As a motorcycling enthusiast and a rider, I see a listed company like a two-wheeler, which moves on the wheels of performance and governance. It will start to tumble and fall the moment there is less momentum in any one of the wheels. The speed and quality of the ride, of course, depend upon the external environment such as road conditions and traffic.
The IPO journey doesn't end at the listing bell. For companies stepping into the public arena, sustaining and growing shareholder value requires unwavering focus on both performance and governance, particularly given the fractured environment we are currently in. These two are not silos, rather they are interdependent; they form an ecosystem where robust operational delivery and ethical oversight naturally enhance the communication with investors, while proactive risk mitigation protects the entire structure.
Post-listing, CFOs and boards operate under intensified regulatory scrutiny, where lapses can erode hard-earned IPO premiums and invite regulatory interventions. We have even, recently, seen companies with great performance but no governance vanishing quickly. Similarly, only governance but no performance does not help the market either.
This third series on IPO readiness provides two broader essentials post listing. Drawing from requirements from SEBI's Listing Obligations and Disclosure Requirements (LODR) and market lessons from successes and pitfalls, it emphasizes on actionable strategies tailored to deliver on growth and compliance rigour.
Performance Delivering Sustainable and Scalable Growth
The market's post-IPO honeymoon is brief; attention swiftly turns to quarterly proof of the business model's viability and scalability. Under SEBI regulations, timely and accurate financial reporting becomes non-negotiable and consistent misses on performance often lead to sharp stock corrections and loss of institutional confidence. Accounting errors and mistakes must be avoided as it lead to significant variations in YoY and QoQ numbers, leading to market confusion.
CFOs need to be more prudent; they must avoid any kind of innovations in accounting. CFOs must adhere meticulously to the guidance provided during the IPO roadshow (including quarterly earning calls) and leverage lead indicators such as revenue growth, EBITDA margins, working capital efficiency, cash flows and other KPIs, etc. These indicators may vary from company to company and industry to industry.
Investors don’t like and appreciate surprises. Delivering on the operational KPIs is quite critical as failure to do so leads to bad financial performance. Performance forms an unshakeable foundation. Without tangible results, efforts in other aspects ring hollow and fail to inspire investors’ confidence. There is no doubt that, in the recent past, this has become even more challenging given the uncertain environment we live in, be it wars, trade tariffs, technology disruption, cyberthreats, regulatory changes, etc.
Recent trends of quarterly results show that many companies are able to demonstrate revenue growth, but profit growth remains a challenge due to these significant external factors surrounding us.
Governance Excellence from Boardroom to Shop Floor
The dictionary meaning of “governance” is “the act, process or system of governing and the way in which an organization or country is controlled and directed”. So, governance is not just about who is in charge, but how decisions are made, implemented and monitored.
In a corporate context, corporate governance refers to the framework that ensures a company is run responsibly, transparently and in the interests of its stakeholders.
To break it down, think of corporate governance as answering four key questions:
● Who makes decisions? Board of directors and management
● In whose interest? Shareholders and broader stakeholders
● How are decisions made? Policies, laws, ethics, internal controls
● How is accountability ensured? Audits, disclosures, oversight
In real world terms, strong governance reduces frauds and mismanagement, builds investors’ trust (important for stock prices and capital raising), ensures long-term sustainability rather than merely short-term gains and protects minority shareholders.
What Makes Good Governance?
When talking about strong governance for listed companies, look at the big picture beyond basic rules:
● Strong and independent board, tone at the top matters
● Real accountability of CEO/CFO and other senior leaders
● Risk awareness, mitigate what can go wrong
● Clear communication with investors, share the good and the bad
● Everyone matters, take care and manage all stakeholders
● Ethical culture and sustainability
● Stay alert to changes, be informed and agile
● Fix short-term issues, don’t lose long-term strategic focus
● No compromise with governance during crisis or survival times
Good governance isn't just about following rules; it is a competitive edge. Poor governance can kill good performance. It leads to scandals, stock drops, heavy fines or even removal from the stock exchange.
Effective Investor Relations is a Bi-Product of Good Performance and Good Governance:
Effective IR demands transparency that goes beyond compliance to foster trust among retail holders, mutual funds and foreign institutional investors (FIIs). When underpinned by genuine performance, IR becomes a powerful magnet for sustained capital inflows and future growth.
Transparency in IR context means sharing bad news with investors as well on time. Don’t try to hide or manipulate, which market hates and at the same time be open with potential solutions or mitigations. Another critical factor is talk less and deliver more, that commands trust with investors and market in the long run.
Risk Management and Regulatory Vigilance is a Continuous Journey, Not a Destination:
Markets, technologies and laws evolve constantly, cyberthreats emerge overnight, economic shifts such as rupee volatility or trade tariffs or wars disrupt plans and regulators introduce new rules anytime.
A one-time risk framework sets the foundation, but new and emerging threats require constant updates and vigilance, and management almost need to act on a real-time basis.
Finally, I would put it very simply: keep moving both the wheels of performance and governance; and manage the external environment for long-term cruising!
