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Change sometimes creeps up unnoticed. Sometimes it smacks you in the face. That’s the feeling retail investors of a certain vintage—and why even institutional investors—may have had when they saw P&G’s investor invite for an analyst meet on Friday, September 22, followed by its presentation being uploaded on the same day and even the transcript available by evening. Sure, the presentation being uploaded was a Sebi requirement but even now companies upload the transcript with a lag of several days.
Talking to investors itself is not a regulatory requirement but a matter of choice, one could say. Releasing results is mandatory and most companies issue a press release at the bare minimum, but beyond that it's at their discretion what they disclose. The only condition is whatever they disclose must be known to all investors.
P&G’s listed companies in India are Procter & Gamble Hygiene & Healthcare, which sells Whisper sanitary pads and Vicks cold and cough products, and Gillette India, which sells Gillette shaving products. They were part of a group of foreign-owned companies –typically in the consumer products sector but also others such as pharmaceuticals and a few other sectors—that did not speak much to the financial community, at least openly. Their press releases would contain the barest of details, with the numbers in the results table being written in words, and the industry context and strategy would be a copy-paste of earlier releases. Very little value-added information would be given. For investors, these served very little purpose by way of explaining the quarter’s performance.
Of course, P&G’s talking to analysts is not a turning point for MNCs and transparency. Nestle India’s near-death brush with the Maggi noodles episode comes to mind as one where a MNC discarded its shyness overnight. The parachuting of an Indian as the CEO and face of the company, who did an admirable job of firefighting, taking hard issues head on, giving quantitative and financial details relating to the noodles episode that one could not have dreamt of getting earlier.
That outreach continued much after the episode died down, as the company probably saw the lasting benefits of this interaction, that it enhanced its image not just among investors but more generally among various external stakeholders as well. Transparency does not hurt (and may even help) as long as you are not doing anything wrong, may have been the lesson.
P&G may also have found that it is one of the few remaining companies that don’t talk much. Colgate-Palmolive (India) is another company that has opened up in recent years, holding more open analyst meets. Its new chief also talks more freely to the financial media.
What is driving these winds of change? Most of these legacy listed MNC companies came from an era when the government capped the foreign holding under foreign exchange regulations in the seventies, forcing many to list. Obviously, nobody would like that and the political climate in those decades probably made them averse to any public glare. Their apathy towards retail investors may have also stemmed from those times and the thinking in the global HQ.
Of course, there were some exceptions, with Hindustan Unilever in the FMCG space being a shining light. But, many others continued to operate in the shadows, when it came to investor interaction t.hat is. Their stocks were still coveted, of course, with valuations trading at bizarre premiums. If you could get those valuations with so little disclosures, where would be the need to step up disclosures one could ask?
While we don’t know the answers, we could hazard some guesses. One could be the Governance in the ESG framework. Global corporations are being held accountable not just for what they do in their home country but also wherever they have key operations. Speaking to the analyst community and being investor-friendly should count for something.
Another could be that more exposure does not hurt and can even help, as the Nestle episode shows. The third could be a change in guard. A younger management is taking over at many of these MNC subsidiaries, not just at the operational level but even board-level changes are taking place. Even the global level a new generation is taking over. They could be raising questions on why the company is not seen as interacting with the financial community, as that leads to a bigger image for the company that should help it in the marketplace as well. Their new thinking may be driving this shift. Lastly, India is a big market and as its economy grows will continue to expand. Being more visible is a sensible strategy in a growing but also very competitive market with homegrown brands stepping up their game.
Of course, these are new beginnings and full change will be slow to come. There is one slide in the PGHH ppt where it talks about key commodity inflation and cites them as Commodity 1, 2, 3 and does not name them. How is that useful to investors? There are few quantitative details discussed such as volume growth that are basic requirements for an investor. If the parent is comfortable sharing these, why can’t the subsidiary also share it? The questions for the management had to submitted before and no spontaneous questioning or follow-ups was possible.
But these seem minor quibbles compared with the earlier situation. The management too will want to assess how it feels to walk in the sunshine along with investors. If they become more comfortable and see mutual benefits, then over time more relevant details could also be shared. And over time, the few remaining holdouts too could join in communicating more often and more openly to investors. For new investors, these are good times to be living in.
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Ravi Ananthanarayanan
Moneycontrol Pro
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