The top 200 companies in India by market cap are increasingly improving both corporate governance and voluntary disclosure, according to the India Disclosure Index, published by FTI Consulting.
Despite gains across a number of areas and three companies in the rankings – Axis Bank, Infosys and State Bank of India – gaining full voluntary disclosure scores, more could be done almost across the board.
Almost a quarter of the top 100 firms have a voluntary disclosure ranking of just four out of eight, with two companies rating just one out of eight and one unnamed firm ‘boasting’ a voluntary disclosure score of zero. The two key reasons for low scores, says FTI Consulting, are ‘insufficient information about the adoption of Indian Accounting Standards (IndAS) and [their] impact on financials’ and ‘board evaluation without the involvement of external third parties’.
In some areas, often deemed basic disclosure practices, big improvements have been made in recent years. One such example is the publication of earnings transcripts: 78 percent of the top 100 companies now publish earnings transcripts, a figure that stood at less than half of top firms in 2015.
‘Higher voluntary disclosure scores indicate corporate India is taking a progressive view of disclosure, beyond a legalistic definition,’ say the report researchers. ‘But one must bear in mind that ‘disclosure standard’ itself is a moving target and this report covers leading Indian companies only. Boards could articulate ‘disclosure policies’ anticipating new risks, regulatory developments and global best practices and better prepare their companies to attract ‘transparency premiums’ from investors.’
Even where significant improvements have been made in some areas, FTI Consulting still finds relatively low levels of voluntary disclosure across others. For example, half of the top 100 companies now provide ‘adequate information on risk metrics’, significantly up from just 32 percent last year. ‘Forty-seven percent of top 100 Indian companies provide information on adoption of IndAS and the impact on financials in their annual reports,’ add the researchers.
Among the next 100 largest Indian companies, average voluntary disclosure is lower, with firms most likely to fail on third-party board evaluation (done by only one company in the group) and risk-management metrics. But two thirds now provide debt-related information, up from 40 percent last year, with the same number offering ‘adequate strategy-related information’, up from 49 percent in 2016.
Some companies continue to fall short even on mandatory disclosure, however, with 22 percent of the top 100 firms failing on ‘either one or some of the mandatory disclosure parameters’.
