Companies that delay AGMs fare badly: Report

Approximately 35% of S&P BSE top 500 companies hold their AGMs in September

Companies delaying their annual general meetings (AGMs) to the last minute often fare worse in financial metrics, says a study by corporate governance firm Institutional Investor Advisory Services (IiAS).

The report says around 35 per cent of the S&P BSE top 500 companies hold their AGMs in September. Companies following April-March as their financial year have to conduct their AGMs before September.

"About 470 of the S&P BSE 500 companies maintain a March year-end. Of these, 181 companies held their 2015 AGMs in September, 38.5 per cent of the total pool and 54 per cent higher than a pure mathematical average," the report states. It says, 55 of the 470 companies reported losses in financial year 2015 and 28 of these held AGMs in September.

“Companies holding their AGMs in September have the lowest median return on equity, compared to companies that hold their AGMs in June, July or August,” stated the report said.

The report also said certain groups tend to bunch AGMs of all listed entities on the same day, which doesn't accord shareholders enough time to ask the right questions.

“For the past three years, the Adani and ADAG (Anil Ambani) groups have held AGMs of all their listed companies on the same day, with a short interval (of two hours or less) — suggestive of a more check-the-box approach towards hosting AGMs."

Further, the report says the next year might not be better in terms of holding AGMs at the last minute, as half of the S&P BSE 500 companies would need to rotate their auditors next year to comply with the norms of Companies Act, 2013.

Under the norms of Companies Act, an auditor firm cannot be reappointed for more than two terms of five years and an individual auditor cannot be reappointed for more than one term of five years.

Adding to this complexity is the change in accounting standards: Voluntary conversion to the Indian accounting standards begins in 2016-17, which coincides with the mandatory auditor rotation.

“If corporate India does not shift gear and strengthen its processes now, AGM timings next year will widen the gap between the doers and the also rans,” cautions the report.