India Inc. is doing much more than just lip service towards Corporate Social Responsibility (CSR) and it is evident from the fact that 1,132 companies listed on the NSE witnessed an annual increase of 17.5% in CSR spends at ₹11,961 crore in FY19.
According to nseinfobase.com—a joint initiative of National Stock Exchange (NSE) and PRIME Database, the average net profit of these companies was over ₹6 lakh crore in FY19, up from ₹5.23 lakh crore in FY18. The CSR spend stood at about 1.99% of the total average net profit in FY19, while the average spend per company was ₹10.57 crore.
Back in FY15, these companies spent ₹6,556 crore or 1.57% of their total net profit on CSR; it was nearly 30% lower than FY19 at ₹7.45 crore on an average per company. “CSR expenditure by companies listed at NSE has grown at a healthy compounded annual growth rate (CAGR) of 17% over the last five years,” says Mukesh Agarwal, CEO, NSE Data & Analytics.
The CSR law, which came into force in April 2014, mandates companies, subject to the provisions of the Act, to invest 2% of their net profit in CSR activities. Companies with net worth of ₹500 crore and above or revenue of ₹1,000 crore and above or net profit of ₹5 crore and above have to spend 2% of average net profits of last three years.
As per CSR requirements, the amount required to be spent for FY19 was ₹12,018 crore, but the companies decided to spend a bit more at ₹12,461 crore, but ₹1,343 crore eventually remained unspent.
While the CSR law mandates spending across 12 prescribed schedules, few companies deployed CSR spends towards community development, infrastructure, social welfare, child welfare, and other activities.
“In line with the previous year, education received the maximum spend (₹4,440 crore) followed by healthcare (₹3,242 crore),” says Pranav Haldea, managing director, PRIME Database Group which has developed and powers nseinfobase.com. “Areas such as armed force veterans, technology incubators, slum development and disaster management saw negligible spends,” Haldea adds.
However, in comparison to previous year, spends on armed force veterans increased the most (84%) – from ₹52.84 crore by 84 companies in FY18 to ₹96.97 crore spent by 126 companies in FY19. Spends on reducing inequalities and healthcare spends followed armed force veterans’ category with 41% and 25% annual growth each. Spends on national heritage, on the other hand, fell the most (55.5%) at ₹174.71 crore by 219 companies in FY19 compared to ₹392.64 crore spent by 208 companies in FY18.
In terms of company-wise CSR spends, the number of companies which spent on CSR went up to 1,055 (93% of the 1,132 companies) in FY19 compared to 1,024 (94%) in FY18. The balance 77 companies, despite being mandated, did not spend anything, according to nseinfobase.com.
Reliance Industries, with CSR spend of ₹849.32 crore emerged as the largest spender in the top 10 list of FY19, which included four public sector undertakings (PSUs) – ONGC (₹614.64 crore), Indian Oil (₹490.6 crore), NTPC (₹285.46 crore) and Power Grid Corporation (₹195.73 crore). The top 10, which included companies like HDFC Bank, TCS, Infosys, Tata Steel, and ITC, together accounted for over ₹4,277 crore – 35.8% of the total CSR spends. The CSR spends from PSUs touched ₹3,198 crore from 57 PSUs in FY19, as compared to ₹2,710 crore spent by 54 PSUs in FY18.
Overall, 653 companies, or 64%, increased their spending as compared to FY18, while there were 488 companies (43%) which exceeded their prescribed spending in FY19. There were also 37 companies, which despite reporting a loss, spent on CSR. On the other hand, there were 332 companies which missed the mandatory spending of 2% of net profit in FY19, compared to 353 in FY18.
On the other hand, there were 332 companies which missed the mandatory spending of 2% of net profit in FY19, compared to 353 in FY18. The CSR spends from PSUs touched ₹3,198 crore from 57 PSUs in FY19, as compared to ₹2,710 crore spent by 54 PSUs in FY18.
In terms of mode of spends on CSR activities, 286 companies (25.3%) spent directly to the tune of ₹5,206.27 crore (43.53% of the total CSR spend), while 283 companies (25.02%) used implementing agencies to deploy ₹4,185.29 crore (34.99%). While 111 companies (9.81%) which deployed ₹222.8 crore (1.86%) did not specify the mode of CSR spends, 451 companies (39.88%) used direct as well as implementing agency route to spend ₹2,346.02 crore (19.61%) on CSR.
The CSR Act also mandates companies to appoint a CSR committee comprising at least three members of the board, of which at least one should be independent. In FY19, out of the total 1,786 companies listed on the NSE, 885 had such CSR committees in place. Several companies went beyond the requirement, since 413 companies had appointed more than 3 members in their CSR committees.
