IPOs that failed at corporate governance test
Between corporate governance test versus listed BSE 100 peers, there are 50 IPOs that failed in FY16 and FY17.
According to a report, the companies that newly came into stock markets have performed worse in the corporate governance scores besides the larger listed ones.
Likewise, according to the Indian Corporate Governance Scorecard, the companies recently had their initial public offering (IPO). The score reported 54 as against a score of 58 for those listed on the BSE 100.
The average score for these 150 companies was 61. The BSE, the International Finance Corporation (IFC), and Institutional Investor Advisory Services India (IIASI) jointly developed the study. The study entitled “Stability despite headwinds” examined 150 BSE-listed companies. Here, 50 IPO companies made into the list between April 2015 and March 2017.
Only three IPO companies could make it to the ‘good’ category with scores between 60 and 69. The three companies, namely, ICICI Prudential Life Insurance, Narayana Hrudalaya, and Syngene International. Also, 37 could make themselves rank as ‘fair’ with a score of 50-59. Similarly, 10 as ‘basic’ with a score below 50.
The score considers the treatment of the shareholders, disclosures, transparency, and role of the board and stakeholders.
IPOs that failed Institutionalized Governance
According to the report, this issue continues to prevail in IPO companies. However, these companies need to institutionalize governance practices. Besides, in some of the companies, severe issues were reported by the auditors. As a result, it said that auditors’ concern on the financial statement of these companies has surged to 32% from 24% in 2018.
While in BSE 100, it has dropped to 25% in 2019 from 35% in 2018. The institutionalization of governance had a greater impact on the larger listed companies.
However, the lowest scores grabbed the state-run companies amidst different promoter groups in the BSE 100. Subsequently, they scored 52 in comparison with 60 for private-led companies.
The study stated that lack of ample independent board representation and transparency on issues, namely related party transactions remained among the reasons that said on the governance score of public sector companies.
The highest score 63 secured by Multinational companies, followed by widely-held companies at 62.
According to the report, the past 12 to 18 months for corporate India noted difficult. Consequently, with slow economic growth, achieving business ambitions also-ran stretching managements with a few short-term fixes. This led to a lower CG (corporate governance) score.
Also, the report said that around 41% of the larger listed companies have a well-equipped board with decent skills as against 26% for IPO companies. It said that only 8 BSE 100 companies and one IPO company published board advancement plans.
Above all, Cipla, Dr. Reddy’s Laboratories, and Tata Power include the leadership category among the BSE 100. They secured a score of 70.