Indian regulators have launched a drive to boost corporate transparency, bombarding firms with disclosure demands, but clumsy execution has created suspicions about an exercise that may not entirely achieve its aim.
The National Stock Exchange (NSE) issued 934 requests for clarification to its top 500 listed companies since revamped disclosure rules took effect in September 30 last year, against 492 requests received over the course of the entire preceding decade.
Requests in the past 14 months have ranged from queries on market rumours to news reports, but repetitive questions mean that firms and investors are questioning the impact of the campaign.
“We are going through the motions of the efforts because we can’t be seen as being indifferent to the queries raised,” said the chief financial officer of one of India’s 20 largest listed companies.
Many inquiries are pertinent and investors say there has been a gradual improvement in corporate governance in recent years, but according to executives, the disclosure drive is littered with redundant, time-wasting requests.
For example, the Bombay Stock Exchange (BSE) queried HCL Technologies on an acquisition that the firm had disclosed the previous day.
In other cases, analysts said, exchanges confused the impacted units or even the companies at stake: sending a clarification for information to Electrosteel Steels instead of Electrosteel Castings, or to Vedanta-owned Cairn India instead of the separate, UK-listed firm Cairn Energy.
“Such disclosures are steps towards achieving better governance. Corporate India will learn,” said VR Narashimhan, chief regulatory officer, NSE.
Asked about criticisms of the disclosure campaign, the BSE said in an emailed statement that it was responding to Sebi’s directive to seek clarifications from companies.
“As more companies’ standards improve, the scope of investment can increase,” said Mahesh Patil, co-chief investment officer at Birla Sun Life Asset Management which manages $20-billion funds.
Under the new rules, regulators have drafted seven categories of price-sensitive company information that would require disclosure to the market, including details on changes to ownership and the outcome of board meetings, which must now be released swiftly after the event.