The Securities and Exchange Board of India (Sebi) is unlikely to accede to India Inc’s demand for waiving off the financial result disclosure for the quarter ended June. Industry bodies CII and FICCI have requested the market regulator to relax the result disclosure requirement for the ongoing quarter in light of the disruption caused by the Covid-19 pandemic.
Source said the regulator had an initial round of discussions on the representations made by the industry bodies and corporates and the general consensus was that it would lead to information asymmetry and wouldn't be a minority-investor friendly move.
Top Sebi officials are of the opinion that the pandemic and the consequent lockdowns have impacted businesses not only in India, but all over the world. However, none of the major global jurisdictions have given such waivers.
CII has requested Sebi to consider waiving the requirement of submitting the financial results for the quarter ending June 30, 2020, as companies would anyway submit their half-yearly numbers after the September quarter. FICCI, meanwhile, has requested that listed companies be given the option to file their June quarter results along with the September quarter.
“It is tricky both practically and theoretically. As for almost two quarters, stocks would trade without key financial disclosures. This could lead to unnecessary volatility and speculation,” said a person privy to the discussion.
He said investors were well-aware of the disruptions caused by the lockdown and grim earnings forecasts and hence, may not react in knee-jerk fashion if earnings disappoint.
The month of April was almost a washout for many sectors with the strict nationwide lockdown in place. Partial relaxations have provided some relief to India Inc, however, top cities like Mumbai continue to face a strict lockdown.
Responding to a query from Business Standard, a Sebi spokesperson said that the regulator is “yet to take a view in the matter.”
In the recent past, Sebi has given several relaxations to India Inc pertaining to regulatory filings and financial disclosures. For instance, Sebi extended the deadline for filing March quarter results by 45 days.
While companies want to bide more time amid the unprecedented disruption, Sebi is of the view that India Inc should be more forthcoming with investors.
Last week, the regulator asked listed firms to disclose the impact of Covid-19 and extended lockdowns on their financials.
“Listed entities should evaluate the impact of covid-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same to investors," Sebi said in a recent circular aimed at providing more transparency to investors.
“Not just promoters or companies, investors are suffering equally in this pandemic. So in order to mitigate the suffering of investors, it is important that there is proper channel of communication between the company and the shareholders, therefore disclosure of result is a vital. Secondly, why always the compliance is the first option, people seek to change or tweak.
Compliance should be treated as an important as business itself,” said J N Gupta, managing director, Stakeholder Empowerment Services, a proxy firm.
FICCI, in its May 13 representation to the Sebi, said “Companies are presently going through one of the most unproductive quarters. Businesses are locked down and services are shut. To ensure against misuse of the situation of not having to report the financial performance till September 30 or beyond for personal gain, extension of the closure of trading window till the announcement of the financial results may be considered for those with access to unpublished price sensitive information on their businesses. “
“Logistically, at least in Mumbai it looks impossible for companies to collate data and act according to the compliance,” said Sandeep Parekh, founder, Finsec Law Firm, adding that some relaxation with this regard should be considered.