Kotak panel on corporate governance to submit report by Sept-end: Sebi

Market regulator set up the 21-member committee on June 2

Sebi chairman Ajay Tyagi on Wednesday said the Uday Kotak committee on corporate governance is expected to submit its report by month-end.

The markets watchdog Sebi had set up the 21-member panel on June 2 this year to advise it on issues relating to corporate governance. It includes representatives from companies, stock exchanges, professional bodies, investor groups, law firms, academicians, research professionals and Sebi officials.

"We feel much needs to be done on corporate governance. We are very serious that issues that enhance participation of minority shareholders and protect their rights, independence of independent directors and their active participation are in place. Improved disclosures on related party transactions and accountability and evaluation of boards are issues that seriously need to be looked into," Tyagi told a capital markets summit organised by industry lobby Ficci in Mumbi.

Tyagi said the if markets were to sustain the present momentum, they have to satisfy some broad conditions such as the standard of conduct for all intermediaries including auditors must be benchmarked to be best in the world.

The Kotak panel was mandated to advise the markets regulator on areas like ensuring active participation of independent directors; improving safeguards and disclosures pertaining to related-party transactions; issues in accounting and auditing practices; improving the effectiveness of board evaluation practices; addressing issues faced by investors on voting; and disclosure and transparency-related issues.

Blaming the high indebtedness of large corporate as the reason for them to shy away from investing afresh, he called for increased coordination between regulators to ensure the twin-balance sheet issues are resolved at the earliest.

"This is one issue (twin-balance sheet troubles) which needs to addressed and I feel all regulators need to collectively work to resolve it," he said.

Stating that Indian market is coming of age, he said public offers of equity shares has grown 70 per cent in FY17 over FY16. This year is expected to see much more action as so far Rs 9,452 crore (rpt Rs 9,452 crore) has been raised and by end of the year it should be all time high.

Noting that the size of OFS through IPOs has been increasing, Tyagi said this means that the market is providing viable exit opportunity for investors. The number of buyback offers has jumped with 51 companies making such offers in FY17 as against nine two years ago.

"Of course partly this is encouraged by tax benefits. We have found that capital returned to shareholders in the form of dividend buybacks was 1.5 times the amount raised through equity capital in FY17. Though equity capital raised was pretty impressive this shows that in FY17 more money was returned to investors than raised from investors," he said.

Lauding the rising inflows from mutual funds, he said the share of mutual fund FPIs in the Nifty companies has increased from 17 per cent in 2010 (rpt 2010) to 25 per cent this year. At the same time share of promoters has declined from 57.3 per cent to 46.1 per cent.

"This shows that institutional investors need to play important role in investing company, which in turn calls for a stewardship code," the Sebi chief said.

A beginning has been made in this regard with Sebi asking MFs to disclose on voting policy and going forward, the watchdog will have uniform norms for all institutional investors, Tyagi said.