SEBI Introduces Stricter KPI Disclosure Norms for IPOs Bound Companies

The Securities and Exchange Board of India (SEBI) has introduced stricter Key Performance Indicator (KPI) disclosure norms for Initial Public Offerings (IPOs) to enhance transparency and improve investor understanding of a company’s valuation and business performance. These guidelines, developed in collaboration with industry associations, mandate clear definitions of KPIs, inclusion of relevant financial and operational metrics, and increased regulatory oversight. Effective from April 1, investment bankers and issuer companies must adhere to these new standards in both draft and final offer documents.

Enhanced Transparency in KPI Disclosures

The new guidelines, issued by the Industry Standards Forum, require companies to provide unambiguous definitions of KPIs and include non-traditional financial metrics crucial to valuation. The audit committee and board of directors must review and approve these KPIs before their inclusion in the offer documents. Additionally, companies must disclose “operational measures,” which consist of non-financial data points that offer insights into valuation and business models. These must be included in the “Basis for Offer Price” section of the IPO documents.

To ensure reliability, the guidelines exclude business-sensitive data, unverifiable information, and forward-looking projections. KPIs disclosed in offer documents must also be certified by a professional, reinforcing their credibility.

Historical KPI Disclosures and Post-Listing Requirements

Under the new regulations, companies must disclose key information previously shared with investors who were allotted securities in any primary issuance within three years before the IPO filing. This includes details from secondary sales and any rights granted to such investors, excluding Employee Stock Ownership Plans (ESOPs). Additionally, KPIs from private placements or rights issue offer letters issued within the same period must also be disclosed.

Post-listing, companies are required to continue disclosing these KPIs periodically, either annually or until the proceeds from the issue are fully utilised. This ongoing disclosure requirement aims to maintain transparency even after the IPO process is complete.

Conclusion

SEBI’s new KPI disclosure norms introduce stricter governance measures to ensure greater transparency and accountability in IPO filings. By mandating clear definitions, professional certification, and historical data disclosure, these regulations provide investors with a comprehensive framework for evaluating a company’s financial and operational performance.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.