India’s markets regulator on Wednesday directed companies that have publicly traded securities, including shares and bonds, to disclose broad-ranging details about the financial fallout from the coronavirus pandemic.
The Securities and Exchange Board of India (Sebi) found that listed companies have only offered sketchy details related to shutdown of operations and, in some cases, updates about sanitation and safety measures at offices under the listing obligation and disclosure requirements (LODR).
“The number of entities that have disclosed the financial impact is, however, small,” Sebi said.
Listed entities, Sebi said, should ensure that all investors have access to timely, adequate and updated information. Following Sebi’s directions, companies will now have to evaluate and disclose the impact of the pandemic on their businesses, both qualitatively and quantitatively.
They will also have to inform investors about the impact of covid-19 on issues such as capital, financial resources, profitability, liquidity, ability to service debt and other financial liabilities, assets, internal financial controls, supply chain, demand for products and services and existing contracts that are not being fulfilled. Most importantly, they also have to assess and disclose the long-term impact on the business due to covid-19.
“The above list is illustrative and not exhaustive,” said Sebi.
While submitting financial statements under listing obligation and disclosure requirements, listed entities may need to specify or include the impact of the covid-19 pandemic on their financial statements to the extent possible, Sebi added.
So far, only banks and non-bank lenders have disclosed changes in provisioning for certain borrower accounts because of the financial impact of covid-19.
“This circular from the markets regulator is a direction that all these aspects, which impact the financials of a company, are disclosed either in the management commentary in annual reports or comes out through specific disclosures and in auditor observations,” said Harish H.V., managing partner, Ecube Investment Advisors.
The market regulator warned companies should not to resort to selective disclosures.
Depending on the circumstances peculiar to a listed entity and on account of the passage of time, the listed entity shall revisit, refresh, or update its previous disclosures, the capital market regulator said.
Listed entities around the world have been disclosing information regarding the impact of the pandemic, including that on financial conditions and results of operations, future operations, capital and financial resources, liquidity, assets, and demand for products and services.