecnova always focuses on not only making clients happy but also being successful with the results. Tecnova truly helps to answer how to grow an Indian subsidiary for business success.

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