SEBI to Revamp KPI Disclosure Framework for IPO-Ready Companies

The framework governing the disclosure of Key Performance Indicators (KPIs)—which serve as benchmarks for evaluating modern IPOs and other equity offerings—is set for a significant revamp, according to Moneycontrol. The Securities and Exchange Board of India (SEBI), nearly three years after implementing these regulations, is now aiming to enhance their scope and ensure greater measurability.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Proposed Revisions

As part of these revisions, SEBI intends to extend the disclosure period for past transactions to three years. Additionally, the updated framework will refine the required disclosures by incorporating financial metrics, key ratios, and operational indicators that assess a company’s long-term sustainability and the factors influencing its financial performance.

Sources familiar with the matter revealed that SEBI is pushing for all KPI disclosures to receive approval from both the company’s audit committee and a certifying professional. Under the existing guidelines, companies are only required to disclose share sale details for the past 18 months, along with an independent directors' declaration confirming that the IPO price band is justified.

"It has been almost three years since the KPI disclosure framework was introduced to address concerns surrounding IPOs of start-ups and new-age companies. Now, with sufficient data available to evaluate industry feedback, it is time to strengthen these regulations," said a person aware of the developments.

The proposed changes have been structured based on recommendations from the Industry Standards Forum (ISF), which includes representatives from major industry bodies such as ASSOCHAM, CII, and FICCI.

Under the revised rules, KPIs will be classified into three broad categories: GAAP Financial Measures, Non-GAAP Financial Measures (which include financial ratios), and Operational Measures, which do not fall under the first two groups.

For GAAP and Non-GAAP KPIs, SEBI mandates that companies disclose all key relevant measures and ratios that align with their business model and industry standards. Moreover, all KPI disclosures must be quantifiable, leaving no room for subjective or qualitative interpretations.

How Companies Are Affected

SEBI also stipulates that any crucial financial or operational data shared with investors through private placements, rights issues, or other equity transactions in the three years leading up to an IPO filing must be made available to all investors. Additionally, KPIs presented in board meetings during this period will also need to be disclosed.

Companies will be required to identify relevant industry peers and compare their own KPIs with at least three of them, preferably listed entities in India. If no suitable Indian-listed peer is available, a comparison with a global counterpart will be permissible.

Furthermore, all KPIs used to determine the issue price must be disclosed and certified by the Managing Director, Chief Executive Officer, Executive Director, or Chief Financial Officer, as per sources cited by Moneycontrol.