Sebi advises India Inc to make enhanced disclosures on Covid-19 biz impact

Market regulator observed that while many have made qualitative disclosures like shutting down and sanitation measures undertaken, only a few have dwelt on financial impact

The Securities and Exchange Board of India (Sebi) has advised India Inc to make enhanced disclosures pertaining to the virus impact on their businesses, and provide both quantitative and qualitative aspects of the same.

“Listed entities should endeavour to ensure that all investors have access to timely, adequate, and updated information. To this end, entities are encouraged to evaluate the impact of Covid-19 on their business, performance and financials — both qualitative and quantitative — to the extent possible, and disseminate the same,” the market watchdog said in a notification. 

Sebi pointed out that while Indian listed entities have already been making disclosures on shutting down of operations — with some having disclosed action taken towards sanitization and safety — only a few have disclosed the financial impact. 

“Listed entities around the world have been making disclosures regarding the impact of the pandemic, including that on the financial condition and results of operations, future operations, capital, and financial resources,” said the regulator.

Sebi shared an illustrative list, which includes steps taken to ensure smooth functioning, schedule for restarting operations, ability to maintain operations in factories/units/office spaces, and estimation of the future impact of Covid on operations. 

 

 

Further, firms may also give a more detailed account of how various aspects of their operations have been hit. 

These could include capital and financial resources, profitability, liquidity position, ability to service debt and other financing arrangements, supply chain, assets, internal financial reporting and control, as well as product or services demand.

Listed entities may also specify the impact of Covid-19 on their financial statements, to the extent possible.

“The circular on disclosure of material impact due to Covid 19 is partly a restatement of the existing disclosure obligations of listed companies under the Listing Regulations. Given the uncertainties surrounding most sectors, it will be a challenge for companies to provide meaningful guidance on the financial impact of Covid at this stage. Any such disclosures will be in good faith with appropriate disclaimers,” said Akila Agrawal, Partner & Head - Mergers & Acquisitions.  

The regulator has warned firms about making selective disclosures. “Depending on 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.” 

While Sebi has granted several relaxations to market participants, the regulator said that the current situation can lead to information gaps about the operations of a company, so better disclosures will allow timely dissemination of information for all investors and stakeholders. 

Citing regulations such as listing obligations and disclosure requirements for listed entities and non-convertible debentures, Sebi pointed out how various regulations require firms to disclose information having a bearing on the operations or performance of the entity.