India: How India's Leading Listed Companies Fare On Disclosure Standards

Last Updated: 12 September 2017
Article by Amrit Singh Deo

Executive Summary

2017 builds on positive disclosure-related regulatory requirements – the New Companies Act 2013 and amended Clause 49 SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 – pushing for higher voluntary disclosure standards, including those around board evaluation. The capital market regulator SEBI has posed an apt question - 'who is evaluating the evaluators?' (in this case, the corporate board) and is the evaluation a robust process? Superior disclosure practices are a proxy for superior management quality and better corporate governance; and we can now add board governance to that list too. This is a positive development for India, a capital markets jurisdiction where charismatic promoters have traditionally held sway over the boards of their companies.

The India Disclosure Index 2017 report, the third edition of its series, reveals a strong embrace of Voluntary Disclosure by Indian companies, coming on the back of previous year's progress on Mandatory Disclosure (even though 22% of Top 100 companies, by market capitalisation, continue to fall short on this measure). The 6.8/ 10 Composite Disclosure Score and 5/ 8 Voluntary Disclosure Score for India's Top 100 companies are good but this significance is evident when reviews movements on individual parameters.

The research methodology for the 2017 report was finalised with the help of an expert research jury (see below). Subsequently, FTI Consulting reviewed publicly available information disclosed by 200 leading listed Indian companies (by market capitalisation) to create a weighted, Composite Disclosure scoring system - with seven parameters for Mandatory Disclosure and eight for Voluntary Disclosure. A re-weighting of parameters marks a significant change in research methodology from previous years, making direct comparisons with previous year's Composite and Voluntary Disclosure scores misleading. The number of companies that provide information on specific individual parameters has risen steadily (specifically for Earnings Transcripts, Margin Improvement Narratives, Risk Metrics and Whistle-Blower Mechanism):

  • 78% of Top 100 companies provided Earning Transcripts (this was 73% in 2016 and 49% in 2015). Amongst the Next 100 companies (by market capitalisation), this was 53% in 2017 (as compared to 49% in 2016)
  • 73% of Top 100 companies provided Margin Improvement Narratives (this was 54% in 2016).
  • 50% of Top 100 companies provided adequate Risk Metrics (this was 32% in 2016).
  • 71% of Top 100 companies provided convenient Whistle-Blowing Mechanisms (this was 68% in 2016)

Three companies – Axis Bank, Infosys and State Bank of India – scored 10/ 10 on the weighted Composite Disclosure score. 22 Indian companies in the Top 200 list scored higher than 9/ 10 and may be considered 'Disclosure Champions'. Two years back, such champions came from one or two sectors. This year, they come from four knowledge economy and three 'old economy' sectors. Each of these companies are setting an example on corporate disclosure for other companies in their respective sectors.

Six companies engaged third-parties for evaluating performance of their boards - an optimistic number given the fairly recent guidance from SEBI on the matter. This number can be expected to grow in following years.

Higher Voluntary Disclosure scores indicate Corporate India is taking a progressive view of disclosure, beyond a legalistic definition. However, 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.

Research Jury for India Disclosure Index 2017

The research methodology for India Disclosure Index 2017 has been modified from previous year's methodology after consultations with a specially constituted three-member research jury comprising of eminent professionals from the regulatory, legal and institutional investment fraternity.

The three-member research jury that finalised the methodology for India Disclosure Index 2017 comprised of:

  • Dr. V. R. Narasimhan, Chief Regulatory Officer, National Stock Exchange (NSE)
  • Sandeep Parekh, Founder Partner, Finsec Law Advisors
  • Vikram Desai, Director, Canada Pension Plan Investment Board (CPPIB) India

The jury made pertinent observations about how corporate disclosure behaviour and regulatory focus had moved beyond mandatory disclosure to voluntary disclosure standards; and recommended an appropriate re-weighting of parameters. The jury also favoured a more ambitious interpretation of the definition of 'board evaluation' favouring 'evaluation by a third-party' as a preferred international benchmark. These meaningful interventions ensure that India Disclosure Index  2017 is sufficiently dynamic and updated to the current environment. FTI Consulting expresses thanks to the jury for their time and support for this non-commercial, public-research initiative.

India Disclosure Index 2017 Report Findings

Composite Disclosure Scores

Overall as a group, the Top 1001 listed Indian companies (by market capitalisation) have an average Composite Disclosure score of 6.8/ 10.

  • Almost 26% have Composite Disclosure scores of eight or more – and three companies stand out for achieving the maximum score of 10 / 10. They are Axis Bank, Infosys and State Bank of India.
  • 14% of the Top 100 listed Indian companies have low Composite Disclosure Scores – scoring five or less.

The Next 1002 listed Indian companies have an average Composite Disclosure score of 6.2/ 10, with no company achieving the maximum score of 10/ 10. Furthermore, 23% of the Next 100 listed Indian companies have an average Corporate Disclosure score of five or less.

22 companies across both groups of companies, Top 100 and Next 100, have a Composite Disclosure score higher than 9/ 10. These companies are from a wide range of industries and can be viewed as sector champions for corporate disclosure standards. Classified by industry, they are:



Financials (6)

Axis Bank, State Bank of India, IndusInd Bank, YES Bank, Federal Bank, Union Bank

IT/Technology/Telecom (4)

Infosys, Bharti Airtel, Bharti Infra, Mindtree

Pharma/ Life Sciences (3)

Lupin, Piramal, BioCon

Manufacturing (3)

Mahindra & Mahindra, Apollo Tyres, Supreme Industries

Metals & Mining (3)

Tata Steel, UPL, Vedanta

Consumer Products/ Services (2)

Hindustan Unilever, Dish TV

Power/ Energy (1)

JSW Energy

Mandatory Disclosure Scores

Overall as a group, the Top 100 listed Indian companies have an average Mandatory Disclosure score of 1.8 /2.

  • 78% of the Top 100 companies score a full 2/ 2 for Mandatory Disclosure (up from 71% in 2016 and 41% in 2015), with the remaining 22% falling short on either one or some of the mandatory disclosure parameters.
  • 78% of Top 100 companies provide information on 'analyst engagement information AND earning call transcripts'. This is marginally up from 73% in 2016 and significantly up from 49% two years back (2015).

The Mandatory Disclosure score for the Next 100 listed Indian companies is also 1.8 /2, with the weakest performance on 'Analyst Engagement Information AND earning call transcripts'. 53% of these companies disclose this information on their corporate websites (up from 49% in 2016).

Voluntary Disclosure Scores

Overall as a group, the Top 100 listed Indian companies score an average of 5/ 8 for Voluntary Disclosure, when reviewed against eight voluntary disclosure parameters (see methodology).

  • Only three of the Top 100 listed Indian companies have a full 8/8 score for Voluntary Disclosure. These were Axis Bank, Infosys and State Bank of India.
  • 24% of the Top 100 listed Indian companies have Voluntary Disclosure scores of 4/ 8 or less. Two companies have Voluntary Disclosure scores below 1/ 8, and there is a company with a zero Voluntary Disclosure score.
  • 50% of companies provided adequate information on risk metrics, significantly up from 32% in 2016.
  • 71% of the Top 100 constituents provided convenient whistleblowing mechanisms to report fraud or unethical activity through a convenient channel (email/phone), up from 63% in 2016.
  • Insufficient information about adoption of Indian Accounting Standards (IndAS) and its impact on financials; and 'board evaluation without the involvement of external third-parties' were the two most significant reasons for low Voluntary Disclosure scores.
  • Six companies use external third-parties for evaluation of the board. They are Axis Bank, Dr. Reddy's Lab, Infosys, Kotak Mahindra Bank, ONGC and State Bank of India.
  • 47% of Top 100 Indian companies provide information on adoption of IndAS and its impact on financials in their Annual Reports.
  • Voluntary Disclosure on Risk Metrics and Margin Improvement Narrative saw the biggest jump from 2016 numbers. 73% of companies provide Margin Improvement Narrative in 2017, up from the 54% figure in 2016 The average Voluntary Disclosure score for the Next 100 companies was 4.6/ 8, with the weakest performance on 'Board Evaluation by Third Party' (done by only one Next 100 company) followed by 'Risk Management Metrics'.
  • 66% of Next 100 listed Indian companies provided debt related information, an improvement from 40% in 2016.
  • 66% provided adequate strategy-related information, up from 49% in 2016.

Two Qualitative Observations: Disclosure Best Practices

While reviewing disclosure information of all 200 companies, the FTI Consulting research team came across two specific noteworthy examples – for the spirit of transparency (in the first instance) and a broad view of risk (in the second):

  • The first instance was one of the Top 100 companies, specifying the number of whistle-blowing instances in the last 12 months, the exact nature of complaints and steps taken to address them.
  • The second was explicit mention of the impact of international regulations, specifically 'The Modern Slavery Act 2015' in this case, on Indian operations.

Both instances are commendable examples of voluntary disclosure in their true spirit, and an indication of how new standards could evolve in the next 18-24 months. Risks arising from international regulations (around anti-bribery, corruption and human rights) will impact Indian companies with overseas operations as well as those that are part of global supply chains. This is an important point for board-level discussions.

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