India Inc's fondness for delayed AGMs grows

Profitable companies compete with loss-making ones in deferring annual meetings; experts say some do so to delay dividend payments

It is usual for loss-making companies to delay their annual general meetings (AGMs), to avoid difficult questions from shareholders. But even the profitable ones have made it a habit of doing so, evident from the fact that as many as 197 of the BSE 500 companies delayed their annual general meetings in 2013-14 till the last month, September. The list includes names such as Hindalco, Sun Pharma, Bharti Airtel and Coal India.

As many as 456 of the BSE 500 companies follow the March ending financial year and need to have their AGMs in the June to September period. But according to a report by proxy advisory firm Institutional Investor Advsiory Services (IiAS), 42 per cent of profitable companies in the list had their AGMs in September.

“The best practice is to have AGMs as soon as possible and not to be just compliant by having it as late as possible,” says Harinderjit Singh, partner at global accountancy firm Price Waterhouse. “Cash flow could be an issue, I can not think of any other issues as logistically there is no challenge,” he says. The list of companies having their AGMs in September also includes some of the top dividend payers such as public sector firms Coal India, ONGC and NMDC, besides private firms such as Strides Acrolab. These are all in the top 10 dividend paying companies for 2013-14 according to BSE data.

Since most of the companies have their accounts on Enterprise Risk Management software, their annual accounts are ready by April 15. The accounting process may take a maximum of a couple of months, hence the AGM period starts in June. The month also saw other high dividend paying companies such as TCS, Reliance Industries, Infosys and HUL having their AGMs for 2013-14.

“There could be an issue with some companies for the delay in AGMs sometime when there are corporate developments, such as an M&A,” says Mudar Patherya, chief executive officer at India’s largest annual reports agency Trisys. “But in most of the cases it is a deeper cash flow issue of delaying dividend payments,” he says.

Notwithstanding the trend, about 80 per cent of BSE 500 list reporting losses for the year chose to hold their AGMs in August and September, wishing away the losses or avoiding shareholder questions.

“From AGM dates alone, investors may construe that companies that delay holding their AGMs till the very last minute are trying to avoid the inevitable (that is, having to answer investor questions on performance),” says Amit Tandon, founder director, IiAS. “Or as the more cynical may argue, are having extended interpretation discussions with their auditors,” he says.