SEBI asks firms to reveal financial impact of Covid-19

Our Bureau Mumbai | Updated on May 20, 2020

Stock market investors are accustomed to the usual risk factors associated with companies including debt and sector woes but they can’t factor in the impact of ‘black-swan’ events like impact of Covid-19. Market regulator SEBI has asked all the listed companies to prepare an impact analysis of Covid-19 on their respective business and present a picture to the investors.

“Listed entities should endeavour to ensure that all investors have access to timely, adequate and updated information. Towards this end, entities are encouraged to evaluate the impact of the Covid-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same,” the market watchdog said.

The month of May has so far been bad for the Sensex and Nifty with both the indices having slipped by more than 10 per cent.

Research houses and analysts are all digging up recent company results to access the lockdown impact but the true picture could only be clear in next two quarters, experts said.

“The SEBI Circular on disclosure of material impact due to Covid 19 is partly a restatement of the existing disclosure obligations of listed companies under the Listing Regulations. Given the uncertainties surrounding most sectors, it will be a challenge for companies to provide meaningful guidance on the financial impact of Covid at this stage. Any such disclosures will be in good faith with appropriate disclaimers,” said Akila Agrawal, Partner & Head - Mergers & Acquisitions, Cyril Amarchand Mangaldas.

Companies like Bajaj Finance and a few others already carried some impact analysis in their recent quarterly filings. But SEBI on Wednesday said that very few have disclosed the financial impact.

“Listed entities around the world have been making disclosures regarding the impact of the pandemic, including that on financial condition and results of operations, future operations, capital and financial resources and Indian companies too should do,” SEBI said.

The regulator has shared an illustrative list, which included steps taken to ensure smooth functioning, schedule for restarting operations, ability to maintain operations in factories/units/office spaces functions and closed down, estimation of future impact of Covid-19 on its operations. Further, companies have to include impact on capital and financial resources, profitability, liquidity position, ability to service debt and other financing arrangements, supply chain, assets, internal financial reporting and control and product or services demand. SEBI has asked for companies to specify the impact of COVID-19 pandemic on their financial statements to the extent possible. “Depending on circumstances peculiar to a listed entity and on account of passage of time, the listed entity shall revisit, refresh, or update its previous disclosures,” SEBI said.

Published on May 20, 2020

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