ET Intelligence Group: There is more than one reason why small investors often fail to make sense of quarterly performance of companies whose stocks they hold. Many corporates – not just smalland mid cap ones but even some of the Nifty and A-group names – find ways to make sure financial numbers either escape the attention of small shareholders or mask the underlying story. While there is nothing illegal about it, such ploys obfuscate a company’s true performance.For instance, large companies are known to share crucial business data like volumes, market share and guidance exclusively with security analysts rather than with investors at large. A leading fast-moving consumer goods (FMCG) company does not disclose volumes on the pretext that it would benefit competitors, even though sharing volume growth is a norm in the FMCG industry.Explanations, too, can be selective. If a higher base or a one-off item adversely impacts the bottomline, it is typically clarified in the communique attached to the results. But rarely does a company point out the positive spin-off from any one-item number or a lower base in the year-ago period. Often, accounting reporting norms are used by managements to their advantage.Recently, a large infrastructure company tweaked the reporting of its order book performance – instead of disclosing domestic order data (which has been normal practice). It now shares only consolidated numbers that includes businesses from overseas market.The change in reporting, one understands, followed a shrinking local order book. It is also a regular practice among companies to post losses arising out of fluctuations in foreign exchange rates to the profit and loss statement in certain quarters while incorporating it in the balance sheet at other times.In August 2012, Schedule VI of the Companies Act was revised, exempting manufacturing companies from disclosing installed capacity and production statistics. Apparently, this was done to “align reporting norms with global standards”.Though such information can be vital for investors, a leading consumer goods company has since then ceased mentioning installed capacity in its annual report.While most companies display the details of their post-results management call with analysts on their website, there are at least seven Nifty companies that do not share the Q&A with analysts. Investors of these companies will have to access analyst reports – a task that is not always easy. To make it worse, the transcript of the analyst call is not made available immediately and is uploaded on the company’s website only after a couple of days. By then the Street discounts most of the information gleaned from the company. “There is nothing unique about this practice.It also happens globally,” said Suruchi Jain, an equity analyst with Morning Star Inc. “If the management call is open to all investors, the smaller investors ask obnoxious questions like why doesn’t the company pay dividends to its shareholders – an informed investor (analyst) would rather know whether the company is in an investment or growth cycle for it to be able to pay dividends,” said Jain. The system functions like this: large investors do business with large reputed brokers because of the latter’s access to corporates. Companies, too, find it easier to share information with the brokerage analysts who are more familiar with the subject and better equipped to handle data.Investor activists, however, look down upon the practice of companies discriminating between institutional and retail investors when it comes to sharing information on financial performance. “There are regulatory norms in India on the lines of the US Regulation Fair Disclosure (also called Reg FD), but companies here are yet to take a serious note of the same,” said Shriram Subramanian, founder and managing director of Ingovern.The notion of fair disclosure implies that no information should be shared selectively with a privileged group of analysts or shareholders. Little wonder then why one of India’s leading manufacturing companies gives large secondary market investors access to its management. The level of interaction depends on the money that would be invested – up to a certain amount of investment, an investor gets to meet the CFO, and beyond that it could be a meeting with the managing director.Certain expenditures like those on advertising, R&D and royalty often go unreported on a quarterly basis. In industries like FMCG, these numbers can be key indicators. Three companies in the 20-member ET FMCG Index do not report ad spend on a quarterly basis.Even the day of announcing results can minimise bad press. Close to 35% of A group companies listed on BSE prefer to announce their quarterly performance on the eve of a trading holiday. Companies do this not only to avert a knee-jerk stock market reaction that follows poor numbers but to avoid adverse publicity.