Introduction
In February, 2025 SEBI issued a circular regarding standards for KPI (Key Performance Indicators) Disclosures in draft offer document or offer document developed by the ISF (Industry Standards Forum) comprising of representatives from ASSOCHAM, CII and FICCI with the assistance of stock exchange to bring about uniformity and clarity. SEBI (Issue of Capital and Disclosure Requirements), Regulations 2018 (ICDR Regulations) mandates the issuer companies to reveal Key Performance Indicators (KPIs) in Initial Public Offer (IPO) documents to determine the reasoning behind the issue price of the shares. These new standards shall be applicable to any offer document made on or after April 1st, 2025. This action is appropriate and required at the present juncture as proceeds from IPO in India grew by 314% from 2021 to 2022. Reflecting a booming startup ecosystem, favourable interest rates, and investor optimism. Concerns like pricing irregularities and insufficient financial transparency in offer documents, particularly for retail investors, are persistent issues that underlie this expansion. In a quick breakdown, KPIs are quantifiable metrics used for evaluating a company’s position in the market. It is a method to weigh a company’s success compared to objectives aimed and other players in the market. Whether it’s foot traffic for retail, occupancy rates for hospitality, utilisation rates for manufacturing, etc., they assist executives in concentrating on the indicators that are most important to their sector. KPI can be focussed on finance like operating expense ratio or on marketing like Return on Ad Spend (ROAS). They also vary from industry to industry for example E-Commerce company like Nykaa would highlight metrics like Average Order Value (AOV) and banks such as SBI would emphasize Non-Performing Assets (NPAs) to reflect credit health and solvency. SEBI hopes to close the knowledge gap in IPO valuations by requiring standardized KPI disclosures, which will empower investors to compare various industries more intelligently and based on data.
SEBI’s framework for standardized KPI Disclosures in IPOs to empower retail investors
Consequently, the newly introduce industry standards starts out with the definition of KPIs as a key numerical measures of an issuer company’s historical, financial and operational performance which is aimed to help investors while evaluating options. Furthermore, they have been categorized into GAAP financial measures (EBITA), Non-GAAP financial methods (return on capital employed) and other operational indicators (cost per unit) and each of these terms should be well-defined using Accounting Standards (Ind AS), the Companies Act, SEBI regulations, or in their absence, a clearly articulated and industry-aligned definition. It also requires KPIs to be quantifiable and measurable excluding any subjectivity or qualitative elements.
Moreover, the new framework holds the management responsible for the identification and certification process of the KPIs from the following (a) information that was shared over the last three years to the investors in primary or secondary issues. (b) KPIs used internally by the board. (c) metrics used to arrive at the share price. Data deemed to be outdated, unverifiable or sensitive (provided that similar data is not disclosed by peers) may be excluded but the reasoning behind the same should be recorded in a note to the audit committee. Before being incorporated into the final draft KPIs must be certified by Managing Director (MD) or Executive Director (ED) or Chief Financial Officer (CFO) or manager on behalf of the management of issuer then subsequently approved by the audit committee.
These standards are wholly meant to empower the investors, before the companies launching an IPO could cherry-pick some metrics to showcase a certain narrative which might not be authentic. Now with standardized definitions and formulas which are derived from consistent time line and not individually chosen which otherwise lead to fabricated metrics. By these standards investors can now gain the information which was before privy to institutional players. Institutional players like Insurance Companies and Investment Banks make large scale investment which is based on information driven through advanced analytical tools and preferential information channels like anchor investor rounds and private consultations which gives an edge to these private entities over retail investors, but SEBI’s move comes to solve this information asymmetry. Retail investors can now juxtapose different companies on similar metrics and evaluate their options. The new provisions require the KPIs to be tied to the “Basis for Issue Price” section, so that the valuation the company put forth is connected to verifiable data. Moreover, SEBI entails continuous disclosure of the same. As a result, transparency becomes a regulatory requirement, creating more fair market for India’s capital market ecosystem.
Limitations of a Standardized Approach to KPI Disclosures
SEBI’s move to standardize KPI disclosure, is a transformative step towards levelling the playing field- securing that retail investors have access to consistent and empirical data that was previously only privy to institutional players. But, this blanket cover over industries undermine the objective of an informed investor decision making. Moreover, it hinders the ability an firm to build an IPO issue price with KPIs relevant to their sector.
The problem posed by these new standards lie in the fact that KPIs are very industry specific and completely showcase different scenario when put in an specific context. For example good performance for banks maybe reflected by KPIs like Net Interest Margin (NIM) which signifies financial health whereas manufacturing companies may highlight a different KPI. According to empirical research, nature of the firm’s operations and capital structure determine how KPIs like Return on Assets (ROA), Return on Net Worth (RONW), Net Asset Value (NAV), and Profit After Tax (PAT) affect IPO offer pricing. Moreover, in retail and FMCG (Fast-Moving Consumers Goods) Companies, gross margin per product line, supply chain efficiency metrics like Order Cycle Time are important in judging the firm’s competitive position. Comparatively in telecom sector, metrics like subscriber churn, Average revenue per user, are more relevant and apt in calculating operational efficiency. This demonstrates how these metrics are highly industry specific and cannot be directly compared as success and performance is measured differently across these industries. KPIs can skew performance narratives and lessen the interpretive value of disclosures when they are applied consistently without sectoral adjustment, as analysts and academic observers have underlined time and time again. Therefore, this standardisation though provides an customer with an reliable view of a company’s performance but they should be flexible and industry specific so that accurate performance can be judged.
Conclusion
SEBI’s 2025 requirement for standardised KPI disclosures in IPO offer documents is a good step towards making financial information more accessible to everyone and making India’s capital markets more open. It aims to give retail investors the same analytical tools that institutional investors have had access to in the past, which will help fix long-standing problems with how IPOs are valued. However, the uniformity it requires can be difficult to apply across India’s very diverse industrial landscape. For example, what signals strength in banking may not be relevant in a tech startup or retail business. As tech-based startup emerge in the market, traditional metrics might not stand relevant and end up becoming redundant in capturing firm’s long term viability. A more adaptable, hybrid regulatory strategy is required to maintain the legitimacy and utility of IPO disclosures; this approach must guarantee comparability while permitting sector-specific KPIs to represent operational reality. Customised disclosures that are grounded in the sector and have well-defined procedures can achieve a balance between relevance and consistency. All parties involved in India’s financial markets should benefit from a more knowledgeable, fair, and resilient investing environment if SEBI’s program is carefully modified.
References
1. Smith, S., & Van Der Heijden, H. (2017). Analysts’ evaluation of KPI usefulness, standardisation and assurance. Journal of Applied Accounting Research, 18(1), 63–86. https://doi.org/10.1108/JAAR-06-2015-0058.
2. Shehata, N., Salhin, A., & El-Helaly, M. (2023). The use of KPIs disclosure and firms’ characteristics: Evidence from the UK. Journal of Risk and Financial Management, 16(3), 135. https://doi.org/10.3390/jrfm16030135.
3. Khaitan & Co. (2025, April). SEBI mandates Key Performance Indicators (“KPIs”) disclosures in the draft offer document and offer document under SEBI ICDR Regulations, 2018 for IPO-bound companies. Lexology. SEBI mandates Key Performance Indicators (“KPIs”) Disclosures in the draft Offer Document and Offer Document under SEBI ICDR Regulations, 2018 for IPO bound Companies – Lexology.
4. Ashar, Y. J., Lahoty, M., & Roy, A. (2025, March 4). SEBI’s new KPI standards for IPOs: Key takeaways. India Corporate Law – Blogs. Cyril Amarchand Mangaldas. SEBI’s New KPI Standards for IPOs: Key Takeaways | India Corporate Law.
5. Securities and Exchange Board of India. (2025, February 28). Industry standards on key performance indicators (“KPIs”) disclosures in the draft offer document and offer document https://taxguru.in/sebi/sebi-issues-guidelines-kpi-disclosures-ipos.html
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