Remember this TV advertisement jingle that was ubiquitous in yesteryears? ‘The tyres we race are the tyres you buy.’ The assurance of quality and robustness was the pith of this. Could an organisation with such a claim fall so much short on standards in sharing information annually with its investors?
There Is A crying urgency to rethink the form and frequency of peddling information with focus on quality than quantity.
A major shift in sharing corporate information is that the annual reports are sent electronically; a link is provided to connect the website of the company to view or download. A soft copy attachment is a rarity.
Viewing a soft copy of 400 or 500 pages is cumbersome – typically information is spread out and splintered connecting the dots needs scrolling up and down:
The unfortunate development of the soft copy era: many a key information is not a part of the running pages of the annual report but provided as a link; this again needs live connectivity to access the company website.
Reconfigure the Annual Report
In the case of the company that purveys ‘tyres with muscle,’ sharing information seamlessly with the loyal shareholders and those interested to research the financials, seems an anaemic affair!
The purpose of this write up is to highlight the need to drastically reconfigure the annual report format to make it user-friendly to view in a smart-phone or i-pad not factoring the problem of net connectivity.
In this instance, the annual return in Form MGT9 is not an integral part of the annual report as earlier and does not open when the link provided is clicked.
A visit to the company website and locating the document with some effort reached a dead end – the particular document is tagged as a ‘protected one’; it is not responding to a simple click to open. Being technologically less than a semi-literate, I stopped exploring the unfamiliar terrain!
PAYMENTS TO PROMOTERS, KEY MANAGERS unclear…
This subject of disproportionate remuneration to promoter-directors has been the butt end of many institutional shareholders’ activism.
A noticeable issue is the absence of a clear picture of payments to promoter-directors as remuneration and a full disclosure as required under clause 5 of the Key Managerial Personnel Remuneration Rules. The information is partially provided in a way not to strike one’s eyes unless one specifically goes in search of it.
Connected to the above, is the information of remuneration paid to KMPs under the related party notes; this disclosure is not given person-wise but in a consolidated fashion.
One gets the impression that the company is shy of making this information easily accessible.
BLACK HOLE ON INVESTMENTS…
The big black hole which may baffle the likes of Albert Einstein is that more than Rs 5800 cr of investments do not carry any descriptive information.
Rs 1120 cr is invested in a listed debenture with no indication of the issuing company and the terms of the issue. Rs 4725 cr invested in mutual funds is reported with a single line stating that the same lies in income schemes under growth option. Unless the company has been exempted specifically, this would be a clear case of non-adherence to the relevant standards on disclosure.
This company retains cash and distributes as dividends less than 1 per cent of its operating cash flow which amounts to approximately Rs 4700 cr in 2021(against a PAT of Rs 1249 cr). It owes not just a disclosure but a detailed explanation of how it plans to deal with so much money belonging to the investors and the reasons to choose the specific investments.
PROMOTERS’ STAKE
This takes one to the next important aspect: the promoters’ sway on the company with a minority holding. As per the data available in the website, promoters’ holding in the company is less than 28 per cent and appears to so for a long time. This level of holding is typically considered very minimal to control such a large enterprise with the last reported top line of Rs 15921 cr in YE March, 2021.
Yet, the promoters seem to hold a levee, with seven of their family members on the board and five of them receive sizable remuneration. The total remuneration received by the promoters in YE 2021 of approximately Rs 85 cr is twice the dividend pay-out of Rs 42 cr!
Six out of the seven independent directors do not hold any other directorship outside this and in the absence of any profile of the IDs in the website (couldn’t be found despite a 15 minute effort!), little is known of their background. The sitting fee is abysmal raising questions in one’s mind of the motivation of these individuals to serve on the board. All the individuals holding office as ID were appointed in the 2019 AGM and in each case, there has been at least some votes cast by the institutional shareholders against the reappointment.
LONG REIGN OF PROMOTERS…
Despite the preponderance of external shareholding, the reign of the promoters seems strong and there has been no major institutional activism. The company share price had reached stratospheric levels, close to six-digit figure and currently seen around Rs 70000. However, the PE ratio is not too exaggerated and one of its competitors, which has a third of the top line of this company, enjoys a higher market cap of Rs 40,000 cr a little over a third more than that of this company.
The most curious aspect of the public shareholding is the constant holding of two entities, one with 11.98 per cent, the highest single holder in the company going under the name of MOWI (P) Ltd and in some years referred to as MOWI Foundation; and another with 2.99 per cent with an entity currently named Evertime Charitable and Educational Foundation (nee MSFS).
Being non-promoters with unchanging holding over the years, (except for change in their names!) in a company where the share prices have been soaring is a matter deserving of delving deeper to detect the beneficial holders in those entities. Another about 9 per cent is with an employee trust with unchanging holding over the last many years.
NEED FOR COMPLETE CHANGE IN REPORTING
The purpose of this article is, as stated in the opening part, the need for a complete changeover in reporting whereby the health of the company which is listed comes out with as little covering as a beautiful human body should!
An unconnected aspect is that one of the joint auditors of the company, upon completion of the first five years of appointment, has regretted to continue, helping the company to reappoint the past audit firm that had rotated out when the audit rotation became mandatory.
The company on governance and disclosure is on a patchy, pacy, Perth pitch of the 1970s and the only way to survive is to play straight with its own branded cricket bat! – V Ranganathan
