[Mythri Murali is a 5th year B.A., LL.B. (Business Law Hons.) student from National Law University, Jodhpur]
Listed companies typically hold gatherings with analysts and investors after quarterly results or at least once a year to share information about their performance and future prospects. These meetings often include presentations, conference calls, group meetings, one-on-one interactions, or walk-in sessions with investors or analysts. The goal of these meetings is to provide transparency regarding the company’s performance, address analysts’ and investors’ questions, and ensure that stakeholders have access to the company’s information. They provide prospective investors with insights into the company, its background, and its key personnel.
These meetings are an investment in the company’s long-term perception in the financial community and market. They offer practical advice and coaching to help management teams deliver impactful communication to large audiences and in critical one-on-one meetings with investors. It involves detailed sessions where management must present well-structured messages and accurate proof points. Sell-side analysts probe deeply into the business model and strategy, requiring management to demonstrate openness, clarity, and enthusiasm. This is crucial because these analysts will ultimately advocate for the company to institutional investors.
More specifically, an effective IPO presentation succinctly conveys why investors should buy the stock, ensuring each slide contributes to a coherent overall picture. Thus, having a well-prepared investor or analyst presentation is indispensable for a successful IPO, as it maximizes the chances of success and positively shapes the company’s future perception.
Are Investor / Analyst Presentations Mandated?
To promote transparency and prevent information asymmetry, companies are required to disclose the schedule, presentations, and other material information from these meetings to stock exchanges and host them on their websites in accordance with the Securities and Exchange Board of India (“SEBI”) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). The LODR Regulations previously required the disclosure of adequate and timely information to help investors track a company’s performance, including details of investor meetings and conference calls with analysts.
Despite these regulations, inconsistencies were observed in the disclosures made by companies. For example, some companies only shared limited presentations from the meetings without detailing the discussions that took place. As a result, minority shareholders who did not attend these meetings were not privy to the information shared with select investors, creating an information imbalance among different shareholder groups.
Noticing the aforementioned trend, SEBI on November 20, 2020 released a Consultation Paper titled ‘Report on Disclosures Pertaining to Analyst Meets, Investor Meets and Conference Calls’, (“Report on Disclosures”) recommending enhanced disclosure requirements. In the report, it was observed that the objective of investor presentations, conference calls, and investor meetings is to present an accurate and fair view of the business to shareholders and potential investors. The aim of disclosing the presentations made in these meetings was to prevent information asymmetry among different classes of investors. However, it has been observed that most listed companies do not fully comply with existing regulations, resulting in continued information asymmetry.
Further, by way of a notification issued on May 5, 2021, SEBI amended the LODR Regulations, which required companies to enhance disclosure standards for analyst and investor meetings to prevent selective disclosure and information imbalance, thus upholding market integrity and protecting investor interests. These changes were optional for financial year 2021-22 but became compulsory starting from financial year 2022-23. There have been no amendments in the LODR Regulations after May 5, 2021 with respect to investor or analyst presentations.
Thus, the current regulatory framework is as follows:
- Regulation 46(2)(o) of the LODR Regulations states that the listed entity ‘shall’ notify the schedule of analyst or institutional investor meetings at least two working days in advance (excluding the date of the intimation and the date of the meeting), ‘including’ presentations delivered by the listed entity to analysts or institutional investors, on its website.
- Part (A)(A)(15) of Schedule III of the LODR Regulations on disclosures to the stock exchanges without the application of the guidelines for materiality reiterates what has been laid down in regulation 46(2)(o).
- Schedule V, Part C(8)(e) also states that ‘presentations made to institutional investors or to the analysts’ must be disclosed in the section on corporate governance in the annual report.
While it seems like the investor or analyst presentations are mandated by SEBI, due to (i) the emphasis on the presence of presentations made to investors or analysts in the LODR Regulations, which make it seem like they are a given; and (ii) the observations made in the Report on Disclosures which repeatedly emphasised on the need to remove the information asymmetry amongst different classes of investors, it does not appear to be the case. Technically, nowhere do the LODR Regulations say that an investor or analyst presentation must be given; the LODR Regulations merely say that in the case that there is a presentation, it must be disclosed.
This semantic difference is important because it shifts the emphasis from an obligation to provide presentations to an obligation to disclose them if they exist. This distinction points to the regulatory focus on transparency and disclosure rather than prescribing specific actions. It places the onus on listed entities to ensure that all relevant information, including presentations, is disclosed to stakeholders. Therefore, while the regulations do not dictate the creation of presentations, they necessitate openness about their existence if they are prepared, with the aim to promote market integrity and investor confidence through enhanced transparency.
Some companies have realised that there exists a loophole, leading them to not have investor / analyst presentations. This may stem from a desire to minimise efforts and resources allocated to such presentations, especially if they perceive them as burdensome or time-consuming.
As a result, some companies opt not to organize these presentations. For example, in their disclosure (dated September 15, 2022) under regulation 30 of the LODR Regulations on the outcome of the investor and analyst meeting, Fino Payments Bank disclosed that no presentation was made during the meeting. Before Fino Payments Bank, DLF Limited also released a disclosure dated May 27, 2022. More recently, similar disclosures were also released by Tata Consultancy Services (disclosure dated May 27, 2024), Sundram Fasteners Limited (disclosure dated May 27, 2024) and ICICI Bank (disclosure dated May 29, 2024), among others.
While these companies are not in the wrong for not having an investor or analyst presentation, according to core of the LODR Regulations, this approach contradicts the underlying principle of transparency and disclosure advocated by SEBI. By neglecting to conduct presentations, companies risk creating information asymmetry among stakeholders, which is what SEBI wanted to tackle through its Report on Disclosures in the first place.
Conclusion
This discrepancy highlights the importance of regulatory oversight and the need for companies to align their practices with the spirit of the LODR Regulations. While the regulations may not explicitly require companies to conduct investor / analyst presentations, they emphasise the necessity of disclosing material information to maintain market integrity and protect investor interests. Therefore, companies should recognize the broader objective of SEBI’s Report on Disclosures and the subsequent amendment to the LODR Regulations in this regard, which is to foster transparency and equitable information dissemination.
By conducting investor and analyst presentations, companies not only comply with the regulatory framework but also promote informed decision-making among all stakeholders. These presentations provide a platform for detailed communication about the company’s performance, future prospects, and strategic direction, thereby reducing the risk of information asymmetry. Furthermore, regular and transparent interactions with analysts and investors can significantly enhance the trust and confidence of the market in the company. Embracing this proactive approach aligns with the ethos of the LODR Regulations. It also shows the company’s commitment to upholding high standards of corporate governance and stakeholder engagement, which is always seen favourably by the investing community.
– Mythri Murali