Securities & Exchange Board of India (SEBI) Chairman Ajay Tyagi stressed that companies must ensure disclosure of material events as per regulations ‘not just in letter but also in spirit.’
“Listed companies must have two sets of disclosures: firstly, periodic disclosures where formats have been prescribed and secondly, disclosures of material events, where certain events have been deemed as material and must be disclosed and the others to be disclosed if considered by the company and its board to be material,” he said, speaking at a FICCI event.
“On both these aspects disclosures by many companies are lacking. On periodic disclosures such as annual reports, while all the fields are being filled in, in many cases, they appear more like a check-box exercise. This is not acceptable,” he added.
“Documents as important as the financial results, annual reports, corporate governance reports and others need the level of quality the investors deserve,” he stressed.
The SEBI chairman said “Not only the periodic disclosures, we often see that companies do not go beyond the deemed material events specified in SEBI Regulations to disclose material events. In several cases, articles appear in the media which are followed by stock exchanges seeking clarification on the same from the companies and the companies then replying to the exchanges on the queries sought. This is surely not the right way to go.”
Stating that since shareholder and board meetings have moved to virtual mode in pandemic time, he said this has created its own set of concerns. “Of particular concern are the issues of confidentiality in board meetings and whether shareholders’ voice is being properly heard in shareholder meetings,” he added.
He said while SEBI will examine specific cases which are brought to its notice, “I would advise companies and their top management to ensure that such concerns are adequately addressed,” he said.
Mr Tyagi said capital markets would play more important role in funding the economic growth.
During 2020-21 compared to the previous year, the resources mobilised through corporate bonds grew at 13.4% compared to 5.2% for bank credit.
The SEBI chairman said more households were investing in the securities markets. “During 2020-21 (upto Q3), the household financial savings deployed in the securities markets amounted to 1.2% of GDP compared to 0.3% during each of the previous two years. In absolute terms, this is a huge increase and if sustained, will give a tremendous boost to both the capital markets and the economy,” he added.
He also said many new- age firms were posting rapid growth, leading them to opt for an IPO at an early stage.
“While many of the IPOs years back used to be for project financing, we rarely now see IPOs being used specifically to finance projects. In terms of value, the proportion of IPOs being used to give exit to existing investors is higher than the proportion being used for raising funds,” he added.
He said the funds raised through IPOs during 2016-21 were six times more than the funds raised in the 2011-16, from ₹0.3 trillion to ₹1.8 trillion in rupee terms. The corresponding figures for the bond markets for the same two periods show an increase of more than 80%.
