Sebi, the capital market regulator, has asked the Industry Standards Forum (ISF) to develop a standard set of Key Performance Indicators (KPIs) for inclusion in the draft prospectus of an initial public offering (IPO), according to sources.
The ISF, which includes representatives from industry associations like as ASSOCHAM, FICCI, and CII, has been developing compliance standards in accordance with SEBI requirements.
According to people acquainted with the situation, the ISF has been requested to determine what actual KPIs are, rather than restricting the list to merely financial and operational indicators. Even though the KPIs will be common, the disclosures may change by industry, according to the individual.
Industry insiders frequently express uncertainty on whether financial data should be regarded as KPI or not. According to insiders familiar with the process, some industry leaders do not consider all operational measures labeled as KPIs, even if they are vital for tracking corporate performance.
Numerous pre-IPO businesses are too cautious, putting everything in the prospectus and labeling it as a key performance indicator. This has resulted in an increasing number of so-called KPIs, despite the fact that many of these measurements do not actually qualify and are presented with investors just for informational purposes.
"It is difficult to standardize KPIs across all sectors, and establishing particular KPIs for each industry or kind of business is similarly difficult. While KPIs may be set for banks and NBFCs, or commodities firms, defining them for new generation technology companies with distinct business models would be extremely difficult," said Yash Ashar, Senior Partner at Cyril Amarchand Mangaldas.
Recently, Sebi began to take a hard stance on KPI-related disclosures made by new-age enterprises and start-ups preparing for an IPO. However, this was done to guarantee that investors have access to all relevant information for determining a fair valuation and making an educated investment decision.
The problem of KPI disclosures arose during a flurry of start-up and digital listings, as the majority of the firms were losing money and the valuations they sought were connected to their private market capital raising rounds. The capital market watchdog believes that such businesses should publish the metrics they share with PE/VC investors to all potential shareholders at the time of their IPO.
Sebi chairwoman Madhabi Puri Buch, who addressed at a recent FICCI event, also mentioned keeping the IPO paperwork brief. She also stated that Sebi intends to use a "demystified IPO document," which would serve as a template-based method to simplify the listing process.
Buch noted that the new style tries to make the paper more compact and focused, containing the 50 critical facts that an investor requires to make an educated decision.
