Sebi unlikely to give result disclosure waiver to India Inc for Q1FY21

CII, FICCI have asked for exemption from disclosing June quarter results; Sebi says yet to take view

The Securities and Exchange Board of India (Sebi) is unlikely to agree to India Inc’s demand of waiving financial results disclosures for the first quarter of this financial year.

Industry bodies Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (Ficci) had requested the regulator to relax the norms due to the disruption caused by Covid-19.

Sources said the regulator held an initial round of discussions and the general consensus was that such a move would lead to information asymmetry and wouldn’t uphold the interests of minority investors.

Top Sebi officials said the pandemic and the consequent lockdowns had impacted businesses all over the world. However, none of the major global jurisdictions had announced such waivers.

The CII asked Sebi to consider waiving the requirement for Q1FY21 as firms would anyway submit their half-yearly numbers after the September quarter. Ficci, meanwhile, requested that listed firms be allowed to release Q1 results along those of the September quarter.

“It is tricky both practically and theoretically, as stocks would trade without key financial disclosures for almost two quarters. This could lead to unnecessary volatility and speculation,” said a person privy to the discussion.

He said investors were aware of the disruptions caused by the lockdown and grim earnings forecasts and, hence, might not react in a knee-jerk manner if earnings disappoint.

April was almost a complete washout for many sectors because of the lockdown. Partial relaxations have provided some relief, however, strict restrictions are still in force in cities such as Mumbai.

Responding to a query from Business Standard, a Sebi spokesperson said that the regulator was “yet to take a view on the matter”.

Sebi has given India Inc several relaxations on regulatory filings and financial disclosures in the recent past. For instance, it extended the deadline for filing March quarter results by 45 days.

While companies want to bide time amid the 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 had said in a recent circular.

“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 is compliance always the first option people seek to change or tweak? Compliance should be treated as important as business itself,” said JN Gupta, managing director of Stakeholder Empowerment Services, a proxy firm.

Ficci in its May 13 representation to Sebi had 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 of Finsec Law Firm. He added that some relaxation should be considered.