SEBI Eyes Tougher IPO Regulations: Stricter KPI & Financial Disclosures

As the number of new age tech-driven IPOs continues to rise in the country, the Securities and Exchange Board of India (Sebi) is reportedly moving closer to implementing stricter disclosure norms for companies planning to go public, according to a report by MoneyControl.

The capital markets regulator is considering extending the disclosure period for past transactions to three years. Additionally, it aims to refine disclosure requirements by incorporating financial metrics, key ratios, and operational indicators, such as the long-term viability of the business and factors influencing its financial performance.

Reports suggest that Sebi is advocating for all Key Performance Indicator (KPI) disclosures to be vetted and approved by both the company's audit committee and an independent certifying professional. Under the current regulations, companies are only mandated to disclose share sale details for the past 18 months, along with a declaration from independent directors affirming that the IPO price band is reasonable.

Also Read: SEBI Mulls Framework for Fast Track Follow-on Offer by REITs, InvITs

This is not the first time reports have surfaced about SEBI's intention to tighten KPI disclosure norms for IPO-bound companies. In November, CNBC-TV18 reported that the regulator was seeking to enhance KPI disclosures, particularly for startups without a proven track record of profitability.

Under the existing IPO framework, key performance indicators include revenue from operations, net profit or loss after tax, return on equity, and earnings per share, among others.

In August last year, SEBI instructed the Industry Standards Forum (ISF), which comprises representatives from industry bodies such as ASSOCHAM, FICCI, and CII to identify the most relevant KPIs for new-age tech IPOs.

Also Read: Need More Professional Regulation of Financial Markets; SEBI Needs Total Overhaul: Cong

Effect on Companies

SEBI also mandates that any significant financial or operational information shared with investors through private placements, rights issues, or other equity transactions within the three years preceding an IPO filing must be disclosed to all investors. Additionally, companies will need to reveal any KPIs discussed in board meetings during this period.

Firms will be required to identify relevant industry peers and compare their KPIs with at least three of them, preferably publicly listed entities in India. If no suitable Indian-listed peers are available, a comparison with global counterparts will be allowed.

Moreover, all KPIs used in determining the issue price must be disclosed and certified by the Managing Director, Chief Executive Officer, Executive Director, or Chief Financial Officer.