Tata Motors’ decision to switch to quarterly reporting of sales data from the industry practice of doing it on a monthly basis has not gone down well with the company’s investors and proxy advisory firms.
They argued this dilutes the disclosure norms and hides critical information about the company from shareholders and analysts which can have a major impact on the company’s stock movement.
Listed automobile manufacturers in India follow the practice of monthly disclosure of volumes.“If the rest of the companies can do it, why Tata Motors can’t? This makes it seem like they have something to hide,” said Amit Tandon, managing director, Institutional Investors Advisory Services, adding, the move by Tata Motors could lead to insider trading as some stakeholders in the company would have data, while others don’t. “How will you ensure it doesn’t lead to insider trading?”
In an email, a Tata Motors spokesperson stated it is in continuation with the firm’s “drive to focus on retails and drive ecosystem viability.” The company stopped reporting the monthly wholesale number from April; for most auto firms, this figure was zero, owing to the lockdown. Tata Motors will instead report quarterly wholesale and retail numbers.
The spokesperson stated: “In the current volatile scenario, we believe this helps us make the right long-term decisions for the business, helps our dealers to focus on serving customers, and helps our investors to focus on long-term drivers of the business and avoid needless short-term volatility.” But, proxy advisories are not convinced. “Let investors decide how they want to interpret the data. As an investor, I would want the information to be disclosed as it was being done earlier,” said J N Gupta, co-founder at Stakeholder Empowerment Services. Unless the firm has a cogent reason, it shouldn’t steer clear of the industry practice, Gupta added.
According to Mahantesh Sabarad, head, retail research, SBICAPS, the move will lead to speculation. “The markets will appreciate if Tata Motors follows the standard of disclosures similar to other automobile firms. Else, information asymmetry often leads to speculation.”
Another analyst at a domestic brokerage dubbed it "bad corporate governance". "One didn’t expect this from Tata Motors." The move by Tata group’s flagship would also impact the collation of the monthly sales data by industry body Society of Indian Automobile Manufacturers (Siam). Siam has been in talks with Tata Motors on monthly data submission, according to sources.
Tata Motors is the leader in the commercial vehicle market with more than 60 per cent share. Therefore, if the company doesn’t disclose monthly data, arriving at total industry volume will be a challenge, said analysts.
“No matter how large or small a player you are, non-submission of monthly data can upset the entire data compilation exercise done by Siam,” said a source.
Auto companies in India declare monthly sales data on the first working day of every month. Subsequently, Siam compiles manufacturer-wise data and releases segment volumes before the 15th of every month.