Sebi chairman CB Bhave on Tuesday said the markets regulator will focus on listed companies which are not ready to provide information to independent research units.
Sebi will also go beyond the statutory disclosure norms and look at independent research agencies for more details. Speaking at the launch of independent equity research (IER) by Crisil, Bhave said disclosing such information will ensure transparency and help investors to understand their investment decisions better.
A Crisil research report shows that out of the 3,500 active listed companies, large cap stocks attract most of the research coverage, while 80% of all traded companies have no analyst coverage. Among those covered, only 170 companies, or 6% of the traded volume, are covered by more than 10 analysts.
Bhave added that there will be reports commissioned by investors for which Crisil may not find enough collaboration from the concerned company. He hoped that Crisil will state in its report that the information provided by the concerned issuer was not sufficient to evaluate.
It will help us regulators to know which companies are not ready to give out information and focus on such companies in greater detail. Itll also help investors to know the corporates who are not prepared to share sufficient information about them, said Bhave.
Sebis Committee on disclosures and Accounting Standards (Scoda), the standing Sebi committee which advises on matters relating to disclosures and accounting standards, recently came out with a discussion paper on several factors to make disclosures more transparent and investor friendly.
Prime recommendations from Scoda include having listed firms declare their balance sheet details on a half-yearly basis, rotation of statutory auditors and the reduction of the time-frame for declaring annual results.
The Crisil IER can be commissioned either by an investor, a stock exchange or a company and will cover listed companies in the mid and small-cap segment largely untouched by the present research analyst.
A lot of us regret the fact that there is no liquidity beyond certain actively traded large cap stocks. This product is what the investors precisely need. It will help create liquidity in those stocks that dont have any kind of equity research coverage, Bhave said.
He, however, advised Crisil to disclose information on the person or entity who has commissioned the research report so that investors have a better understanding of the company.
Our efforts will be to address this huge gap in equity research where most of the listed companies have limited coverage. The Crisil IER will help such companies become visible to a wider audience, said Roopa Kudva, MD & CEO, Crisil Ltd.
The research will address two important parameters in the investment process where grades will be assigned to the fundamentals and valuations of a company.
Unlike traditional research that provides buy, sell or hold recommendations, Crisil IER will assign grades on the fundamentals and valuations of a company. These grades will be on a five point scale, with five being the highest and one the lowest.