The Securities and Exchange Board of India (“SEBI”) issued a circular announcing the adoption of the Industry Standards on KPI Disclosures in the Draft Offer Document and Offer Document (“KPI Standards”) on February 28, 2025, which shall be applicable to all IPO draft offer documents/offer documents filed on or after April 1, 2025.

By way of quick background, KPIs are indicators, outside of accounting information, that investors analyse to evaluate a company. For instance, these may include the number of outlets for retail businesses, manufacturing capacity and volumes for manufacturers, daily users on a technology platform, and number of doctors and beds for a hospital company. Such KPIs vary across industries, and may also vary within industries, depending on the business models of the companies (more particularly in non-traditional businesses).

The identification and disclosure practices for KPIs in equity public offerings have been a topic of much discussion since SEBI formally introduced the KPI framework in November 2022. The Industry Standards Forum (ASSOCHAM, CII and FICCI, under the oversight of Stock Exchanges) was tasked by SEBI to come up with industry standards in this respect, which have now been notified and made mandatory.

This blog is restricted to review of certain key aspects of the KPI Standards, as discussed below.

Evaluation of Investor and Board Information: The KPI Standards require the issuer to collate all key financial and operational metrics shared with investors and/ or used by the company’s board of directors or management to track the company’s performance in the preceding three years, as part of a core data set that will be evaluated for disclosure as KPIs in the offer documents (“Master Data Sheet”). This would be the key source document.

All information shared: (a) with allottees in a primary issuance, (b) as part of any offer letters, (c) with investors, or (d) with purchasers in a secondary sale, where the issuer was involved, should form part of such Master Data Sheet. While this largely aligns with recent market practice, SEBI has explicitly outlined the groundwork it expects issuers to put in when preparing the Master Data Sheet.

Business Sensitive Data and Other Exclusions: Confidential or business sensitive data need not be disclosed as a KPI, provided similar data is not routinely disclosed by industry peers (to be read as publicly listed). In addition, any (a) projections, (b) unverifiable data that cannot be verified, certified, or audited, and (c) obsolete metrics considering changes in business model can be excluded. Any metric that is subsumed within an identified KPI may also be excluded.

New-age technology companies and other industry-first issuers may benefit from the permitted exclusion of confidential and business-sensitive data from their KPI disclosure. It is important to note that if similar disclosures are made by industry peers, the exemption shall not be available. If a company has no comparable listed peers in India but lists global listed peers in the offer document, it may need to disclose such metrics as KPIs. However, if issuers wish to discuss such data with investors in an equity public offering, it must be included in the offer documents. The specifically permitted exclusions for unverifiable or obsolete metrics are also helpful and reflective of market practice.

Defining KPIs: In its push towards more standardised KPI disclosures, the KPI Standards require that all KPIs be defined as per the relevant accounting standards, or as per the SEBI ICDR Regulations or the Companies Act, 2013, in that order. For any deviations, the issuer will need to disclose the rationale behind adopting an alternate definition in the offer documents. Further, where any KPIs are not defined in any of the above instances, the definition is required to align with ‘common industry practices’ and ‘widely-accepted international standards’, to the extent feasible.

For non-traditional businesses, including new-age technology companies, there is often ambiguity regarding what constitutes common and widely-accepted practices, more specifically for operational KPIs. Accordingly, issuers will have to be mindful of how their peers are defining/ reporting their KPIs – and any deviations must be discussed and recorded by the management. Where such peer KPIs are being included in the offer document, it is imperative that relevant explanation is provided.

Audit Committee Review and Approval: Under the SEBI ICDR Regulations, the audit committee is required to approve the KPIs being disclosed in the offer document. In this respect, the KPI Standards require the audit committee to evaluate, among others, (a) the Master Data Sheet, (b) the shortlist of KPIs proposed to be disclosed, and (c) specific rationale for excluding certain metrics from the Master Data Sheet in the KPI list. Further, detailed minutes of the deliberations of the meeting are also required to be maintained.

While largely in line with market practice, it would appear SEBI’s focus is to ensure a more informed approval by the audit committee. Thus, IPO-bound companies must ensure that a thorough deliberation is carried out in the audit committee meeting, prior to the approval of the final KPI list. In some instances, one may also consider discussing this with the entire board of directors.

Continuous Disclosure Requirements: Building on good disclosure principles already established under securities laws, since November 2022, SEBI has specifically mandated issuers to disclose all KPIs on a periodic basis, at least once a year, until the issue proceeds are fully utilised or one year from listing, whichever is later. The KPI Standards have clarified that if any KPIs become irrelevant during such period or no longer reflect the business model, they may be excluded from the continuous reporting obligations, provided the rationale is disclosed. Further, all continuing KPI disclosures must be approved by the audit committee and the board of directors.  

The KPI Standards attempt to bridge any existing gap between information shared with private market investors and disclosures in an equity public offering. The regulator is also seeking to ensure consistency with data disclosed by comparable listed companies, while eliminating detailed or granular data that may not be necessary for public market investors or could potentially cause confusion. While most of the suggested steps were already being followed, considering recent SEBI scrutiny and guidance, issuers and other stakeholders do stand to benefit from clearly defined data collation and identification processes and disclosure norms. Certain challenges remain, such as the push towards standardised definitions, which may require further deliberation among the various stakeholders.