As an investor, it is essential for you to get to know a company inside out before choosing to invest in it. A great way to do that is by doing a thorough due diligence exercise. This entails going through the company’s records, their financial statements, corporate governance policies, and more.
Okay, but then how do you get access to all of this information? Here’s where the Securities and Exchange Board of India (SEBI) and its rules and regulatory provisions come in handy. Every public limited company that’s listed in the Indian stock exchanges are mandatorily required to publish all of the information regarding their entity in the public domain.
In order to be compliant with such rules and regulations, all listed public limited companies have a separate division called ‘investor relations’ that is tasked with providing existing and potential investors with all the necessary information. If the question ‘what are investor relations?’ still running on your mind, here’s a more in depth look at the investor relations meaning and their duties and responsibilities.
What are investor relations?
As you’ve already seen above, investor relations (IR) is part of a listed company’s business division. Investor relations combines and takes input from multiple divisions of a company’s business such as finance, compliance, executive management, marketing and communication, and legal to compile information.
This information is then shared with both the existing and prospective investors by way of publishing it in the public domain. Investor relations help investors get the latest, accurate, and reliable information directly from the company’s management itself, reducing the chances of the spread of misinformation and miscommunication. The information so released by the company can be used by investors to make informed investment decisions and choices.
If you, as an investor, wish to get to know everything there is to know about a company, all that you have to do is visit the said company’s website. Almost every listed public company in India tends to have a separate ‘investor relations’ section on their company’s website that hosts all of the information needed by an investor to make an informed investment decision about whether to invest in the said company or not.
To put it in much simpler terms, investor relations can be considered to be the bridge of communication between a company’s management and its existing and potential investors.
Why are investor relations important for a company?
Now that you’re aware of the investor relations meaning, let’s try to understand the importance of investor relations.
Investors generally tend to value companies that are transparent and maintain a trustworthy relationship with them. A company that is completely honest and transparent with its investors will enjoy a significantly higher valuation in the long run, provided its financial performance is on track.
Here’s where investor relations play a huge role. Since a company’s IR department works to enhance transparency through adequate and timely communication, it is widely considered to be quite vital to the success and growth of the company.
What are the roles and responsibilities of investor relations?
In addition to being a link between the investors and the company’s executive management, investor relations also have certain other roles and responsibilities. Here’s a quick look at some of them.
- Providing both existing and potential investors with in-depth financial information about the company in order to enable them to make informed investment decisions.
- Providing both existing and potential investors with timely and accurate non-financial information such as corporate governance reports and compliance-related information.
- Investor relations not only represents the company to its investors, but also represents the investors to the company. In fact, the job of an IR division of a company also includes coordinating with the investors via meetings and calls, listening to their grievances, and bringing them to the notice of the company for redressal.
- Ensuring that the company is compliant with all the applicable laws, rules, and regulations laid out by the various acts, SEBI, and the stock exchanges.
- To assist the company in its endeavour towards achieving a share price that accurately reflects its intrinsic value.
- Also responsible for marketing through communication of vital information to the prospective investors of a company in the event of an Initial Public Offering (IPO) or a Follow-on Public Offering (FPO).
What are the advantages that investor relations bring to the company?
With a proactive and good investor relations division, a company gets to enjoy several benefits and advantages. Let’s take a brief look at a few of them.
- A dedicated investor relations team works towards enhancing and adding some much needed value to the shareholders of the company.
- By improving the transparency in the process flow and information dissemination to the investors of the company, IR helps maintain a loyal shareholder base and increases the chances of new investors coming onboard.
- IR also helps enhance the credibility of the company and builds trust with the investor community. This makes future fund raising exercises much easier and more favourable for the company.
- In the case of a company gearing up for an Initial Public Offering (IPO), the investor relations division plays a huge role in piquing and garnering public interest for the stock. In addition to that, the IR team is also closely associated with the preparation of the prospectus of the company, which contains almost all of the vital information about the said entity.
Just like how the finance division is an extremely vital part of an organization, the investor relations division also enjoys such a position in a listed public company. The IR division is almost always very tightly integrated with the various other divisions of a company to ensure better cross-communication between them.
Also, the investor relations team is also responsible for keeping up with the ever-changing regulatory requirements and implementing the said changes throughout the company to ensure compliance. Furthermore, the IR division also constantly advises the company’s executive management on the appropriate measures to be taken to make sure the entity enjoys a consistent and favourable treatment amongst the investors.