SEBI Tightens Rules over KPI Disclosure by Start-Ups Planning IPOs: Report 

The Securities and Exchange Board of India (SEBI) has decided to increase its scrutiny of the disclosure of key performance indicators (KPIs) by IPO-bound start-ups, as per a report by CNBC-TV18. 

A start-up that had to refile its draft red herring prospectus was FirstCry. The regulator had asked the company to refile its draft papers because of inadequate disclosure of the start-up's key performance indicators, as per a report by the Economic Times. 

While SEBI had sought 25 KPIs, around 5–6 were disclosed by FirstCry in its timings. Average order value, number of orders, and annual transacting customers are some of the KPIs. 

Speaking to CNBC, a source said, “It’s not just FirstCry; SEBI has tightened scrutiny on all IPO filings. The impact is more on the new age space where investor concentration is very high and SEBI wants them to disclose much more information than what are considered KPIs by the companies.” 

As per the report, the regulator has mandated that all KPIs that have been shared with private investors in the last three years be included in the DRHP. Issuers may choose not to disclose, though, by giving SEBI explanations for their decision. 

This rule was implemented by SEBI in 2022 in response to widespread criticism of the agency's allegedly inadequate supervision of sizable loss-making firms that have attracted exorbitant valuations. The industry is looking forward to having a standard framework for KPI disclosures; however, some are of the opinion that this will lead to a delay in the process of start-up IPOs getting approval from SEBI, as per the report. 

Global IPO regulations are focused on disclosure and forbid making any predictions about the issue's future marketing. As a result, the issue price is determined by conventional metrics like the P/E ratio and NAV, as well as by market conditions, historical patterns in KPIs, valuations from prior fundraising rounds, and trends in KPIs.