Compliances pertaining to revised market capitalisation as on December 31, 2024 –SEBI (Listing Obligations and Disclosures Requirements) Regulation 2015
Introduction
Securities Exchange Board of India (SEBI) had vided its amendment notification dt: May 17, 2024, amended sub-regulation (2) of Reg 3 of SEBI (Listing Obligations and Disclosures Requirements) Regulation, 2015 (‘LODR’). Regulation 3 provides for applicability of LODR to entities who have listed various types of securities. In this write up we shall check compliances that a listed entity needs to do in the context of LODR amendment May 17, 2024.
Pursuant to clause (a) and (b) of sub-regulation (2) of regulation 3 of LODR every recognised stock exchange shall at the end of calendar year December 31, 2024, prepare a list of entities that have their specified securities listed based on their average market capitalisation from July 1 to December 31[1]. It further states that the relevant provisions that become applicable to a listed entity based on average market capitalisation for the first time, the listed entity would be required to comply within a period of three months or beginning of immediate next financial year whichever is later.
So based on market capitalisation as at the end of December 31. If an equity listed entity becomes part of top 500 companies for the first time (earlier, it being part of top 1000) then it will have to comply with the compliances applicable for top 500 companies within a period of three months from December 31or start of next financial year whichever is later.
Listed companies having financial year beginning 1st April, will have to comply with the compliances applicable for top 500 Companies as specified under SEBI (LODR) on or before March 31.
Compliances applicable to listed entities based on market capitalisation are quoted below:
Listed entities coming into a particular market cap for the first time and are required to comply with certain compliances viz appointment of Independent Women director, minimum director to be six directors, constitution of risk management committee needs to be done within 6 months.
Listed companies need to take concrete steps to avoid SEBI (LODR) non-compliance.
ESG and BRSR compliances for FY 2025-26.
As per SEBI circular dt.: 12 July, 2023[2] read with reg. 34 of SEBI LODR top 500 companies as per market cap on 31st December 2024 are required to put in place systems for compliance with BRSR core during the period of three months ended March 2025 and submit report on BRSR core in the annual report for financial year 2025-26.
Listed companies that are coming under the purview of top 500 companies as per market capitalisation for the first time as on December 31, 2024, shall get 3 months or until the next financial year, whichever is later. During these three months listed companies would be required to put in place systems for compliance with applicable regulations of SEBI LODR incl. BRSR core. BRSR core focuses on performance of listed companies on specific Key Performance Indicators pertaining to certain BRSR principles. These nine KPIs are pertaining to Green House Gas (‘GHG’) emissions, water footprint, energy footprint, enhancing employee wellbeing, gender diversity, enabling inclusive development, fairness in communicating with consumers, openness in business and waste management.
To comply with BRSR core principles listed companies need to have proper mechanisms in place to compile accurate data which shall then be disclosed in the BRSR core. The standards for all the above BRSR core parameters are stated in annexure 1 of the circular[3].
It needs to be further highlighted that top 500 listed companies as per market capitalisation as on December 31, 2024, are required to attain assurance for the above-mentioned KPIs[4]. Further SEBI has vided its circular dt: July 12, 2023, has also mandated top 500 listed companies as per market capitalisation as on December 31, 2024, to give disclosures of compliance with KPIs by its value chain partners. The first task that companies need to do is to identify its upstream and downstream value chain partners.
A value chain partner means an entity or a person who contributes to the company’s sales or purchases. SEBI has stated that the company needs to disclose only its top 75% of its upstream and downstream partners.
After identification the entity needs to arrange meetings with its value chain partners and make sure that they have proper tools and mechanisms in place to disclose accurate data regarding the KPIs mentioned above.
Conclusion
In conclusion, listed companies must prioritize and ensure full compliance with all relevant regulations within a three-month timeframe to mitigate risks, maintain investor confidence, and uphold their legal and ethical obligations. Timely adherence to these compliance requirements is crucial for safeguarding the company’s reputation and long-term sustainability in the market.
Reference
[1] https://www.nseindia.com/regulations/listing-compliance/nse-market-capitalisation-all-companies
[2] https://www.sebi.gov.in/legal/circulars/jul-2023/brsr-core-framework-for-assurance-and-esg-disclosures-for-value-chain_73854.html
[3] ibid
[4] ibid
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Author: Mr. Tanmay Gogate (consultant) and Vallabh Joshi (senior manager) with MAKARAND M. JOSHI & CO., Company Secretaries
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