SEBI Urges Listed Companies To Reveal Coronavirus’ Impact On Business

The Securities and Exchange Board of India has said listed entities must perform a qualitative and quantitative evaluation of coronavirus' impact on their business performance and financials and provide such information to shareholders.

The market regulator has noted in its circular—which comes into immediate effect—that the listing regulations provide for disclosure of material events that impact the business of a listed entity. While some companies have disclosed information on measures taken by them for sanitation and safety, the total number of entities which have made such disclosures is small.

In order to ensure proper disclosures, SEBI has directed that listed entities must not resort to selective disclosures and ensure transparency in reporting. Among others, listed entities must disclose:

• Impact of Covid-19 on business, ability to maintain business operations and details of offices functioning and closed down.
• Covid-19's impact on capital and financial resources, assets, profitability, debt-servicing ability, internal financial reporting controls and supply chain.
• Impact of Covid-19 on financial statements.
• Details of existing agreements where non-fulfillment of obligations by a party will have significant impact on its business.

Experts welcomed the market regulator's move.

Sumit Agrawal, partner at Regstreet Law Advisors, pointed out that almost every company is facing operational and other challenges as a result of coronavirus. “Assessing and disclosing the evolving impact of Covid-19 as far as possible will be in the interest of shareholders, company as well as the national interest,” he said.

The challenge would be to assess and analyse such information because it may not be accurate and yet evolving, he said.

This is a welcome step by SEBI and in line with what we're seeing in other jurisdictions, Nikhil Naredi, partner at Shardul Amarchand Mangaldas and Co., said.

It will go a long way in ensuring information parity in the market and help in quelling speculative trading in stocks because of the possible impact of the Covid-19 situation on financial performance of listed companies, especially as we head towards the end of the first full quarter after being hit by the pandemic, he said.