an understanding of financial communications and investor relations
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©2011 06.29.2010 | P1
AN UNDERSTANDINGOF
FINANCIAL COMMUNICATIONS &
INVESTOR RELATIONS
BY JAIDEEP SHERGILLCEO & HEAD FINANCIAL COMMUNICATIONS ASIA Feb 2012
©2011©2011
INDEX
Financial Communications – An Understanding
Asia Offering
PR for Financial Firms- Listed Corporates, IPO & M&A, BFSI
Investor Relations
Your Role In Financial Communication
Case Studies
©2011 06.29.2010 | P3
FINANCIAL COMMUNICATIONS -
INTRODUCTION
©2011
Financial Communicati
on
PR - Financial Firms
BanksInsurance
Mutual FundsNon Banking Financial
CompaniesBroking Firms
PR – Listed Corporates
Corporate EarningsCorporate GovernanceStatutory Compliance
Disclosure PolicyInvestor Relations
PR – Financial Deals
Equity Capital MarketsIPO/ FPO/Rights
Debt Capital MarketsNCD/FCD/Bonds
Transaction Communications-M&A
Financial Communications – An Understanding
©2011©2011
Transaction Communications
• M&A – friendly and contested, international and domestic
• Divestitures / spinoffs• Recapitalizations• Post-acquisition / integration
programs• IPOs & other listings
Private Equity / Hedge Funds
• Strategic positioning for alternative investment firms
• Media relations• Transaction support• Portfolio company support
Corporate Communicationsand Positioning
• Integrated programs, including:
• Media relations• Thought leadership programs• Investor relations• Internal programs• Government affairs
Special Situations andCrisis Communications
• Crisis communications• Litigation support• Regulatory matters• Bankruptcies / restructurings• Investigations• Senior Executive changes• Product recalls
Corporate Governance
• Proxy contests• Shareholder activism• CEO succession planning• Board accountability
Financial communications- Asia Offering
Investor Relations / Disclosure
• IPOs and other listings• Complex disclosures• Quarterly and annual
reporting• Roadshow presentations• Financial community
intelligence• Investor targeting
5
©2011 06.29.2010 | P6
PR FOR FINANCIAL FIRMSCORPORATES / IPO & M&A/ BFSI
©2011
PR For Financial Firms – How It Is Different
Requires in-depth understanding of the Company, its Business and the environment it operates in
Differentiated Audiences require specialized information
Customers are investors and not consumers
Regulated business environment (Regulatory/Government Bodies)
Regular update of information required with continuous changing Business environment
Financial crisis & Scams- Create a turbulent market of uncertainty (Impacts the company’s overall Growth Story & Fund Raising capabilities)
©2011©2011
How can the stakeholders validate the financial
information?
Analysis
• Financial statements & Results
• Management forecast
• Key performance indicators
How is it possible?
Supply of Financial Information
Timely…Qualitative…Adequate…Reliable…Accurate…Indicative
Telling a Financial Story To The Stakeholders Who Will Validate It - Listed Corporates
©2011
PR For Financial Firms – How It Is Different?
Mutual Funds & Equity Traded Funds
Understanding of Regulatory & Communication Guidelines
differs from each country.
Philosophy of Fund Managers and Mutual Fund Companies. Value Investor : Looks for stocks with potential long term growth
Growth Investing- Buy low and sell high
Blend investing – Is a combination of the above two
Aggressive growth Investing – High Risk, High return
Momentum Investing – Catch a good script and ride the wave to exist with a medium to
good return
Peer Group & Media trends mapping & products – Its about
building the brand.
ETF are the next big funds as they are investing in Gold and
give excellent return
©2011
Need timely communication at the time of deal.
Knowledge of regulation governing an IPO or M&A is important and is
regulated by securities regulator, the China Securities Regulatory
Commission (CSRC).
Communication needs to be in line with regulators and approved by
lawyers as is a practice all over the world ie IPO listing on LSE or in China
Fresh issue of equity / debt requires communications to attract investors –
we need to tell a story on why we are raising funds, growth of industry
and our plans in order to make the story attractive
Mergers & Acquisitions, Price - Earnings, Venture Capital deals need
planned & strategic communications
Valuation of the business & company is the key communication here
Transaction Communications- IPO & M&A
In Touch : Investment Bankers, Corporate Lawyers, Corporates who are your clients, Consultant Firms; i.e. Ernst & Young, PWC,
KPMG, Deloitte Touche Tohmatsu , Boston Consulting Group. Every Region will have top 4 names.
©2011©2011
Communication for BFSI Sector
Banking & Financial Services Insurance
Commercial Banks: Government Banks Private Banks MNC Banks
Capital Market Banking
Wealth Management
FOREX Management
Asset Management
Hedge Fund
Management
Stock Broking –
Intermediary
Private Equity Funds
Venture Capital Funds
Angel Investment
Financial Litigation
Insurance Advisory
Underwriting Re-insurance
Life & General
Retail Banking Institutional
Banking Investment
Banking
Business Segmentation
©2011©2011
Communication Imperatives
Key Triggers for Communication Needs for BFSI: Fast growing sector – Reach beyond urban markets, semi-urban & rural
as well Expanded service basket amid fierce competition Product & services differentiation – Key positioning required Geographical challenges – product & service distribution Mass-scale consumer orientation required on real-time basis Growing dependence on facilitators including communication counsel Complex compliance requirements & adherence to regulatory
framework
Communication Areas
New products, services & geographical expansion Product distribution Product innovation Operational flexibility – Peer comparison Infrastructure capabilities Financial reporting & regulatory compliance – Assets/Liabilities Quality,
Governance, etc
Communication: Strengthening Business Relationships & Quality of Services
Need to leverage these areas
©2011 06.29.2010 | P13
INVESTOR RELATIONS
©2011
Why Do Corporates Need Investor Relations?
To appropriately convey performance to
shareholders & keep co-owners informed
To support corporate positioning
Clear communication helps to secure fair
valuation & market company’s stock
To build corporate reputation, trust and credibility
To create information level playing field
To unlock Value
Good corporate citizenship
Investor relations (IR) is a set of activities which relate to the ways in which a company discloses information required for regulatory compliance and good
investment judgment to bond and/or shareholders and the wider financial markets.
©2011
INVESTOR RELATIONS
Finance
Securities Law
Compliance
Marketing
Communications
Investor Relations enables the most effective two-way communication between
a company, the financial community and other constituencies, which ultimately
contribute to a company's securities achieving fair valuation.
What Does It Consists Of?
©2011
Components Of Investor Relations
Consistent proactive communication
Quarterly result updates / press release
Important corporate developments
Choice of appropriate outreach tool
Analyst meet Vs conference call
Facility visit
One-to-one meetings
Regular feedback
Constant touch with investing community
©2011
Consistency & transparency of Investor Relations
Understanding of Markets & Valuation
Business knowledge / insights from team
Quality of one-on-one meetings / conferences
Quality of service from Investor Relations team
Important Criteria For Investor Relations
©2011
Business Knowledge / Insights From IR Team
Understand the Company, Industry
Products and Services you bring to the Market
Markets you compete in
Demand drivers, market opportunity
Growth characteristics, operating metrics, segment
profitability
Keep track of latest developments in the Company
©2011
Activities Under Investor Relations
One-on-One MeetingMost analysts prefer having a direct update from the company’s top management. This helps them to understand the company better and can also come up with research reports.
ConcallsIt is essential to communicate the investor community during quarter/annual results of the company. Through this, the company can address the current and future plans and achievements of the company. It is the most preferred mode as it is economical, easy to access and can be reached to a large number of people in a short time frame.
Bridge-Building MeetingIt is advisable to conduct these meetings as it provides an opportunity to introduce your company to various financial institutions and advisories. This also helps in establishing strong relationships with the target groups.
Analyst MeetingThrough this, the management of the company can interact with the entire research analyst community in a span of three hours. However, it is always advisable to conduct these meetings once a year as the costing for these meetings is generally high.
©2011
Quarterly Result Planning
Audit Comm. Meeting
Board Meeting before 12 noon
Intimation to stock exchanges
Media Briefing
Uploading results on the website
Analyst Briefing
Preferably Early in the day
Within 15 minutes of conclusion on board meeting
One-to-one Select briefing
Concall Analyst meet
©2011 06.29.2010 | P21
OUR AUDIENCE
©2011
Target Audience
Sell-side Analysts : Analysts who sells equity ideas
mainly from Stock Broking Houses & Investment Banks
Buy-side Analysts: Analysts who supports fund
managers from Various Funds; PEs, Etc..
Fund Managers: manages different portfolios of funds
Portfolio Managers: individual portfolio managers
mainly provides by PCG/HNI segments of broking houses
and investment banks.
Financial Media : media reporting about financial
performances and businesses.
©2011
Sell-Side Analysts - Motivation
Sector specialists with Institutions like Asset Management
companies
Research prominent companies within the sector with an
objective to make a recommendations
Recommendations could be – Buy, Sell, Hold, Outperform,
under-perform, market performer, overweight, underweight
Motivation is to identify stocks which have potential to go up
further
Essentially a cost centre, exist to generate higher broking
income
©2011
Dealing With Sell-Side Analysts
Our Objective
Help them make correct assessment about revenue and profitability
Create consensus about strategy and future outlook
Gain positive endorsement
Receive feedback
How do we deal with them?
Educate about the sector
Educate about the company
Help them make correct assumptions
Remove wrong notions
Continuous update
Do not provide opinion on their projected numbers
©2011
How Do They Work?
Spend lot of time with the company
Understand growth triggers and value drivers
Make assumptions
Ultimately interested in projecting EPS for the next two years (Net
Income – Dividends divided by Average outstanding shares)
Use different valuations techniques and justify recommendation
Finally what matters….?
All the sell-side analysts have positive recommendations
No major discrepancies in their estimates, recommendations
©2011
Some Of The Top Institutions In APAC Region
Today’s financial marketplace is dominated by institutional investors, particularly the new breed of professional investor represented by hedge funds (proprietary investment partnerships). Consequently, increasing
institutional ownership can be one of the most important catalysts to sustainable share price appreciation.
©201127
Summary Of Attributes Valued By Investors
Valued by Media/Investors/Analy
stsSteps we can take
· Transparency· Better qualitative and quantitative disclosure
standards in Annual Reports / Financial Statements
· Timeliness of Communication
· Be the first one to deliver the news “Good” or “Bad”
· Frequency of Communication
· Regular Analyst Meets / Conference calls post results announcements.
· Management Credibility
· Create track record of corporate governance
· Strategy · Articulate your differentiation vis- a- vis local
and global competition
· Availability of research
· Encourage research analysts to print research on the company.
· Ability to face “What if” questions
· Don’t prepare perfect answers. Perfect answers may not be the right answer.
· Demonstrate awareness and willingness to deal with the situation
©2011 06.29.2010 | P28
YOUR ROLE
©2011
Establishing Financial Communication Processes
Enhancing / updating corporate website for better investor interface
Create mailing list of buy-side and sell-side analysts
Establishing a Disclosure Policy
Keeping messaging consistent over time and across spokespersons
Create a mechanism for responding to media & investor queries
Establishing Standard Operating Procedures (SOP)
Work on key messages
Identifying spokespersons for different constituencies i.e. media, analysts, fund managers
Establishing calendar of events
©2011
Quality Of Service expected from Financial Communication Team
Domain Knowledge ie. Banking, Non Banking, Insurance, Mutual
Funds, Equity Markets/ Financial Markets & listed companies and
their sector ie Steel, Wind Energy, Power etc
Investor Relations function must demonstrate integrity,
leadership and ownership
Be Accessible and provide access to Management based on
knowledge
Place a high priority on response time
Anticipate issues, be prepared to respond to current events
Keep expectations balanced
©2011
Key To Success In Financial Communication
Your Commitment & involvement – Be see as an advisor
Consistent and credible - communications
Clearly articulated, credible business strategies
Open discussion of financial results / expectations
Regular contact with client & financial community ie.
Investment Bankers, Research Analyst, Influencers,
Brokers.
©2011©2011
Cases - Highlight
©2011
Service Period: March 2009 ~ December 2010 Client: Seoul Metropolitan Government (Invest Promotion Division) Objective: To position the City of Seoul as Asia’s next Financial Center and
help increase investment attractiveness of its financial industry among international investors
Activities:– Established new English information kits and distributed to financial
leaders and professionals (direct marketing)– Produced creative promotional video, which shown at international
conferences/roadshows– Uploaded the video clip on YouTube and created linked banner ads at
FT.com, WSJ.com, Economist.com and BBC.co.uk – Created and sent E-Newsletter ‘Seoul Finance Premium Quarterly’,
including vision of SFC, contribution of a foreign CEO in Seoul, to 500 local & overseas financiers
– Arranged speaking opportunities at large financial seminars to secure opportunities for on-site promotion of Seoul City
– Co-planned and provided on-site support for Seoul’s overseas investment roadshows held in Hong Kong, Singapore, and London
– Generated positive coverage on SIFC both in domestic/international media Results:
− Seoul ranked the world’s 16th most competitive financial city by the 9th Global Financial Centres Index
− Promotional video clip won Grand Prize at Korea Digital Media Award and Gold Winner at 2010/2011 International MERCURY Awards
- Awarded the Gold Prize in PR Awards hosted by Korea Association of Advertising & Public Relations
The Banker (2009)
Seoul International Financial Hub
©2011
Citigroup Global Markets Korea Securities (CGMK)
Service Period: Feb 2008 ~ Mar 2010 Client: Citigroup Global Markets Korea Securities Objectives: Build CGMK’s corporate profile as a leading
player in the Korean ELW and structured financial products market
Activities- Media campaign for CGMK’s ELW business launch in
Korea- Strategic media relationship programs, including
roundtable and educational workshop- Speaking opportunity arrangement in industry-
relevant conference- Publicity – by-lined articles, press releases, interviews
Results- Helped the company’s successful news business
launch and settlement in Korea through well-organized publicity initiatives and promotional activities targeting investors
<Contributed Column> "Take advantage of derivatives as investment option”
19 Apr 2010, Hankyung Business
<Feature article> “CGMK Enters into Domestic ELW Market”
22 Feb 2008, Maeil Business Newspaper
<Interview> “You should be prepared in order to invest in ELWs with high leverage” 20 Mar 2009, Maeil Business Newspaper
©2011
Strategy & Implementation
Strategy for rural India to educate the masses as well
as increasing recall for the brand Western Union
Money Transfer® through road shows, support for
local events, community development initiatives, etc
Constant media updates on new alliances of Western
Union that contributed to increasing network of Agent
Locations
Created local marketing activities supported by
localized PR in rural markets for different states:
Rural Olympics in Punjab
Ajmet Urs – Rajasthan
Deva Shariff – Lucknow
Support for Tibet settlements, among others…
Western Union Money Transfer®
35
©2011
Our Mandate Highlight the synergies between Bharti & Axa and thereby
build a strong platform for the launch of the Company
Popularize Bharti Axa Life Insurance’s corporate launch
campaigns
Position Bharti Axa Life Insurance as “A revolutionary in the
life insurance space”
Project their spokespeople as industry thought leaders
Situation Presence of a dominant public sector player… “LIC”
Media clutter (in terms of brand messaging)
Maintain a respectable ‘Share of Voice’ in category media
spends and industry stories…(Especially being a new entrant
in the market)
Strategy Promote Bharti Axa Life’s dignitaries
Establish MD&CEO as a thought leader in the Insurance space
Develop the second rung of spokes people from the senior
management team as corporate spokespeople
Adopt senior journalists to establish Bharti Axa Life in the
market as one of the leading private insurance player in the
nation
Increase Bharti Axa Life’s visibility in Tier II &III cities
Initiate Non Media Activities
Bharati AXA Life Insurance
36
©2011
ProgramHighlighting the importance of the deal and showcasing the entrepreneurial mindset of Mr. Ajay Piramal among the stakeholders. To provide a humungous platform considering the size of the deals which was split in two separate tranches.
Key Challenges Handling the entirety of the deal and
strategizing it in two separate events
Building a sustained interest from the media as well as the shareholders towards the second part of the deal
Creating a stronger content than the first part of the deal in order to keep the importance of the deal
Results An overwhelming response with a
positive outlook by the media Wires, Publications, Electronic
Channels lining-up to grab the first-cut on the deal
Every known business media house carried the coverage extensively
Acknowledgements on the strategic move by Mr. Piramal poured in from various financial experts
Piramal – Vodafone Deal
Mint
Business Standard
Hindu Business
Line
The Economic
Times
DNA Money
Financial Express
CNBC TV18
ET Now
©2011
ProgramFurthering to Fortis Healthcare’s acquisition spree rumors, it was essential to attract the key media to cover the news exclusively. Known for their entrepreneurial successes, the promoters had to be brought in the fore front of the media to address the stakeholders on the positive developments surrounding the deal.
Key Challenges Rumors about a negative deal
making rounds among the media The Singh Brothers reluctance to
address the media
Results Exclusive interactions covered by
Reuters and other key Financials in India
News covered across Mainlines, Wires, Financials, Electronic Channels, Regional Media etc.
Wide spread response from across the shareholders and Financial Community
Fortis Healthcare – Fortis International Deal
Business
Standard
Financial
Express
Hindu Business Line
Indian Express
Hindustan Times
The Economic Times
©2011
ProgramSensitize Binani’s 3B – The Fiberglass Company acquisition by projecting the same on an international arena. Leverage the acquisition to foster Binani Industries’ positioning in the corporate league. Generate sound bytes to the news and project the Group as a global conglomerate in offing.
Key Challenges A pre-cursor news was already in the
public domain Attracting international media to the
news in European markets Building a strong content to make the
announcement newsworthy for national & international media
Execution of the news considering the different time-zones across the globe
Results Countering the odd time of the
release Activation of media interest on a
larger scale at odd hours – 10 biggest publications of India responding positively
Break-through in TOI, ET, BS, HBL, DNA as lead news
News covered by all Electronic Channels during Prime Time
Journalists queuing up with ‘interactions’ requests
News covered by all Mainlines, Financials, Regional, Electronic Channels, Wires nationally and internationally
Binani Industries – 3B Deal
The Economic Times
Business Standard
Financial Chronicle
Times of India
Hindu Business Line
Business
Bhaskar
Kerala Bhushanam
©2011
ProgramHanmer MSL was given the mandate to create awareness among retail and institutional investors about the 1000 cr. public issue of Tax Free Secured Redeemable Non Convertible Bonds in Kolkata and Bengaluru.
Key Challenges Volatile market conditions Very short notice to the media and
broking houses to attend the conference
Results• All leading media houses in print,
electronic, wires and onlines including The Economic Times, Business Standard, Hindustan Times, Dainik Jagaran, Vijay Karnataka, Bloomberg, PTI etc. attended the conferences across Bangalore and Kolkata
• The Economic Times carried the news about the NHAI issue as a banner headline in all its editions across the country, highlighting the high – quality of media relations that HANMER MSL possesses
• The bonds issue was oversubscribed three times
National Highway Authority of India
The Economic Times
The Financial Express
Dainik Jagaran
Deccan Herald
Business Standard
The Times of India
The Hindu Business Line
©2011
Program Hanmer MSL was given the mandate to create awareness about the 600 cr. public issue of secured, redeemable, non-convertible debentures (“NCDs”) to open on December 22, 2011 across 10 cities
Key Challenges
Volatile market conditions
Very short notice for the media to attend
the conference
Story featured in certain publications and
websites much ahead of the conference
Results All leading media houses in print,
electronic, wires and onlines including The
Economic Times, Business Standard,
Hindustan Times, ET NOW, Dainik Jagran,
Malayala Manorama, etc attended the
conference and covered the news in all ten
cities .
Press release disseminated in Tier II towns
received coverage in most leading
publication
Most Publication mentioned the NCD issue
as a profitable investible option
Muthoot Finance
The Economic Times
Business Standard-
Smart Investor
Malayala Manorama
NDTV Profit
ET NOW
Hindustan
Divya Bhaskar
The Hindu Business Line
41
©2011
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