Communication Needs

why a company incorporate too many subsidary companies?

benefit of having more companies under one name.For example Company + Reliance Industries Ltd. + Reliance Petroleum Ltd. + Reliance Capital Ltd. + Reliance Infrastructure Ltd. + Reliance Communications Ltd. + Reliance Industrial InfraStructure Ltd. + Reliance Natural Resources Ltd. + Reliance Energy Ventures Ltd. + Reliance Capital Ventures Ltd. + Reliance Chemotex Industries Ltd. + Reliance Power Ltd. + Reliance Enterprises Ltd. ONLY FROM THE FINANCIAL ASPECT.

Public Comments

1. Reliance is a Brand and therefore company tries to increase its brand value so that in the event of fall this value come to their rescue.
2. When a company creates a Subsidary, the management of that subsidary company gets easier. Management in terms of Finance, HR, Production/service, Operations,Resource Allocation..each gets diversified in subsidary creation. Take your own Reliance Example. Had there been only 1 Reliance Company. it would have had to handle the Telecomm, Petroleum,Financing and Investing, Energy, Infrastructure etc. The business lines are too diversified, the requirements are different, they cater to diff market segments, Each business line faces a different Buniess Enviorment. To ease their internal management burden ,they create Subsidaries. Another vital point is, when 1 huge company makes enormous profits, the tax liability on that company is a big financial burden. Subsidaries allow the parent company on inter-fund transfer facility wherein the inter-company investments and fund movts makes their tax liability come down to reasonable limits.
3. In most cases, companies create subsidiaries to provide more focus in each's area of specialty. Focus in terms of flexibility and being able to monitor the profitability, needs and potential of each sector, provide a more suitable business structure and culture in each unit, etc to generate better revenues with a much lighter OPEX and other overhead costs (CSR, Employee benefits, etc). if one of the ventures fail, it dies alone. The rest of the businesses can more subtly detach from the weak link and all the negative publicity. It's much cheaper to close a company than to try to payout debts, clean up the image... Groups of companies like this are usually spearheaded by a Holding or Mother Company to serve as the guiding star and general leader of the various subsidiaries. it is also this entity that provides the generic technology, resources, culture, and other general services that the units can avail of. Effectively these units are able to enjoy the best of both worlds. Flexibility and Focus of a small company with the stability and wide network of a big company.