OVERVIEW
The SEBI ICDR Regulations requires the Issuer Company to disclose KPIs in the IPO offer document that are relevant to determining the basis for the
issue price. The disclosure of KPIs is essential for providing potential investors with the information needed to evaluate the Issuer Company’s financial
and business performance, growth prospects, and associated risks. It enhances transparency, builds investor confidence, helps set realistic expectations
for the Issuer Company’s future performance, and ensures information symmetry among various classes of investors. Additionally, KPIs serve as
benchmarks for comparing the Issuer Company’s performance with its industry peers, as applicable. The objective of the KPI Standards is to standardize
the identification and disclosure practices of KPIs, which are essential for facilitating informed decision-making among investors considering a
proposed public offering of equity shares. In order to facilitate uniform approach in identification and disclosure practices of KPIs, the ISF comprising of
representatives from three industry associations, viz. ASSOCHAM, CII and FICCI, under the aegis of the Stock Exchanges, has formulated industry
standards, in consultation with SEBI, for effective implementation of the requirement to disclose KPIs in the draft offer document and offer document
as per the provisions of SEBI ICDR.
PROPOSED AMENDMENTS
The proposed amendments are expected to standardize the identification and disclosure practices of KPIs referred in Clause (3) of Paragraph 9(k) of
Part A of Schedule VI of SEBI ICDR Regulations, which are essential for facilitating informed decision-making among investors considering a proposed
public offering of equity shares. A comparison of the extract of SEBI ICDR Regulations along with the proposed amendments of standardization
formulated by ISF are listed below:
- KPIs disclosed in the offer document and the terms used in KPIs shall be defined consistently and precisely in the “Definitions and
Abbreviations” section of the offer document using simple English terms/phrases so as to enable easy understanding of the contents.
Technical terms, if any, used in explaining the KPIs shall be further clarified in simple terms. - KPIs disclosed in the offer document shall be approved by the Audit Committee of the Issuer Company.
- KPIs disclosed in the offer document shall be certified by the statutory auditor(s) or Chartered Accountants or firm of Charted Accountants,
holding a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India or by Cost Accountants, holding
a valid certificate issued by the Peer Review Board of the Institute of Cost Accountants of India. - Certificate issued with respect to KPIs shall be included in the list of material documents for inspection.
For each KPI being disclosed in the offer document, the details thereof shall be provided for period which will be co-terminus with the period
for which the restated financial information is disclosed in the offer document. - KPIs disclosed in the offer document should be comprehensive and explanation shall be provided on how these KPIs have been used by the
management historically to analyse, track or monitor the operational and/ or financial performance of the Issuer Company. - Comparison of KPIs over time shall be explained based on additions or dispositions to the business, if any. For e.g. in case the Issuer Company
has undertaken a material acquisition or disposition of assets / business for the periods that are covered by the KPIs, the KPIs shall reflect and
explain the same. - For ‘Basis of Issue Price’ chapter, the following disclosures shall be made
- The Issuer Company shall continue to disclose the KPIs which were disclosed in the ‘Basis for Issue Price’ chapter of the offer document, on a
periodic basis, at least once in a year (or for any lesser period as determined by the Issuer Company), for a duration that is at least the later of
(i) one year after the listing date or period specified by the Board; or (ii) till the utilization of the issue proceeds as per the disclosure made in
the objects of the issue section of the prospectus. Any change in these KPIs, during the aforementioned period, shall be explained by the
Issuer Company. The ongoing KPIs shall be continued to be certified by a member of an expert body as per clause 3(c)
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UNIQUS POINT OF VIEW
Comprehensive Disclosure Requirements
Companies will be required to disclose a wider range of KPIs that are directly relevant to their operations including KPIs regularly presented or discussed in board meetings of the company during the three-year period prior to the filing of offer document too shall have to be included in disclosures. This is expected to provide a more accurate picture of a company’s performance.
Consistency and Comparability
SEBI’s focus is on ensuring that KPIs disclosed by different companies are consistent and comparable, making it easier for investors to make informed decisions. This is
particularly important as companies from various sectors may previously have used different metrics.
Improved Investor Confidence
By improving the quality of information available to investors since all the KPI disclosures need approval from both company’s Audit Committee and a certifying
professional, SEBI aims to boost investor confidence, particularly in the IPO market, which can sometimes be risky for retail investors due to inadequate disclosures.
Overall, we believe that this amendment is a positive development for the Indian financial markets. Transparent, standardized disclosures are crucial for
maintaining market integrity and fostering investor trust. For investors, especially retail investors, better access to clear and comparable information will
likely reduce some of the risks associated with IPOs. It can also encourage more informed participation in the stock market, potentially leading to
healthier and more sustainable growth of the Indian equity market. For companies, while the changes might seem burdensome initially, the long-term
benefits include better investor relations and possibly even more interest from institutional investors who value clear and reliable data.
