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SEBI against companies giving quarterly guidance

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‘National Institute of Securities Market to be set up near Mumbai in a month’

No guidance please: (From left) Mr S. Mahalingam, Chairman, CII, National Conclave on the Changing Face of Financial Leadership; Mr Gopal Srinivasan, Chairman, CII Tamil Nadu State Council; Mr M. Damodaran, Chairman, SEBI; and Mr R. Seshasayee, past President, CII; at the National Conclave on `The changing face of financial leadership' organised by the CII in Chennai on Thursday. - Bijoy Ghosh
No guidance please: (From left) Mr S. Mahalingam, Chairman, CII, National Conclave on the Changing Face of Financial Leadership; Mr Gopal Srinivasan, Chairman, CII Tamil Nadu State Council; Mr M. Damodaran, Chairman, SEBI; and Mr R. Seshasayee, past President, CII; at the National Conclave on `The changing face of financial leadership' organised by the CII in Chennai on Thursday. - Bijoy Ghosh

Our Bureau

Chennai, Aug 2 The Chairman of the Securities Exchange Board of India (SEBI), Mr M. Damodaran, today asked Indian industry to ponder over whether it was proper to give quarterly guidance “that to my mind is no different than forward-looking statements that regulations do not contemplate.”

Speaking at the National Conclave of the CII, Mr Damodaran said that some companies did that either because of “television audiences or because of analyst pressure.”

While some big companies “frown at this practice,” some others, “equally large and respected,” adopt this practice because they believe that internationally this is how it is done.

“You (already) have a problem of quarterly results being put out that puts extraordinary pressure on company managements to focus on numbers than how to take businesses forward,” Mr Damodaran said.

Because of this pressure, some companies indulge in “financial engineering,” he added.

If the industry is of the opinion that the practice is not good, the SEBI could regulate against it, he said.

Later, answering a question on the SEBI’s agenda, Mr Damodaran listed out a number of issues.

“We have to see that more shares are traded in the market, that companies with smaller public shareholding have larger public shareholding and that companies that have not come to the market are persuaded to come to the market.”

As regards compliance with corporate governance, he said: “We have spent enough time for putting in place a prescriptive regime and there are several big companies that are not compliant.”

He added: “You will very soon see evidence of what happens if you are not compliant, notwithstanding your size.”

Stocks in syllabus

The SEBI has succeeded in persuading the Ministry of Human Resources Development that it is not bad to put stock market related education in school syllabus, Mr Damodaran said.

“Finally, after a lot of effort, we have convinced the authorities in human resource development that securities market education isn’t such a bad thing and you need to have a bit of that in school syllabus.”

He added: “If you can vote for your representative at the age of 18, there is no harm in knowing what the stock market is all about. Till now it was resisted on the ground that young minds should not be “corrupted” by knowledge of stock markets.”

He also mentioned that the proposed setting up of National Institute of Securities Market, near Mumbai, would happen in a month.

“As we speak, five management institutes from the US and one from the UK want to tie up with us and we are in a position of being able to choose who our partners are going to be.”

(This article was published in the Business Line print edition dated August 3, 2007)
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