Last month SEBI issued
a discussion paper on Annual Information Memorandum (AIM) to be filed by the
listed companies in India. Genesis of the paper lies in the background that
under the present system, companies file a detailed memorandum for the
information of the investors only at the time of launch of the Initial Public
Offer (IPO). Post IPO, companies are required to submit various information
through notifications to Stock Exchanges and Regulators. There is no single
point reference document for the information of the investors. The happening of
material events after the listing of the security is known to the investors
over a period of time, and investors also find it difficult to access all
relevant information for the purpose of making an informed investment
decision. This situation specially affects
the secondary market investors.
In light of the above,
need was felt for introduction of an annual AIM to be filed by listed
companies, and accordingly, SEBI launched the discussion paper in the matter.
As per the discussion paper, frequency for preparation of AIM shall be yearly.
For companies which are planning IPOs, the requirement of AIM would commence
with the IPO. This would require that the disclosures made by the companies at
the IPO stage be updated on an annual basis so as to ensure that at any point
of time, updated information about them is available in public domain. AIM
shall be disseminated within 135 days from the end of financial year. AIM may be
disseminated electronically by uploading the same on the company’s website and
simultaneous filing with stock exchanges.AIM shall be approved by Board of
Directors at their meeting prior to dissemination. SEBI has set a
implementation timeline of financial year 2014-15 for the top 200 companies
based on their market capitalization as on March 31, 2014, and FY 2015-16 for
all others listed companies.
Considering, the spirit
of making the AIM as one point source for all the important information. it would
be good if the annual AIM includes some of the other critical information related
to the happenings during the related Financial Year, viz:
(1) Credit Rating of
the company, risk concerns raised by rating agency and response towards the
same by the company.
(2) CIBIL Report scores
(as on last March 31) of the Board of Directors along with comments on any
negative information appearing in the reports.
(3) Brief Summary of
the CIBIL Report (as on last March 31) of the company along with any negative
information viz. overdues etc) appearing in the report, and comments on the
same by company.
(4) No. of instances of
Letter of Credit devolvements, Amount involved; Bank Guarantees invocations,
Amount Involved; and clarifications from the company on these devolvement/invocations.
(5) No. of defaults
incurred but the company in making payments to its lenders and current position
as on the date of approval of AIM by Board.
(6) No. of instances of
ad-hoc limits utilized by the company from lenders, justification from the
company on the same, plans for meeting such requirements in future.
(7) Workings of Debt
Equity Ratio, Total Debt to Total Liabilities Ratio, Current Ratio and Asset
Coverage Ratio (Book Value Basis and Market Value Basis) [SEBI may also
prescribe the method for calculation of these ratios so that there is no
ambiguity].
(8) Tabular information
on financial performance of the subsidiaries, associate companies, joint
ventures and SPVs [SEBI may prescribe the tabular format].
(9) Details of any
overdues/defaults/devolvement/invocation under the financial facilities availed
by subsidiaries/associates from banking sector, present status of the same.
(10) Undertaking from
the Managing Director that company does not foresee any sign/need for financial
restructuring in the next financial year OR if yes, then explanatory note on
the same.
(11) Note on any
Financial Restructuring approved by lenders in the past five years and current
status of implementation and compliance with the terms and conditions.
(12) Explanatory note
on resignations of key executives viz. CFO, Head Treasury, Directors etc.
(13) Tabular
information on instances of name change of the company and need for the same.
(14) Copy of RoC search
report regarding the charge created on the assets of the company.
(15) Negative comments
appearing in the Stock Audit Report and clarification on the same from company.
(16) Forex Risk with
the company and addressing the same under the Hedging Policy and measures adopted
by the company.
(17) Financial Projections
for next two years (Stand-alone and Consolidated basis) along with key ratios
as mentioned above and also the Debt Services Coverage Ratio,
(18) Comparison of
actual financial performance for the last financial year covered in AIM with
the projections for the same made during previous year. Note on
achievements/non achievements of the financial projections with clarifications.
(19) Suggested names of
the competitors in the local and international markets, which the management
feels, can be considered by investors for comparison analysis.
(20) Note on any
particular concentration risks viz. Any particular customer forming more than
25% of the sales, Any particular supplier forming more than 25% of the total
procurement, Exposure of the company to risk associated with the volatility in
commodity (forming more than 40% of the production cost) pricing etc.
These suggestions if
implemented would be helpful for the entire financial sector including the
secondary market investors and lenders, in understanding the financial
strengths and hidden weaknesses of the company. The serious implications of the
information under these suggestions, would bring more discipline in financial
management by the listed companies.
