Monday, October 2, 2023

CFA Capital Market Awards recognizes Investor Relations as key to building value in listed entities

With the ninth annual CFA Capital Market Awards – which recognize and reward professionals who have established benchmarks for the advancement of domestic capital market participants – scheduled to be held in June this year, the organizers of the event, CFA Society Sri Lanka, take a look back at the major entities feted at the 2021 edition of the awards.

Last year’s CFA Capital Market Awards were presented under five categories including Best Investor Relations Team, where the objective is to recognize companies that practice investor relations (IR) to interactively communicate with the investor community, and encourage best practices in IR that are supportive of informed and efficient capital markets.

In 2021, Sunshine Holdings was conferred the Gold award for Best Investor Relations Team, with Group Managing Director of Sunshine Holdings Vish Govindasamy commenting: “At Sunshine Holdings, we consider IR to be a key responsibility of a listed entity, which helps build confidence among investors, analysts, and the larger investing public. We commend the CFA Society Sri Lanka for recognizing and rewarding this role in the CFA Capital Market Awards, and for promoting more companies to adopt good IR practices.”

“We are honored to have received the Gold award in 2021 and have been encouraged to improve our practices over the years through the valuable guidance they have provided via the award process,” he adds.

See the source image

Sunshine Holdings has embraced the concept of responsible entrepreneurship, gradually building up the governance process, and going on to set up an IR function with the aim of better communicating its financial standing to shareholders and the broader public.

“We had a unique problem in that we were relatively unknown in the market, and as a result, suffered in terms of value recognition. The IR function was a key tool that we used as part of solving that problem in tandem with the overall objective of creating value,” reveals Hiran Samarasinghe – Head of Strategy at Sunshine Holdings.

To this end, Business Analyst at Sunshine Holdings Nilakshi Morage discloses that “in April 2014, our market cap was around Rs. 4.4 billion, whereas by end of April 2022, it stood at Rs. 15 billion, while keeping in mind that the market is in a downtrend right now. In January 2022, it reached around Rs. 30 billion as well.”

Samarasinghe adds: “That is the value recognition we have achieved. We were always undervalued as the stock was identified as a plantation company and allocated plantation valuations. But we over communicated to tell our story in the healthcare and consumer space. And in the last upcycle, we saw investors recognizing the value of the stock.”

Among the main challenges encountered by Sunshine Holdings at the implementation stage was a lack of clarity on what could be classified as sensitive and non-sensitive information internally. And with its IR function being at a nascent stage, not many analysts were in a position to provide stock coverage on Sunshine Holdings. Nevertheless, both internal and external parties are now aware of what to expect, with approximately eight brokerages covering the stock with full initiations, as opposed to just one in 2014.

Samarasinghe states that it’s also important to ensure CEO participation in the process, as it elicits more trust from analysts, who prefer to hear from a chief executive who actually runs the business, adding: “At Sunshine Holdings, we do things differently compared to others by providing access to all CEOs.”

Speaking of how IR in listed entities can improve, he notes: “There needs to be a greater push from the investors, while there is also a need for improved financial literacy for the larger investing public to grasp what is being communicated by investor relations.”

His advice to companies looking to establish IR is to engender a paradigm shift in the thought process when it comes to handling the funds invested in the company by public investors. Such responsibility should be embedded in an organization’s core values.

Samarasinghe elaborates: “It’s not merely about gains in the share price, as public investors would also like to know how the company is using their funds in a responsible manner. You can then build the process, with technology now available to make it easier.”

Kirana Jayawardena – Business Analyst at Sunshine Holdings – also explains the best way to go about setting up an IR function, stating that “at the inception, it’s important to take a gradual approach and then once you start to see the results, have dedicated teams working on the function. It should be a step-by-step implementation and you can’t expect things to happen overnight.”

Having IR in place would prove particularly helpful to a company in times of volatile market conditions. To this end, Samarasinghe affirms that “the goal is to build long-term sustainable value for shareholders, and a key part of that is the trust and confidence they place in us.”

Furthermore, in terms of attracting foreign investors and external capital, Environmental, Social and Governance (ESG) practices and frameworks are key, according to Samarasinghe, who opines: “It’s definitely important if you’re looking at a global investor base and raising capital internationally, because Sri Lanka is a relatively small market. You have to look beyond.”

Spotlight on CFA Capital Market Awards

The Best Investor Relations Team accolade mainly serves to improve IR standards of listed equities in the local capital markets. Over the years, the feedback received through the CFA Capital Market Awards has been considered vital for award winners, in turn enabling them to implement a number of tangible reforms.

In the case of Sunshine Holdings, this is reflected in its increased frequency of investor calls from bi-annual to quarterly, shifting from physical to online forums in 2019 and thereby providing access to a wider audience. This was followed by accommodating CFA Society’s recommendation of uploading call transcripts, while the team also went a step further to post recorded earnings call videos to the corporate website.

Samarasinghe comments: “It’s important and that is why we’ve differentiated. Moreover, those who couldn’t participate in the forums, or the broader public, can access our YouTube page and follow the story there.”

Looking ahead, he points out that further steps can be taken by CFA Society Sri Lanka to set up a framework for investor relations beyond the basic listing rules, attract larger organizations to list so that overall market valuations may improve, and look at ways of improving literacy levels of the larger investing public given the modern technology and tools available.

He concludes by declaring: “You have to look at the big picture. When larger companies engage in similar value building and IR work, they build trust, and that has a major impact on the market. CFA could also advocate for raising the bar on listing rules for capital markets. In addition, the CFA Society can look at modern ways of getting through to the target audience, reaching out to the retail investor base directly.”

Related Articles


Please enter your comment!
Please enter your name here
Captcha verification failed!
CAPTCHA user score failed. Please contact us!

Stay Connected

- Advertisement -spot_img

Latest Articles

%d bloggers like this: