A few days before its ₹3,000-crore public offer in October, Interglobe Aviation which runs IndiGo Airlines, declared its financial results for the June 2015 quarter. But, if you want to know how the airline did in the September 2015 quarter, you will have to wait at least until January 1, 2016 or even up to February 15 next year. This is despite the shares getting listed on the stock exchanges on November 10 – five days before the 45-day deadline (November 15) for companies to declare their September quarter results came to pass. 

Blame this on a regulatory loophole that has put investors in IPOs in a financial dark hole that could range anywhere from 90 days to 135 days from the end of the quarter before the company gets listed. But the good news is that this gap just might get reduced come December 2, 2015.  A lot, however, depends on how the new regulatory framework under the amended Clause 30 of the listing agreement which comes into effect from that date, is interpreted. 

Wiggle-room As it stands, newly listed companies have some wiggle-room in filing their latest quarter results. An official from IndiGo says that the 45-day deadline doesn’t apply to the company as far as the September 2015 quarter is concerned – it is supposed to declare quarterly results only after the December 2015 quarter. The official says that the company will be releasing the September quarter results together with the December quarter results – meaning beginning January 2016 and before mid-February 2016. The net result is that an investor who has subscribed to the company’s shares in the IPO or trades in it in the secondary market, post its listing would be in a manner of speaking, ‘flying in the dark’ until this period.  He wouldn’t know how the company has fared in the quarter ending September 2015. He/she will have to wait to see if it did well or whether there are any nasty surprises waiting for him until January 1, 2016 or perhaps even later. 

 Corporate law experts and market men, while not happy with this situation, concede that the company is within the rights to do so – it is strictly going by the rule-book. Exchange officials too say that the 45-day rule applies from the date of listing, implying that InterGlobe Aviation was not obliged to submit its September quarter results just yet as its shares got listed only on November 10, well past the quarter ending September 30.  

Change in the offing? But some experts point out that a recourse to this practice may not be possible in the future under SEBI’s new rules. The SEBI regulations (listing and disclosure requirements) 2015 were notified in September this year and will be effective from December 2.

Under the amended clause 30 of those regulations, companies will now have to disclose everything that is mandatory and material - on a continuous basis. If financial performance for a full 90 days is per se a material event, no matter how well or poorly the company has performed, then, it will have to be disclosed once the shares get listed. It is by no means clear that such an interpretation would prevail. But if it does get accepted as the legal framework, then all companies irrespective of when they get listed, would  have to disclose their financial performance for the quarter immediately prior to listing, sooner than they are currently required to do.

Exceptions even now Of course, even at present, not all newly listed companies have chosen to delay the dissemination of their financial performance.  A case in point is that of Coffee Day Enterprises, which owns the franchise for Café Coffee Day outlets. It listed about a week before InterGlobe Aviation but filed its September quarter results on November 9. Exchange officials say that Coffee Day Enterprises may have done this in line with its internal practices, but was not required to do so under the current SEBI rules. 

Background A listed company is expected to announce its results every quarter to keep its shareholders and other interested stakeholders informed about its performance.  The regular flow of information is mandated under clause 41 of the listing agreement that companies sign with stock exchanges.  This enables investors to take appropriate action – on whether to buy, sell or hold a stock. Listed companies are required to submit to the stock exchanges their financial results within 45 days of the end of each quarter. The quarterly results can be audited (accompanied by the audit report) or unaudited (accompanied by the limited review report of the auditor). In the case of the last quarter and the entire financial year, the results need to be audited and should be submitted within 60 days of the end of the financial year. 

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