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Institutional EYE

Commentary on Corporate Governance Issues

The Last Minute 2016-17: The scramble continues

In the fifth edition of IiAS’ study on timelines of Annual General Meetings (AGMs) of S&P BSE 500 companies, we continue to conclude that there is a correlation between performance and the timing of the AGM: the later the AGM, the weaker the performance. IiAS believes corporate India can improve, and must be better structured to close their books, publish their annual reports, and hold their AGMs sooner. The Kotak Committee on Corporate Governance has taken the first step in addressing this by advocating that the top 100 listed companies by market capitalization hold their AGMs within five months of the financial year-end. If accepted, 28 of the top 100 companies which held their AGMs in September 2017 will need to advance their AGMs to comply with these provisions.

The 2017 season: September continues to be the busiest​.

The month of September remains the busiest period for both corporate India and investors, a trend unchanged over the past five years. In FY17, 477 of the S&P BSE 500 companies reported a March year-end. 70% of these companies held their AGMs in August and September, with a little over half of these holding their AGMs in September 2017.

September AGMs are usually concentrated in the last two weeks. This inconveniences not just investors, but may also prevent directors serving on multiple boards from attending meetings for all of their companies.

Correlation with financial performance

The trend largely continues for the fifth year: companies holding their AGMs in September have the lowest median return on equity compared to the others.

The FY17 trend is an exception on account of public sector banks, which largely hold AGMs in June, having low ROEs in FY17 due to write-offs or provisioning for their non-performing loans. As a result, the median ROE of 10.8% in companies with June AGMs was lower than the median ROE of 11.4% for companies with September AGMs.

That the poorly performing companies hold AGMs in September is further corroborated by the fact that of the 54 companies that reported losses in FY17, 28 held their AGMs in September.

Debunking the ‘large and complex’ myth

IiAS contends that companies’ rationale of delaying holding their AGMs because of their large and complex size is untenable. By virtue of the being an S&P BSE 500 company, the businesses are naturally large and sufficiently complex. Yet, 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 that those with AGMs in August and September. State Bank of India Limited held its AGM in June 2017 while Reliance Industries Limited held its AGM in July 2017. Therefore, size and complexity cannot be an impediment in holding AGMs sooner.

Regulatory changes have not affected timelines

Two major regulatory changes – implementation of Ind AS accounting standards and mandatory auditor rotation - have not affected the distribution patterns of AGMs held in 2017, indicating that the scheduling of AGMs is probably just a question of intent. 416 companies out of 477 companies in the S&P BSE 500 with a March financial year end had to implement Ind AS accounting standards starting in FY17. Further, the window period for compliance with mandatory auditor rotation after two terms of five years each, defined by the Companies Act, 2013, expired in March 2017. Companies that had vintage auditors had to necessarily rotate them on expiry of the window period. Neither of these changes seem to have affected AGM scheduling.


Corporate India continues to delay holding its AGM. Perhaps, companies are hoping that the conversation with its shareholders over weak performance may well be mitigated by a better first quarter performance. Or, it may just as well be that companies are just negotiating a bit too much with their auditors. But, if 30% of S&P BSE 500 companies, encompassing multiple sectors and sizes, hold AGMs within four months of the financial year-end, there is no reason why the other 70% should not be able to do so.

Several countries including South Korea, Thailand, Italy, Singapore, Japan, have a shorter timeline as compared to India for company AGMs to be held. The Kotak Committee on Corporate Governance too has recommended a reduced timeline for the top 100 companies by market capitalization to hold their AGMs by 31 August 2018, i.e. within five months from the end of the next financial year. If ratified, 28 of the top 100 companies which held their AGMs in September 2017 will need to advance their AGMs to comply with these provisions.

Corporate India has done well on several governance agendas: this is one more that it needs to address.

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