The March 2025 edition of Fox & Mandal's newsletter examines SEBI's revamp of industry standards on KPI disclosures; standardization of LODR disclosures; classification of homebuyers under buy-back schemes as allottees under the Real Estate (Regulation and Development) Act, 2016; IBBI's amendments for enhanced information clarity in the insolvency resolution process; RBI's framework for bond forward transactions in government securities; CCI's draft regulations for a more precise assessment of predatory pricing; and other legal and regulatory changes in India's corporate, capital markets, real estate, insolvency, and banking sectors, and their business impact.
SEBI revamps industry standards on KPI disclosures
Revised KPI standards applicable from April 1, 2025
The Securities and Exchange Board of India (SEBI) has introduced new industry standards for Key Performance Indicator (KPI) disclosures in draft and final o er documents for Initial Public Offerings (IPOs), which shall be applicable from April 1, 2025 (Circular).
KPIs are key numerical measures of an issuer company's historical financial and/or operational performance, evaluated and tracked by its management to monitor its performance and provide information to investors for an informed valuation. In the context of an IPO, KPIs provide insight into the growth prospects of the company to prospective investors.
Following are the key features of the Circular:
- Formalisation of KPI classification:
- Generally Accepted Accounting Principles (GAAP) financial measures: Metrics disclosed in accordance with GAAP offer standardised insights into the financial health of the issuer.
- Non-GAAP financial measures including financial ratios: Non-GAAP financial measures adjust GAAP financial metrics by including or excluding specific items to provide a refined view of the company's financial performance and, along with financial ratios, support a deeper financial analysis.
- Operational measures: Data points, other than traditional financial metrics (GAAP and non GAAP financial measures), that reflect various aspects of a company's operations, performance, or condition, providing a broader understanding of the company's operational efficiency and sustainability. E.g. research and development expenses, occupancy rates, and leasable area.
- Mandatory nature: The new industry standards are mandatory for all IPO-related o er documents filed on or after April 1, 2025.
- Uniformity in disclosures: The objective is to
standardise the disclosure of KPIs to:
- Ensure consistent and transparent reporting
- Enable comparability across companies within the same industry
- Eliminate discrepancies between private market investor disclosures and public equity offering requirements
- Disclosure process requirements: The Circular
provides detailed guidelines on:
- How KPIs should be defined and classified
- The process for identifying, collecting, and shortlisting KPIs
- The roles of management, statutory auditors, and the audit committee in certifying and approving the KPIs
- Continuous disclosure: Issuers must continue to report all the KPIs mentioned in their o er documents at least annually for a specified duration post-listing (or until the use of issue proceeds is complete). Issuers have the option to discontinue reporting if a KPI becomes irrelevant, provided they disclose the rationale.
- Protection of sensitive information: Confidential or business-sensitive data is exempt from mandatory disclosure if similar data is not shared by listed peers. However, if such KPIs are discussed during IPO roadshows, they must appear in the draft o er document.
SEBI's standards for KPI disclosure aim to harmonise discrepancies between private market investor disclosures and public equity offering requirements. By ensuring consistency in disclosure, SEBI seeks to enhance comparability and transparency without overwhelming investors. While most of these requirements align with existing market practices, the push for standardisation may require further industry discussions. Issuers must establish robust processes for data collection and disclosure to ensure compliance, which, in turn, is expected to enhance investor confidence by reducing ambiguity and improving the quality of information available for valuation
Recent Developments In India's Corporate & Commercial Laws - March 2025
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