Sebi to ask listed firms to record minute financial details

The Securities and Exchange Board of India (Sebi) is planning to ask listed entities to start using information utilities, set up under the insolvency law, to record minute financial details.

Experts say that this will ensure transparency as the existing declaration mechanism is mandatory only to a certain extent. A former Sebi official said: “This will ensure more transparency in letting out details of companies and better access to all stakeholders as all details will be dematerialised.” This would also help banks maintain dematerialised records, which are safer, he added.

An e-mail sent to Sebi on the issue remained unanswered.

Information utilities are being set up to eliminate disputes related to debts and assets of companies that have been taken to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code. Information utilities are a database in which financial information which is verified is available to facilitate due diligence before any transaction under the insolvency process.

There is one information utility, NeSL, now. State Bank of India, Canara Bank, and Bank of Baroda have a 10 per cent stake each, while ICICI Bank and Axis Bank hold 9.9 per cent and 9.5 per cent, respectively. Life Insurance Corporation and Karnataka Bank own 6 per cent each in the information utility.

Others among the 17 shareholders include HDFC, Punjab National Bank, Union Bank of India, Axis Bank, and Nabard. Meanwhile, Sebi is planning to get credit rating agencies to identify default. The regulator has met banks, the Reserve Bank of India (RBI), and rating agencies to finalise the disclosure framework. Since rating agencies are expected to keep a close watch on company financials and are capable of conducting qualitative analysis of companies, Sebi wants their involvement in the matter.   

Besides, the market regulator is planning to give up to a month to companies for disclosing loan defaults and explain their nature. Under the revised directives, Sebi may increase the “delta D” or date of default to 30 days and may give additional time to companies to make disclosures.

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