The Securities and Exchange Board of India (SEBI) (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) requires listed companies to disclose material events which have a bearing on their performance or operations under various provisions.

In the wake of coronavirus (COVID-19), SEBI has observed that many of the listed companies are providing disclosures primarily relating to shutdown of operations owing to the pandemic and resultant lockdowns while some have provided information relating to actions taken towards sanitation, safety, etc. However, a very small number of companies have disclosed the financial impact of the pandemic.

Accordingly, on 20 May 2020, SEBI issued an advisory and encouraged listed companies to evaluate the impact of the COVID-19 pandemic on their business, performance and financial results, both qualitatively and quantitatively, to the extent possible and disseminate the same.

SEBI has recently advised listed entities in India to make suitable disclosures regarding the financial impact of Covid-19 on its operations as part of its disclosure obligations to shareholders and investors.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) require listed companies to disclose material information on account of natural calamities or force majeure events that result in ‘disruption of operations of any one or more units or divisions of the listed entity’ based on the listed entity’s materiality policy and the relevant LODR Regulations.

While the ensuing lockdown and disruption caused by Covid-19 is dynamic and unpredictable, SEBI has felt that such events can lead to distortions in the market if there are gaps in the information being disclosed and available about the operations of a listed entity during the pandemic. There is therefore a need for key information about the impact of the pandemic on the company and its operations to be made known to investors and stakeholders in a timely and cogent manner.

While many listed entities have made disclosures under the LODR Regulations, primarily relating to shutdown of operations and actions taken towards sanitation relating to Covid-19, very few entities have disclosed the financial impact of the pandemic. Taking a cue from listed entities around the world that have been making fairly detailed disclosures regarding the financial impact of the pandemic, including that on financial condition and results of operations, future operations, liquidity, assets, demand for products/services etc., the SEBI has issued an advisory on 20 May 2020 (SEBI Advisory) advising listed entities in India to make suitable disclosures relating to the financial impact of Covid-19 on its operations as part of its disclosure obligations to shareholders and investors. Listed companies have been encouraged to evaluate and disseminate the impact of the Covid-19 pandemic on their business, performance and financials, both qualitatively and quantitatively, to the extent possible.

The SEBI Advisory prescribes an indicative (and not exhaustive) list of information that listed entities may consider disclosing, as set out below:

• Impact of the Covid-19 pandemic on the business;
• Ability to maintain operations including the factories/units/office spaces functioning and closed;
• Schedule for restarting the operations;
• Steps taken to ensure smooth functioning of operations;
• Estimation of the future impact of Covid-19 on its operations;
• Details of impact of Covid-19 on the listed entity’s:-
• Capital and financial resources;
• Profitability;
• Liquidity position;
• Ability to service debt and other financing arrangements;
• Assets;
• Internal financial reporting and control;
• Supply chain;
• Demand for its products/services;
• Existing contracts/agreements where non-fulfilment of the obligations by any party will have significant impact on the listed entity’s business; and
• Other relevant material updates about the listed entity’s business.

Additionally, the SEBI Advisory specifically sets out that while submitting financial statements under the relevant provision of the LODR Regulations, listed entities may specify the impact of the Covid-19 pandemic on their financial statements, to the extent possible. Further, as an overarching guideline, the regulator has encouraged listed entities to provide regular updates on any material developments in this regard and to avoid resorting to selective disclosures.

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