Given these developments, Indian companies are becoming more aware of the requirement of a dedicated IR team and the importance of the IR head as he/she can be a brand ambassador of the company.

Requisite qualities

With the change in the role model of IR, companies look for some crucial qualities that the IRO must possess. Excellent communication skills, in-depth financial knowledge, an analytical bent of mind and good networking skills are essential. The IRO should be an effective communication medium between the company and the investors.

The IRO should possess fair information about competitors, peer group and benchmark their operational/financial performance on a quarterly basis so as to keep the company’s management informed of the same through regular reporting. These aspects will help the company carry out SWOT analysis, which in turn helps the company in evolving its corporate strategy and, thereby, remaining competitive.

The prerequisites of being a successful IRO are: good financial analytical skills, aware of market happenings, updated knowledge on operational areas of the company, strong understanding of the sector in which the company operates, understanding of the performance and strategies of competitors/peers.

These qualities will help the IRO benchmark every parameter on which performance in terms of products (business), ratios (financial), growth (operational) can be mapped. This aspect is important for every IRO to know and implement.

Another important area where an IRO usually needs to pay attention is creating a robust MIS relevant for the IR function. During the course of interactions — investor meetings or investor conferences — the body language of parties helps the IRO understand the possible investment interest in the company.

Thus, post meeting, an IRO can track the shareholding pattern to understand the outcome of the meeting. Also, systematic analyses of buying and selling patterns observed from weekly movements in shareholding pattern helps to know the composition of shareholders in the company — long term, cyclical, short term, expectation of returns in each of these categories, etc.

Systematic and long-term analysis of this dynamite information helps the IRO understand and judge the nature of every basket of investors.

In summary, the IRO should possess technical, fundamental and soft skills as his/her interaction happens with a very knowledgeable class of investors, intermediaries and sector specialists coming from the research department of brokerage houses/investment banks.

Further, the IRO needs to be conceptually clear and consistent about his communication to various stakeholders, including investor’s community at large. This is necessary to develop a long-term relationship since faith in the IRO is a prerequisite.

Functions

When the IRO has to develop the IR function from scratch, he/she has to focus on many areas such as: understanding the variety of existing investors; creating sector specific investing community database; understanding the business activities and revenue model of the company; understanding the sector; preparation and dissemination of updates in the company — financial and operational to the investing community at large; developing and nurturing analyst relations — domestic and international; maintaining systematic communication with various stakeholders; holding of investor/analyst meet; quarterly earnings calls; holding NDR (non-deal road-shows); holding CEO lunch meets (with CIOs and senior analysts who know the company well); preparation and dissemination of regular press releases as and when any major news needs to be shared such as opening of a new business, alliance, M&A deal, expansion of business, IPO, etc.

The IRO works in the framework of best practices of corporate governance and ensures that there he/she does not disseminate selective information to select stakeholders. The quality of being fair and transparent will always help the IRO in the long run since it will obtain the much-needed trust of the investing community. This will help in maintaining the image and reputation of the company.

Future outlook

Over a period of time, due to widespread interaction with the investing community, brokerage houses and investment bankers, the IRO gathers a fair amount of knowledge about the manner in which the business is run Also, many a times, these categories of firms connect the company through the IRO with some strategic investment opportunities in the areas of alliance, M&A and business expansion opportunities.

Given the dynamic role played by the IRO, of late, companies have been involving the IRO in strategic planning, business modelling from investment perspective, organising road-shows/meetings for fund raising, etc.

This offers both opportunities and challenges to the IRO and the company. First, there are no formal educational courses for IR in India and the IRO needs to adapt these qualities on the job. Second, collating information from outside sources as well as from within the company is a challenge for the IRO.

On the other hand, the companies are finding it difficult to get the right candidate for its evolving IR function. Globally, the IR function is well recognised and a fairly established function. The corporates are well-versed with the IR processes and the dynamics of information dissemination to its stakeholders. In India, the IR function is evolving and has a long way to go to reach global standards given the psychology of the promoters and the ever growing demand for dynamic information of various stakeholders.

Certainly, the IR function has made significant inroads, but some of the challenges mentioned need to be addressed to take it to global standards.