A regulatory product turns brand tool

This article first appeared in Business India Magazine | Niche Business | Written by Rohit Panchal | May 2014 edition

An annual report sets forth a firm’s vision, values and strategies

For a company, a branding exercise doesn’t happen through marketing and advertising alone. With investors and shareholders in mind, companies use the services of consultancies to reach out to them through corporate reporting as a brand tool as well.

“Every company budgets crores of rupees for advertising each year to reach out to potential customers, but they forget to interact with the people who are already associated with them – the shareholders,” says Arvind Agrawal, founder & CEO, Atherstone Investor Communications Limited (AICL), a consultancy firm specialising in corporate reporting – annual and sustainability reports. “An annual report does just that, it sets forth the firm’s vision, values and operating philosophy, as well as its communication strategy.”

A chartered accountant and company secretary by qualification, Agrawal started AICL in 2006. The largest group of stakeholders it appeals to is the investors. Its clients are companies, which want to be seen as a part of their global peer and have an international look and feel for their corporate communication – as companies planning to go public or have recently gone public.

Various statutory reports and sections that form a part of the annual report and sustainability report are statutory financial section, corporate governance report, director’s report management discussion and analysis (MD&A) and business responsibility report (BRR). There’s not much AICL can do in the financial section, as the template is set by the companies act. Similarly, for corporate governance and the director’s report, though there is no prescribed format, “We format the data differently to make it presentable,” says Agrawal. “We ensure it answers the questions investors and shareholders want to ask.”

AICL does significant work in MD&A and BRR. “We believe MD&A is the heart of the annual report and, therefore, help companies give a structure to make it investor-and reader-friendly.” The non-statutory and non-mandatory section of the annual report is another prominent section that AICL focuses on, helping companies build a story around the year. “We help the company identify a theme, a strategy, around which the report will be woven,” says Agrawal. “Then, we structure the argument into page-by-page discussion.”

AICL services 45 per cent of companies of the S&P BSE Sensex, 25 per cent of the Nifty 50 and a few Indian Fortune 500 companies, including Reliance Industries, Tata Motors, IDBI Bank, Sun Pharma, Zee Entertainment, etc. “Zee being a listed company, it is important to build a corporate brand and AICL helps us put brand communications in perspective,’ says Roland Landers, head, corporate brand, Zee Entertainment. Adds Krishnandu Banerjee, CGM, Corp Comm, IDBI Bank: “It is a branding statement that has not only got the attention of our stakeholders, but was also awarded at Association of Development Financing Institutions in Asia and the Pacific.”

“An annual report is a regulatory product, but, we use it as a brand tool,” says Agrawal. “Typically, the need for good annual report is more acute for listed companies, but, we also work with unlisted companies – some of them being in insurance sector.”

Aiming for a century

The consultancy fee charged by AICL varies from Rs 25 lakh to Rs 1 crore. When asked if this is an additional cost to the company, Agrawal says the bulk of the cost is paper, printing and mailing. Therefore, companies produce two types of reports: a high quality one for large shareholders and brokers; and a basic one with the same content, but less expensive paper and printing. Companies produce a small number of premium reports (for Rs 400-500 each) and a large number of basic reports (for Rs 25-50) because, “companies take shareholders seriously and don’t want to be seen as cutting corners when servicing them”.

Many companies also send their shareholders e-mail copies of the report, which are interactive Websites with videos and images. “I believe, 25-40 per cent of total annual reports,” says Agrawal. “The role of the annual reports has been largely changed by innovations in technology.”

Last year, AICL had done 80 projects and this year Agrawal feels it could go up to 100. He immediately informs that, for AICL, “the number of projects we do is not important, but the quality is”. When asked for the last year’s turnover, he says it is close to Rs 10 crore (without being specific), adding that there is enough potential to grow but the kind of talent required is not available – there are smaller players in the segment but, he says, there is also scope for a large player to do business.