Institutional Eye: Special Reports by IiAS

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Institutional EYE provides insightful views on contemporary issues faced across companies. These commentaries are thoroughly researched and objectively analysed to provide a clear understanding of the underlying issues.

Among the various sections of the Companies Act 2013, Clause 135 has generated the most debate. The Clause 'mandates' spending on CSR to the extent of at least 2% of average net profits during every block of three years for companies above a certain financial threshold.

In its special report titled 'Corporate Social Responsibility: Review of current policies, practices and disclosures' Institutional Investor Advisory Services (IiAS) studied the FY13 CSR initiatives and disclosures of 51 companies forming a part of the BSE SNP Sensex30 and CNX Nifty50. IiAS engaged with N Krishnan, Managing Director, 'Samhita Social Ventures' to develop a framework to evaluate the CSR effort of companies. Read Report >>
Shareholders consistently appeal to boards during annual general meetings to increase the quantum of dividends. IiAS believes their demand is justified.

In its report titled 'Dividends: Companies that can pay more', Institutional Investor Advisory Services (IiAS) analysed the 2012- 13 financial numbers of S&P BSE500 companies. While IiAS believes that the market as a whole can pay higher dividends, it conservatively identified 77 companies – after excluding banks and NBFC's, which can and should pay higher dividends. Read Report >>
Paying the price: Multinationals, Royalty Payments and Minority Shareholders

In the recent financial year 2012-13, royalty and related payments continued to remain elevated for Indian subsidiaries of foreign companies.

In the special report titled 'Paying the price: Multinationals, Royalty Payments and Minority Shareholders', IiAS analysed royalty related data of 25 companies. IiAS has also developed the "IiAS Royalty Signal," which classifies companies on the basis of how increased royalty payments have impacted company financials Read Report >>
Dividend: Room for larger payouts:

Finding that companies are sitting on a higher cash pile than before, IiAS has said company managements must remember that the cash is not theirs to keep, and needs to be returned to shareholders as dividend. IiAS has asked companies not just to spell out their dividend policy and have these ratified by shareholders, but to detail what cash retained will be used for and have this voted upon by shareholders as well. Read Report >>
Executive Remuneration: Time to rein in the rewards:

At a time when the global markets plagued by a prolonged slowdown are stumbling towards recovery, public scrutiny and criticism of high executive remuneration is getting sharper. In India, while there have been some isolated cases of discontent regarding executive pay this umbrage is nowhere close to the 'say-on-pay' movement that is rocking US and Europe. Read Report >>
Royalty payments and minority shareholders:

There has been a steady uptick in the amount of royalty remitted by Indian MNC's to their parents, since such payments were freed up by the Government of India in December 2009. The data compiled for 25 of the highest royalty paying companies indicates that since the rules have been eased, multinationals companies have not behaved responsibly: They have been impatient, constantly pushing up royalty with little in the performance to justify this increase. Read Report >>
Auditor Rotation: A formality or a fiduciary responsibility?

IiAS analysis of 286 listed companies (SENSEX, NIFTY, BSE200, CNX200, NIFTY mid-cap and all F&O stocks) reveals that 25% have had the same auditor for more than ten years. This includes 56% of the SENSEX companies and 40% of the NIFTY companies. With the tone being set by the new Companies Bill, our view is that audit committees should strictly abide by the mandatory rotation clause. Read Report >>
Auditor Rotation: No value for vintage

IiAS’ analysis of the top 200 listed companies reveals that more than 60% of these companies will need to change their auditors over the next three years to comply with the recently notified section 139 of the Companies Act 2013. While the Act provides a 3-year window to comply with the provisions, companies must be forward-looking and start complying immediately. Read Report >>