The Securities and Exchange Board of India (SEBI) in its recent circular, has issued Industry Standard Note (framed by Industry Standard Forum (ISF)), on disclosure of Key Performance Indicators (KPIs) in the IPO offer document which are relevant for determination of issue price. Applicable for all the draft offer documents/offer documents filed by the issuer companies with SEBI/Stock Exchanges on or after 01.04.2025.

Key highlights of the Industry Standard Note are as follows:

• Definition of Key Performance Indicators (KPIs) :
  
  KPIs are key numerical measures of an Issuer Company’s historical financial and/or operational performance, which the management of such Issuer Company evaluates and tracks to monitor the performance of the Issuer Company and which provides information to investors to make an informed decision with respect to valuation of the Issuer Company.
• Classification of KPIs:
  
  KPIs are being classified into following three categories:

• • Generally Accepted Accounting Principles (GAAP) Financial Measures.
  • Non-GAAP Financial Measures including financial ratios.
  • Operational Measures, which are not included above.
• Identification of KPIs:

• • The management of the issuer company shall be responsible for identifying the KPIs to be included in the offer document.
  • KPIs shall be measurable and expressible in numbers.
  • KPIs shall be a measure of the issuer company’s historical financial or operational performance.
  • The management of the issuer company along with the lead merchant banker(s), shall identify suitable Industry Peers by following the criteria as laid in the Industry Standard Note.
  • Management to shortlist KPIs from the selected data and peer KPI disclosures.
  • KPI selected for disclosure is to be certified by the Managing Director or Executive Director or Chief Executive Officer or Chief Financial Officer or Manager on behalf of the management of the Issuer Company.
  • Management to prepare a note specifying GAAP/Non-GAAP financial measures, operational measures, details the process and factors considered while making the shortlist from the Selected Data to KPIs and others as specified in the Industry Standard Note.
• Certification of selected KPIs:

KPIs as identified/certified by the management to be disclosed in the offer documents are to be certified by the statutory auditor(s) or Chartered Accountants or a peer reviewed firm of Chartered Accountants, or by peer reviewed Cost Accountants.

• Approval by the Audit Committee:
  Audit Committee approval must be obtained for the KPIs as identified/certified by the management.

• Certification of the disclosed KPIs:

KPI disclosed in the offer document shall be certified by the certifying professional in terms of “Technical Guide on Disclosure and Reporting of Key Performance Indicators (KPIs) in Offer Documents” as issued by ICMAI or ICAI.

• Disclosure of KPIs in the offer document:

KPIs approved for disclosure shall be included either in the ‘Basis for Issue Price’ chapter or the ‘Business’ chapter of the offer document in the format as prescribed in the Industry Standard Note.

• Standards for presenting KPIs:

• • The unit of measurement of financial indicators (such as lakhs, millions, crores etc.) shall be disclosed in a format that is prescribed under the SEBI ICDR Regulations and consistent with financial disclosures in the offer document.
  • While presenting financial indicators in a foreign currency, the issuer company shall also present them in equivalent Indian Rupees.
• Continuous disclosures requirements of KPIs:
  • Issuer Company shall disclose all the KPIs which were disclosed in the offer document, on a periodic basis, at least once in a year or for any lesser period as determined by the Issuer Company. The period for such disclosures must continue for at least the later of the following:

1. 1. 1. One year after the listing date, or the period specified by the Board, whichever is later; or
      2. Until the issue proceeds are fully utilized, as per the disclosure made in the “Objects of the Issue” section of the prospectus.

• • Issuer company to exclude the KPIs that have become irrelevant during the afore-mentioned period, or that no longer reflect the current business model due to changes in the business environment or other reasons.

For ease of reference, please refer to the circular hyperlinked below.

Source: SEBI (NSE)

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