RHP-type disclosures can make annual reports more useful

ET Intelligence Group: The initial public offering of a company It is often the best time to study and get to know that company thoroughly because the smokescreen prospectus (Fast) presented at the time of the IPO requires full disclosure of every aspect of the business.

There is a reason for such disclosure to be mandatory as part of the annual report, as it will allow existing and future companies to stakeholders to better assess the risk of investing in the company.

Through the RHP, a company that is going public provides comprehensive information on a number of Risk factors and operational aspects of its business – internal and external risk factors, proportion of revenue earned from top ten customers, estimated market share in the industry, segment-wise details of product recalls or returns (as a proportion of revenue), quantity of raw materials sourced from top five suppliers, sales distribution by region, level of insurance coverage, proportion of raw materials imported from strategic markets such as China, and comparison with peers on operating parameters such as revenue growth, operating margin, return on equity and debt-to-equity ratio.

Currently, publicly traded companies must disclose their Financial performance each quarter and the annual accounts and management report as part of the annual report after the end of the financial year.

While the annual report contains the director’s report and management discussion and analysis, these do not necessarily always quantify all the key risk factors, both internal and external, for shareholders. Nor does it necessarily include a comparative analysis of the company’s performance relative to its peers.

The Corporate Responsibility and Sustainability Report that seeks to provide added value ESG Disclosures Currently it only applies to the 1,000 largest companies.

When it comes to non-mandatory Disclosures In the annual report, these figures often vary from one company to another. Large companies (usually industry leaders) tend to disclose them more comprehensively than their smaller counterparts.

However, a large amount of information that is required to be disclosed in the RHP can easily be requested from companies to disclose in their annual reports.

This is especially useful for older companies that have been publicly traded for many decades. Their IPO documents, even if available online, would not reflect the current business conditions of the company.

According to data compiled by the ETIG database, among the companies listed on the London Stock Exchange, 2,181 companies have been listed for at least two decades. For these companies, annual disclosure of information related to their market share, supply chain, raw material sourcing, customer concentration, supplier concentration and comparison with their peers in terms of operational parameters can be very useful for their stakeholders.