This directive will apply to all draft offer documents and offer documents filed with SEBI/stock exchanges on or after April 1, 2025.

The new standards aim to standardise the identification and disclosure practices of KPIs, enabling potential investors to make more informed decisions. These standards will apply to both the disclosures in the offer document as well as ongoing disclosures following the listing.

Days after asking issuers to follow the KPI Standards, SEBI mandated certain additional disclosures in the IPO offer documents, including disclosures of all criminal proceedings involving key managerial personnel and senior management, the pre-issue and post-issue shareholding of promoters, the promoter group and additional top 10 shareholders, etc.[2]

Key Performance Indicators

KPIs are key numerical measures of an issuer’s historical financial and/or operational performance. The disclosure of KPIs offers potential investors insight into the company’s financial and business performance, growth prospects, and associated risks. KPIs also serve as benchmarks for comparing the company’s performance with its industry peers.

Background

The KPI framework has been in force since November 2022, following amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations).[3] This framework requires issuers to disclose KPIs in the IPO offer document that are relevant to determining the basis for the issue price. The framework also mandated IPO-bound companies to disclose KPIs that have been shared with their investors in the preceding three years.

The introduction of the KPI framework was considered necessary after several IPOs of digital majors, such as Zomato, Paytm, Nykaa, and Policybazaar, significantly underperformed post-listing in 2021.

Take the example of Nykaa: The new-age company made a strong IPO debut in November 2021 at a market price of Rs.1,125, with the IPO oversubscribed by 82.42 times on the final day. However, as of March 13, 6 pm, the stock is trading at Rs.164.90. 

Over the years, SEBI has increased scrutiny with respect to KPI disclosures, particularly for new-age companies, startups, and digital majors. For instance, last year, SEBI asked the startup FirstCry to refile its draft papers, citing inadequate KPI disclosures.

In January 2025, SEBI’s Chairperson remarked that the goal was not to intervene in pricing or to overload disclosures but to ensure that investors have adequate information to assess whether the price is appropriate.

Industry Standards

Key aspects of the KPI Standards are as follows:

• Indicators based on business model and industry: KPIs have been classified into three categories:

• • GAAP financial measures;
  • Non-GAAP financial measures, including financial ratios;
  • Operational measures not included in the first two categories.

These measures have to be disclosed by issuers as per their business model and the industry they operate in.

• Criteria: All KPIs must be measurable and expressible in numbers. The inclusion of subjective or qualitative aspects as KPIs is not allowed.

• KPI selection process: It is the responsibility of the issuer’s management to identify the KPIs to be included in the offer document and also to collate the issuer company’s historical information as specified in the KPI Standards.

Further, industry peers have to be identified. The issuer has to strive to compare its KPIs with a minimum of three industry peers, where feasible. If fewer than three industry peers are available, the issuer has to disclose that only one or two peers are available for KPIs comparison. In case no suitable industry peers are available, the issuer company is required to explain the uniqueness of its business model or line of business and state that no industry peers are available for KPIs comparison.

The management has to shortlist KPIs from the selected data based on prescribed factors. For instance, projections are not allowed to be included. Moreover, the KPI Standards provide for the exclusion of confidential or business-sensitive data that could impact the issuer company’s competitiveness if disclosed publicly, provided that a rationale for this exclusion is given in the audit committee note. However, if such confidential or business-sensitive selected data is routinely disclosed by industry peers, it cannot be excluded.

• Certification and approval: KPIs identified/certified by the management to be disclosed in the offer document have to be certified by a certifying professional and approved by the issuer’s audit committee.

• Continuous disclosures of KPIs: Issuers are required to continue disclosing the KPIs which were disclosed in the offer document periodically for at least one year or till the utilisation of the IPO proceeds.

Comments

By providing for uniform KPI identification and disclosure practices, the new standards foster greater transparency and accountability. Further, they promote information symmetry. IPO-bound companies must allocate sufficient time and resources and build robust teams with clear procedures to effectively implement these standards.