Sebi wants advisory body ISF to evolve sector-specific, standard KPIs for IPO prospectus

In a recent FICCI event, Sebi chairperson Madhabi Puri Buch had spoken about making the IPO document concise. She said that Sebi plans to introduce a “demystified IPO document”, which is designed as a template-based approach to simplify the listing process.

Capital market regulator Sebi has directed the Industry Standards Forum (ISF) to evolve a standard set of Key Performance Indicators (KPIs) that can be included in the draft prospectus of an initial public offer (IPO), people in the know told Moneycontrol.

The ISF, which has representations from industry bodies like ASSOCHAM, FICCI and CII, has been formulating compliance standards in line with SEBI regulations.

People familiar with the development said that the ISF has been asked to decide what true KPIs are, while not limiting the list to include only financial and operational metrics. Even though it will be a standard set of KPIs, it could differ in terms of disclosures from sector to sector, the person added.

Industry insiders also cite some confusion on whether financial data should be classified as KPI or not. Also, a section of industry representatives do not all operational metrics labelled as KPIs even if they are important to track business performance, said insiders to the process.

Also read: Citing omissions, Sebi returns over 10 IPO papers in a strong signal to merchant bankers

Industry sources further added that several pre-IPO companies are being overly cautious, and including everything in the prospectus, labelling them as KPIs. This has led to a growing list of so-called KPIs even though many of these metrics do not truly qualify and are shared with investors only for informational purposes.

"It is challenging to standardize KPIs across all sectors, and setting specific KPIs for every industry or any type of company is equally complex. While KPIs can be established for banks and NBFCs, or say commodity companies, defining them for companies like new age technology companies with different models of doing business would be quite challenging," said Yash Ashar, Senior Partner at Cyril Amarchand Mangaldas.

Recently, Moneycontrol reported that Sebi had started taking a strict view on the KPI-related disclosures made by new-age companies and start-ups going for an IPO. However, this was done to ensure that investors have access to all information that can be taken into account to arrive at a fair valuation, and then take an informed investment decision.

The issue of KPI disclosures came to the forefront after a slew of listings from the start-up and digital space, as most of the companies were loss-making and valuations they sought were linked to their rounds of fund raising in the private market. The capital market watchdog was of the view that such companies should disclose the metrics that they share with PE/VC investors with all potential shareholders at the time of their IPO.

At a recent FICCI event, Sebi chairperson Madhabi Puri Buch too had spoken about making the IPO document concise. She added that Sebi plans to introduce a “demystified IPO document”, which is designed as a template-based approach to simplify the listing process.

Buch explained that this new format aims to make the document more concise and focused, covering the 50 essential elements an investor needs to make an informed decision.

Disclaimer: The views expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​