Companies with weak financial performance continue to delay their annual general meeting (AGMs), proxy advisory firm Institutional Investor Advisory Services (IiAS) said in a report. Companies in the BSE 500 universe who hold their AGMs in September have lower median return on equity (RoE) compared to firms that hold their AGMs in June, July or August. The report said that in financial year (FY16), companies holding their AGMs in September gave 11.9% median return on equity whereas those which held their AGMs in July and August gave 16.4 and 15.8% returns respectively. And 30 of the 150 firms who held their AGMs in September were loss making. This was almost half of the 64 companies in the BSE 500 universe which reported losses.
The report said that this has been the trend for the past four years. In FY 2015, companies that held their AGMs in September gave a median RoE of 11.6% whereas those holding AGMs in July and August gave 16 and 14.1% returns respectively.
However, the RoE of companies holding their AGMs in June were lower. This is largely attributed to how public sector banks perform – since they dominate the AGM season in June, the report said.
In FY16, 477 of the S&P BSE 500 companies reported a March year-ending, an increase of 23 companies from 454 companies two years ago. Almost 70% of the companies held their AGMs in August 2016 and September 2016, and 38% of the companies held AGMs in September 2016 alone. The report added that 2016-17 will be a challenging year as mandatory auditor rotation kicks in along with Indian Accounting Standards ( IND-AS) reporting for most listed companies.
The report also said it expects around 50% of S&P BSE 500 companies will need to rotate their auditors in April 2017. By holding AGMs towards September, companies may have already had the opportunity to announce the first quarter results of the next financial year – which may help quell possible shareholders’ concerns over the previous year’s performance, the report added.