Associate Company
A company in which another holds significant influence but not control, typically 20% or more of voting power.
How it is identified
Test: the investor holds at least 20% of voting power or has significant influence without control; accounted for by the equity method
Unit
qualitative
In depth
Associates are equity-accounted rather than consolidated, meaning only the investor's share of profit appears in the profit and loss statement and only the carrying value of the investment appears on the balance sheet. The practical consequence is that an associate's debt stays entirely off the investor's balance sheet even where the investor is economically exposed to it. This makes associate structures a route to off-balance-sheet leverage, and the notes are where the exposure becomes visible. Joint ventures are treated similarly under Indian accounting standards.
Worked example
A 30% stake in a company with ₹900 crore of debt shows on the balance sheet only as an investment. The ₹270 crore of economic exposure to that debt appears nowhere in the leverage ratios.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Associate Company” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.