Clause 49 of the Listing Agreement -- Corporate Governance -- Annexure 1C requires companies to disclose in their annual reports, inter-alia, (a) Market Price data: High , Low during each month in last financial year and (b) Performance in comparison to broad-based indices such as BSE Sensex, CRISIL Index etc.
An ingenious practice is adopted by various listed companies to nullify the spirit behind the need for disclosing comparison between company's share price movement and sensex / nifty movement.
Whereas companies dutifully comply with the requirement of disclosure, most of them especially those companies whose share prices declined more sharply than sensex / nifty have chosen to depict the comparative movements in the form of a graph. In a combined graph which shows the movements of both share price and sensex / nifty, Y-axis is calibrated in such a way that the slopes of both curves look similar and thus give a mistaken impression that the share price has moved in tandem with the indices. This impression is created because the Y-axis does not begin at zero value at the origin and same lengths in the Y-axis are used to portray substantially different ranges in movement of share price and indices.
For example, the graph in page 45 of the 2008-09 annual report of Cholamandalam DBS Finance Limited gives a distorted appearance of "in-tandem" movement though the fall in Sensex was only about 35 % whereas the decline in share price was as high as 85 %
This matter was taken up with SEBI as early as July 2009. Response is still awaited.
An ingenious practice is adopted by various listed companies to nullify the spirit behind the need for disclosing comparison between company's share price movement and sensex / nifty movement.
Whereas companies dutifully comply with the requirement of disclosure, most of them especially those companies whose share prices declined more sharply than sensex / nifty have chosen to depict the comparative movements in the form of a graph. In a combined graph which shows the movements of both share price and sensex / nifty, Y-axis is calibrated in such a way that the slopes of both curves look similar and thus give a mistaken impression that the share price has moved in tandem with the indices. This impression is created because the Y-axis does not begin at zero value at the origin and same lengths in the Y-axis are used to portray substantially different ranges in movement of share price and indices.
For example, the graph in page 45 of the 2008-09 annual report of Cholamandalam DBS Finance Limited gives a distorted appearance of "in-tandem" movement though the fall in Sensex was only about 35 % whereas the decline in share price was as high as 85 %
This matter was taken up with SEBI as early as July 2009. Response is still awaited.
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