In a move aimed at enhancing the transparency and comparability of IPO disclosures, the Securities and Exchange Board of India (SEBI), via its circular dated 28th February 2025, has issued the Industry Standards Note on Key Performance Indicators (“KPIs”). The guidelines, which come into effect for draft offer documents and offer documents filed on or after 1st April 2025, mark a pivotal development for companies proposing to list, their merchant bankers, auditors, and the investor community at large.
These standards, developed by the Industry Standards Forum (“ISF”) comprising of ASSOCHAM, FICCI, and CII, aim to bring uniformity in the identification, certification, presentation, and ongoing disclosure of KPIs used to determine issue pricing in IPOs.
Aligning Valuation Metrics with Market Expectations
Under the new framework, Key Performance Indicators are defined as key numerical measures of a company’s historical financial and/or operational performance. These are the metrics management monitors internally and are considered material for investors when evaluating the company’s valuation.
KPIs have now been formally categorized into three types:
- GAAP Financial Measures (e.g., revenue, EBITDA, net profit),
- Non-GAAP Financial Measures including financial ratios (e.g., adjusted EBITDA, return on capital employed),
- Operational Measures (e.g., active user base, cost per unit, churn rate).
Each term used must be defined precisely using Indian Accounting Standards (Ind AS), the Companies Act, SEBI regulations, or, in their absence, a clearly articulated and industry-aligned definition.
Management to be Responsible for Identification and Certification Process
SEBI has placed the onus of KPI identification on management, who must curate the relevant KPIs from a comprehensive set of historical disclosures, such as:
- Information shared with investors in primary or secondary issuances over the last three years,
- KPIs used internally by the board,
- Metrics used to arrive at the issue price.
This selected dataset (termed as “Selected Data”) is expected to be filtered with diligence. KPIs that are unverifiable, outdated, or sensitive (unless similarly disclosed by peers) may be excluded, but the rationale must be recorded in a note to the Audit Committee.
Certification Trail and Governance
To prevent the misuse or overstatement of performance metrics:
- The management must certify the selected KPIs.
- The KPIs must then be approved by the Audit Committee.
- A statutory auditor, Chartered Accountant (CA), or Cost Accountant with a valid peer review certificate must issue a final certification in line with technical guidance from ICAI or ICMAI.
- This certificate will be a material document open for inspection.
Where, What and How to Present KPIs
To avoid inconsistencies, SEBI has specified clear guidelines on presentation:
- KPIs must appear in either the ‘Basis for Issue Price’ or the ‘Business’ chapters of the offer document.
- Clear definitions under a standalone heading in the Definitions section are mandatory.
- KPI tables should include three years’ data (in descending order) and comparisons with at least three Industry Peers, preferably Indian listed companies. In their absence, global peers may be used with INR equivalents.
These disclosures must also explain how the management uses each KPI to track business and financial performance.
Mandating Ongoing Disclosures
SEBI’s reforms extend into the post-listing phase by introducing mandatory periodic disclosures of the disclosed KPIs. Issuer companies must:
- Continue publishing the KPIs at least once a year (or more frequently, if they choose),
- Continue disclosure until at least the later of
- one year post-listing or
- full utilization of issue proceeds,
- Obtain Board and Audit Committee approvals for the KPIs to be disclosed post-listing,
- Ensure ongoing certification by qualified professionals.
If any KPI becomes irrelevant due to business model shifts or market evolution, the management must disclose the reason for its exclusion.
Raising the Bar for Market Confidence
By mandating rigorous identification, layered certification, precise presentation, and continued disclosure of KPIs, the new framework is set to reduce information asymmetry and bring greater accountability to how issuers communicate their financial and operational story.
For issuers and their advisors, this means recalibrating IPO preparation strategies to incorporate robust internal audit trails, peer benchmarking, and validation processes. For investors, this starts the regime where IPO valuations will be easier to understand and compare—grounded in metrics that matter.
Written by: Dwaipayan Das
Co-authored by: Amiya Mukherjee
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