Second Covid-19 wave: Fewer companies to avail Q4 filing relaxation

Experts say Sebi's move to extend the deadline is a welcome step

Fewer companies will take advantage of Sebi’s deadline relaxation for filing March quarter financials compared to last year when the pandemic first took hold. An analysis done using Capital Line’s data showed 501 companies had filed their fourth-quarter results before the original deadline of May 15. In comparison, only 159 had managed to file their fourth-quarter results last year by May 15.

On April 29, Sebi in a circular said the deadline to file the March quarter and annual financial results has been extended to June 30. The regulator had given a similar extension last year as well, as companies and auditors had to grapple with the strict lockdown imposed to contain the spread of the virus.

Despite a more lethal second wave of the Covid-19 pandemic, auditors had a better handle this time around, say legal experts.

“Last year, due to the sudden impact of Covid-19, companies were not prepared. This year, in view of its ongoing spread, most companies must have kept compliances in mind and filed their results within the original timeline. However, the extension of the timeline by Sebi is a positive step, keeping in view the mammoth impact the second wave of Covid is having across the country,” said Raj Bhalla, partner at law firm MV Kini.

While the number of companies that have filed their results is higher this time around when compared to last year, it is lower than usual. For instance, in May 2019, nearly 700 companies had filed their results before May 15. Experts said Sebi’s extension will benefit smaller companies more than larger ones.

“Let’s not look at it only from the perspective of the top companies but smaller companies, as well, which may not have infrastructure at the same level. Penalising them for missing the deadline at a time when nearly every person we speak to is in some manner adversely affected by Covid will be cruel,” said Amrita Tonk, partner, L&L Partners.

Listed companies get up to 45 days from the end of every quarter to make public their quarterly financials.

Usually, most companies while declaring their results also provide an outlook for the coming quarters. Experts say the ongoing pandemic has made this aspect difficult.

“The challenges are not only limited to the non-availability of key individuals for closing financials due to health concerns and personal losses but also extends to the fact that businesses and their auditors are still grappling with accurately assessing the true impact of Covid-19 on the business,” said Prashaant Vikram Rajput, partner, White & Brief Advocates and Solicitors.

He said forcing companies to strictly adhere to the deadline could have led to a possibility of companies being unable to provide their true financial position. “The fallout of this would have been that the market would have had access to potentially incorrect financial information which could have adversely impacted the ability of an investor to make an informed investment decision.”