First Fintec Clarifies SEBI RPT Disclosure Rules

First Fintec Ltd has stated that SEBI's regulations requiring disclosures for related party transactions (RPTs) do not apply to the company. This clarification was noted in its Corporate Governance report for the period ending March 31, 2026. The company's position is based on the absence of any RPTs on a standalone basis and its exclusive reliance on standalone financial reporting.

Understanding SEBI's RPT Rules

For listed entities in India, SEBI regulations mandate comprehensive disclosures for related party dealings. These rules are designed to ensure transparency and protect minority shareholder interests against potential conflicts of interest. Typically, companies must disclose material related party transactions and seek shareholder approval. First Fintec's clarification suggests a specific interpretation tied to its unique reporting structure and lack of identified RPTs.

First Fintec's Operations and Background

The company, formerly known as IQMS Software Limited, operates in the IT, ITES, and e-education sectors. Incorporated in March 2000, First Fintec is a micro-cap company.

Financial Performance and Key Risks

First Fintec faces significant financial challenges. The company was downgraded to 'Strong Sell' on March 19, 2026, due to fundamental weakness, stagnant results, negative EBITDA, and a low Return on Equity (ROE) of 0.15%. Flat financial results in Q3 FY25-26 and ongoing negative EBITDA highlight persistent operational difficulties. While the company asserts RPT disclosure rules do not apply, any future scrutiny by SEBI or the exchange regarding this interpretation could pose a compliance risk if their views differ.

Industry Context

Most listed Indian companies, particularly in the IT sector, prepare consolidated financial statements and often engage in numerous related party transactions arising from group operations. Major IT firms like TCS or Infosys must adhere strictly to SEBI (LODR) Regulation 23 requirements, including detailed disclosures and approvals for material RPTs. First Fintec's claim of non-applicability, based on standalone reporting and the absence of RPTs, distinguishes it from these peers.

Looking Ahead

Investors will monitor First Fintec's subsequent corporate governance reports and annual filings for any changes in its stance on RPT disclosures or the emergence of such transactions. Any clarifications sought by exchanges or the company's efforts to improve its weak financial performance, including addressing negative EBITDA and poor ROE, will also be key. Any shift towards consolidated reporting would necessitate strict adherence to RPT disclosure norms.