Debt listed Companies now allowed to Publish the financial results As QR Code - MMJC

The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI LODR’) lays down the provisions for effective corporate governance and fair disclosures by listed companies in India.

On July 8, 2024, SEBI vide its SEBI LODR (Second amendment) regulation 2014 [LODR second amendment’] notified an amendment providing an option to debt-listed entities to publish their financial results in newspapers as window advertisements that refers to a QR code.[1]

Sub-regulation (8) of Regulation 52 requires debt listed entities to publish their financial results within two working days after their board of directors’ meeting. These results, which should include specific line items mentioned in sub-regulation (4), must be published in at least one English national daily newspaper that is widely circulated across India. If a company submits both standalone and consolidated financial results to the stock exchanges, it must publish the consolidated financial results, including the specified line items, in the newspaper.

The LODR second amendment now adds a proviso to sub-regulation (8) of regulation 52 which gives an option to debt listed entities to publish only a window advertisement in newspapers referring a QR code. It further states that this window advertisement shall have a link to the website of the debt listed entity and stock exchange(s) website where the financial results according to sub-regulation(4) of regulation 52, are available and accessible to investors.

Features of LODR second amendment are highlighted below:

1. Format of financial Results:

There are two formats for reporting financial results by debt listed entities as specified by SEBI circular dt: May 21, 2024[2]. One format is for reporting of financial results to the stock exchange(s) and other is to publish the financial results in the newspaper by way of an advertisement. Debt listed entities now have an option to submit the financial results in the form of a window advertisement referring to the QR code. If debt listed entities choose to publish their financial results in accordance with the amended regulation 52 (8) as window advertisement referring to QR code, then they will have to give link of the website and stock exchange website where financial results are available. This link of the website of the listed entity and exchange(s) the link should be to the results in the format reported to the exchange(s).

2. Debenture Trustee Approval:

For reporting of the financial results as a window advertisement with QR code the debt listed entity should seek one-time prior approval from debenture trustee.

3. Window advertisement for financial results- whether applicable to Equity listed entities?

Entities that are both equity-listed and debt-listed do not have the option to publish their financial results as a window advertisement referring to QR code. According to Regulation 47 of the LODR, equity listed entities must publish their financial results in newspapers. They are required to publish the results specified in Regulation 33, including the auditor’s modified or unmodified opinions. Hence as it is mandatory for equity listed entities to publish results in newspapers, they do not have the option to publish financial results as window advertisement.

4. SEBI proposes QR code reporting for equity listed entities:

SEBI published a consultation paper[3] on June 26, 2024, proposing that the requirement for detailed newspaper advertisements of financial results under Regulation 47(1)(b) may become optional. With the advancement of technology, reliance on newspapers for company financial results has significantly decreased. Instead, a small box advertisement with a QR code and a web link to the page where the full financial results are available should be published for the benefit of investors is what SEBI proposing. SEBI is also considering streamlining the provision relating to publishing of newspaper advertisement as window advertisement for equity listed entities also.

Conclusion:

The recent amendment by SEBI to the LODR Regulations marks a significant shift in how debt-listed companies can publish their financial results. By allowing these companies to use QR codes in newspaper advertisements, SEBI aims to modernize the disclosure process and provide investors with more accessible and convenient ways to view financial information. However, for entities listed in both equity and debt markets, the traditional requirement for detailed newspaper advertisements remains in place, highlighting a transitional phase in the regulatory approach. SEBI’s ongoing consultations suggest that further updates may be on the horizon, potentially making detailed newspaper disclosures optional in favour of more digital-centric methods. This evolution underscores the need for regulatory frameworks to keep pace with technological advancements and changing investor preferences.

This article is written by Mr. Animesh Joshi, Research Associate!

[1] https://www.sebi.gov.in/legal/regulations/jul-2024/securities-and-exchange-board-of-india-listing-obligations-and-disclosure-requirements-second-amendment-regulations-2024_84773.html

[2] https://www.sebi.gov.in/legal/master-circulars/may-2024/master-circular-for-listing-obligations-and-disclosure-requirements-for-non-convertible-securities-securitized-debt-instruments-and-or-commercial-paper_83481.html

[3]https://www.sebi.gov.in/sebi_data/commondocs/jun2024/Expert%20Committee%20report%20on%20ICDR%20and%20LODR-new_p.pdf