An Understanding Of Financial Communications And Investor Relations by MSL Global

An Understanding of Financial communications & Investor Relations By Jaideep Shergill CEO & Head Financial Communications Asia

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Feb 2012 06.29.2010 | P1

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

Financial communications Introduction

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Financial Communications – An Understanding Banks Financial ●

Financial Communication

PR - Financial Firms

Banks Insurance Mutual Funds Non Banking Financial Companies Broking Firms

PR – Listed Corporates

Corporate Earnings Corporate Governance Statutory Compliance Disclosure Policy Investor Relations

PR – Financial Deals

Equity Capital Markets IPO/ FPO/Rights Debt Capital Markets NCD/FCD/Bonds Transaction Communications-M&A

Financial communications- Asia Offering

Corporate Communications and Positioning

• M&A – friendly and contested, international and domestic • Divestitures / spinoffs • Recapitalizations • Post-acquisition / integration programs • IPOs & other listings

• Integrated programs, including: • Media relations • Thought leadership programs • Investor relations • Internal programs • Government affairs

Private Equity / Hedge Funds • Strategic positioning for alternative investment firms • Media relations • Transaction support • Portfolio company support

Investor Relations / Disclosure

Transaction Communications • • • • •

IPOs and other listings Complex disclosures Quarterly and annual reporting Roadshow presentations Financial community intelligence • Investor targeting

Special Situations and Crisis Communications

Corporate Governance • • • •

Proxy contests Shareholder activism CEO succession planning Board accountability

• • • • • • •

Crisis communications Litigation support Regulatory matters Bankruptcies / restructurings Investigations Senior Executive changes Product recalls

PR For Financial Firms Corporates / IPO & M&A/ BFSI

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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)

Telling a Financial Story To The Stakeholders Who Will Validate It - Listed Corporates How can the stakeholders validate the financial information?

Analysis

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Financial statements & Results

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Management forecast

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Key performance indicators

How is it possible?

Supply of Financial Information

PR For Financial Firms – How It Is Different? Mutual Funds & Equity Traded Funds 

Understanding of Regulatory & Communication Guidelines differs from each country.

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Philosophy of Fund Managers and Mutual Fund Companies. 

Value Investor : Looks for stocks with potential long term growth

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Growth Investing- Buy low and sell high

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Blend investing – Is a combination of the above two

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Aggressive growth Investing – High Risk, High return

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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.

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ETF are the next big funds as they are investing in Gold and give excellent return

Transaction Communications- IPO & M&A 

Need timely communication at the time of deal.

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Knowledge of regulation governing an IPO or M&A is important and is regulated by securities regulator, the China Securities Regulatory Commission (CSRC).

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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

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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

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Mergers & Acquisitions, Price - Earnings, Venture Capital deals need planned & strategic communications

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Valuation of the business & company is the key communication here

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

Communication for BFSI Sector Banking & Financial Services

Insurance Business Segmentation

Commercial Banks:  Government Banks  Private Banks  MNC Banks

Life & General

 Capital Market Banking  Wealth Management  FOREX Management

 Retail Banking  Institutional Banking  Investment Banking

 Asset Management  Hedge Fund Management  Stock Broking – Intermediary  Private Equity Funds  Venture Capital Funds  Angel Investment

 Financial Litigation

 Insurance Advisory  Underwriting  Re-insurance

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 Need to leverage these 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

INVESTOR RELATIONS

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Why Do Corporates Need Investor Relations? 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.

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To appropriately convey performance to shareholders & keep co-owners informed

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To support corporate positioning

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Clear communication helps to secure fair valuation & market company’s stock

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To build corporate reputation, trust and credibility

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To create information level playing field

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To unlock Value

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Good corporate citizenship

What Does It Consists Of?

INVESTOR RELATIONS

Securities Law Compliance

Communica tions Finance

Marketing

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. ÂŠ2011

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

Important Criteria For Investor Relations

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Consistency & transparency of Investor Relations

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Understanding of Markets & Valuation

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Business knowledge / insights from team

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Quality of one-on-one meetings / conferences

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Quality of service from Investor Relations team

Business Knowledge / Insights From IR Team

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Understand the Company, Industry

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Products and Services you bring to the Market

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Markets you compete in

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Demand drivers, market opportunity

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Growth characteristics, operating metrics, segment profitability

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Keep track of latest developments in the Company

Activities Under Investor Relations

One-on-One Meeting Most analysts prefer having a direct update from the companyâ&#x20AC;&#x2122;s top management. This helps them to understand the company better and can also come up with research reports.

Bridge-Building Meeting It 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.

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Concalls It 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.

Analyst Meeting Through 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.

Quarterly Result Planning

Preferably Early in the day

Audit Comm. Meeting Board Meeting before 12 noon

Within 15 minutes of conclusion on board meeting

Intimation to stock exchanges

Analyst Briefing

Media Briefing

One-to-one

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Uploading results on the website

Select briefing

Concall

Analyst meet

Our audience

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Target Audience 

Sell-side Analysts : Analysts who sells equity ideas mainly from Stock Broking Houses & Investment Banks

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Buy-side Analysts: Analysts who supports fund managers from Various Funds; PEs, Etc..

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Fund Managers: manages different portfolios of funds

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Portfolio Managers: individual portfolio managers mainly provides by PCG/HNI segments of broking houses and investment banks.

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Financial Media : media reporting about financial performances and businesses.

Sell-Side Analysts - Motivation

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Sector specialists with Institutions like Asset Management companies

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Research prominent companies within the sector with an objective to make a recommendations

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Recommendations could be – Buy, Sell, Hold, Outperform, underperform, market performer, overweight, underweight

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Motivation is to identify stocks which have potential to go up further

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Essentially a cost centre, exist to generate higher broking income

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

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Understand growth triggers and value drivers

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Make assumptions

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Ultimately interested in projecting EPS for the next two years (Net Income – Dividends divided by Average outstanding shares)

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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

Some Of The Top Institutions In APAC Region Todayâ&#x20AC;&#x2122;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.

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Summary Of Attributes Valued By Investors

Valued by Media/Investors/Analysts •

Better qualitative and quantitative disclosure standards in Annual Reports / Financial Statements

Timeliness of Communication

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Be the first one to deliver the news “Good” or “Bad”

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Frequency of Communication

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Regular Analyst Meets / Conference calls post results announcements.

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Management Credibility

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Create track record of corporate governance

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Strategy

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Articulate your differentiation vis- a- vis local and global competition

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Availability of research

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Encourage research analysts to print research on the company.

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Don’t prepare perfect answers. Perfect answers may not be the right answer.

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Transparency

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Steps we can take

Ability to face “What if” questions •

Demonstrate awareness and willingness to deal with the situation

Your Role

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Establishing Financial Communication Processes Establishing calendar of events

Identifying spokespersons for different constituencies i.e. media, analysts, fund managers

Work on key messages

Establishing Standard Operating Procedures (SOP)

Create a mechanism for responding to media & investor queries

Keeping messaging consistent over time and across spokespersons

Establishing a Disclosure Policy

Create mailing list of buy-side and sell-side analysts

Enhancing / updating corporate website for better investor interface ÂŠ2011

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

Key To Success In Financial Communication

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Your Commitment & involvement – Be see as an advisor

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Consistent and credible - communications

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Clearly articulated, credible business strategies

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Open discussion of financial results / expectations

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Regular contact with client & financial community ie. Investment Bankers, Research Analyst, Influencers, Brokers.

Cases - Highlight

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Seoul International Financial Hub   

The Banker (2009)

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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

Citigroup Global Markets Korea Securities (CGMK)    

<Feature article> “CGMK Enters into Domestic ELW Market” 22 Feb 2008, Maeil Business Newspaper

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<Contributed Column> "Take advantage of derivatives as investment option” 19 Apr 2010, Hankyung Business

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

<Interview> “You should be prepared in order to invest in ELWs with high leverage” 20 Mar 2009, Maeil Business Newspaper

Western Union Money Transfer®

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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…

Bharati AXA Life Insurance –

Our Mandate

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Highlight the synergies between Bharti & Axa and thereby build a strong platform for the launch of the Company

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Popularize Bharti Axa Life Insurance’s corporate launch campaigns

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Position Bharti Axa Life Insurance as “A revolutionary in the life insurance space”

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Project their spokespeople as industry thought leaders

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Situation

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Presence of a dominant public sector player… “LIC”

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Media clutter (in terms of brand messaging)

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Maintain a respectable ‘Share of Voice’ in category media spends and industry stories…(Especially being a new entrant in the market)

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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

Piramal – Vodafone Deal Program Highlighting 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.

Business Standard CNBC TV18

Key Challenges Hindu Business Line The Economic Times

Financial Express ET Now

 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  

  Mint

DNA Money

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

Fortis Healthcare – Fortis International Deal Program Furthering 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.

The Economic Times

Hindustan Times

Business Standard

Financial Express

Hindu Business Line

Indian Express

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

Binani Industries – 3B Deal Program

The Economic Times Kerala Bhushanam

Business Bhaskar

Hindu Business Line

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

Business Standard

Financial Chronicle

Sensitize 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.

Times of India

 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

National Highway Authority of India Program

The Economic Times

Hanmer 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.

The Hindu Business Line

Key Challenges The Times of India

Results

The Financial Express

Deccan Herald

Dainik Jagaran

 Volatile market conditions  Very short notice to the media and broking houses to attend the conference

Business Standard

• 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

Muthoot Finance –

Program

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Hanmer MSL was given the mandate to create awareness about the 600 cr. public issue of secured, redeemable, nonconvertible debentures (“NCDs”) to open on December 22, 2011 across 10 cities

The Economic Times

Key Challenges

ET NOW

Divya Bhaskar

 Volatile market conditions  Very short notice for the media to attend the conference

Business StandardSmart Investor

 Story featured in certain publications and websites much ahead of the conference –

Hindustan

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 .

NDTV Profit

 Press release disseminated in Tier II towns received coverage in most leading publication

The Hindu Business Line

 Most Publication mentioned profitable investible option

the NCD issue as a

Malayala Manorama