Institutional Investor Advisory Services (IiAS) has published a study on the association between the timing of the Annual General Meetings (AGMs) of Nifty 500 companies and their financial performance. Despite Covid-linked disruptions, the trend of companies with a weak performance waiting till the last minute to hold their AGMs continues.
In financial year 2020, for instance, 49 companies from the Nifty 500 were loss-making companies and 57 percent of them held their AGMs between September and December.
Same old story
IiAS has been conducting this study for the last six years and this is the seventh edition of the report. “For the seventh straight year we find that the median return on equity (ROE) is lowest for companies that hold their AGMs held towards the end of the AGM season,” the report noted.
An analysis of data from financial year 2014 shows that out of 51 loss-making companies, 27 held their AGM in September. Similarly in 2016, 30 of 64 loss-making companies held their AGM in September. In 2017, out of 53 loss-making companies, 27 had their AGM in September.
In 2018, financial conditions improved and only 43 companies reported losses, of which 13 had their AGM in September. In 2019, 17 companies had their AGM in September out of 40 loss-making companies.
‘Size and complexity should not matter’
IiAS continues to contend that the rationale offered by many companies for delaying their AGMs due to their ‘large size and complex business’ is untenable. “To be a part of the NIFTY 500, companies will necessarily have to have size and complex structures. Using the median total assets and gross sales as a proxy for complexity, we find that companies with AGMs in June and July are much larger and complex than those with AGMs in August and September. Therefore, size and complexity cannot be a deterrent to holding AGMs sooner,” the report said.
“IiAS acknowledges that the disruption caused by Covid-19 has contributed to delays in holding AGMs for many companies. The linkage between performance of companies and date of AGMs holds. Historically, larger, better performing and more complex companies have had no difficulty in holding early AGMs. The reverse is often true”.
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