IIAS Study: Weak companies prefer September date for AGMs

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Published: February 12, 2020 6:00:51 AM

Companies with weak performances wait till the last minute to hold their annual general meetings (AGMs). This is perhaps because these companies hope that their shareholders will not focus on weak financial numbers as attention shifts to the new financial year’s numbers.

As many as 40 companies from the Nifty500 universe reported losses in FY19.

Companies with weak performances wait till the last minute to hold their annual general meetings (AGMs). This is perhaps because these companies hope that their shareholders will not focus on weak financial numbers as attention shifts to the new financial year’s numbers, an analysis done by proxy advisory firm Institutional Investor Advisory Services (IiAS) shows.  The IiAS study, based on last six years’ data through FY19, saw that more than two-thirds of Nifty500 companies have been conducting their AGMs in either August or September. The Kotak Committee on Corporate Governance had advocated that the top 100 listed companies by market capitalisation hold their AGMs within five months of the financial year end, that is, August 31, 2019.

As many as 40 companies from the Nifty500 universe reported losses in FY19 and 40% of them held their AGMs in September. This is the basis for IiAS to suggest that the companies believe that keeping the AGM date towards the end could be because they hope that their shareholders will not focus on weak financial numbers as attention will shift to the new financial year’s performance.

Although, the number of companies which held AGMs in September has come down to 122 in FY19 from 198 seen in FY14, the cumulative number of annual meetings held in August and September remained over 65% in the last six years with the fiscal year FY15 and FY16 having over 70% of companies holding their annual meetings in these two months. The study further found that the median return on equity (RoE) of companies which held their meetings in September was lowest. Interestingly, the top 12 companies under the IBC process almost always held their AGMs in September. While Alok Industries did not have an AGM in 2014, Bhushan Steel & Power did so in 2016 and 2017 respectively.

Moreover, IiAS argues that if 34% of Nifty 500 companies, comprising varied sectors and sizes, can hold AGMs within four months of the financial year-end, the remaining two-thirds should be able to do so too. Additionally, the rationale behind delayed AGMs cannot be attributed to the size of the organisation. For instance, the country’s largest state-owned lender – State Bank of India — and the largest lender by market capitalisation — HDFC Bank – have held their annual meeting in June and July. The largest company by all three parameters –revenue, profit and market value · Reliance Industries — held its AGM in August 2019.

In June 2017, Sebi formed a committee on corporate governance under the chairmanship of Uday Kotak to enhance the standards of corporate governance of listed entities in the country. With the market regulator accepting the recommendations made by the Kotak committee, IiAS hope that the companies will bring their AGM dates forward in the coming years.

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