Sebi asks listed cos to disclose to investors impact of COVID-19 on business

Markets regulator Sebi on Wednesday asked listed companies to make disclosure about the impact of coronavirus pandemic on their business to investors and stakeholders in a timely and cogent manner.

Listed entities should evaluate the impact of COVID-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible and disseminate the same to investors, the Securities and Exchange Board of India (Sebi) said in a circular.

The listed entities should not resort to selective disclosures while disclosing material information related to the impact of COVID-19, it added.

The coronavirus pandemic and the consequent lockdown restrictions imposed by national governments have impacted businesses not only in India but all over the world.

In view of the same, Sebi has granted several relaxations to listed entities in terms of timelines for filing of various reports or disclosures under LODR (Listing Obligation and Disclosure Requirements) Regulations.

"While such a lockdown and disruption is unforeseen and beyond the control of the entities, such events can lead to distortions in the market due to the gaps in information available about the operations of a listed entity," Sebi said.

"Hence, it is important for a listed entity to ensure that all available information about the impact of these events on the company and its operations is communicated in a timely and cogent manner to its investors and stakeholders," it added.

Various provisions under the LODR Regulations already require listed entities to disclose material events which have a bearing on its performance or operations.

Sebi observed that many listed entities have made disclosures under LODR Regulations, primarily intimating shutdown of operations owing to the pandemic and resultant lockdowns.

Some listed entities have provided information relating to actions taken towards sanitation, safety, among others. However, the number of entities that have disclosed the financial impact is small, it added.

According to Sebi, listed entities around the world have been making disclosures regarding the impact of the pandemic, including that on financial condition and results of operations, future operations, capital and financial resources, liquidity, assets, internal financial control over financial reporting and disclosure controls and procedures, demand for products or services, among others.

Regulators have encouraged timely reporting as well as complete and accurate disclosure of the impact, as far as possible, the circular said.

Further, the regulator has given an illustrative list of information that listed entities may consider disclosing, subject to the application of materiality, about impact of the pandemic on the business, ability to maintain operations including factories/units/office spaces functioning and closed down and schedule, if any, for restarting the operations.

Among others, Sebi suggested that listed entities should disclose about steps taken to ensure smooth functioning of operations, estimation of the future impact of COVID-19 on operations, details of impact of the pandemic on listed entity's capital and financial resources, profitability, liquidity position, ability to service debt and other financing arrangements, assets, internal financial reporting and control, supply chain and demand for its products as well as services.

The listed entities should update investors on existing contracts or agreements where non-fulfilment of the obligations by any party will have significant impact on the their business, and other relevant material updates about the listed entity's business, it said.

The regulator said the list is only illustrative and not exhaustive.

Further, to have continuous information about the impact of the pandemic on operations, listed entities may provide regular updates, as and when there are material developments.

Additionally, while submitting financial statements, listed entities may specify the impact of the pandemic on their financial statements, to the extent possible.

Depending on circumstances peculiar to a listed entity and on account of passage of time, the listed entity needs to update its previous disclosures, it added.

The circular shall come into force with immediate effect, Sebi said.