To address concerns regarding the selective disclosure of key performance indicators (KPIs) by startups ahead of their public offerings, market regulator SEBI has ramped up scrutiny on the disclosure of KPIs, according to sources familiar with the matter speaking to CNBC-TV18.
The regulator now mandates that all KPIs shared with private investors over the past three years must be disclosed in the Draft Red Herring Prospectus (DRHP), the sources revealed. However, issuers have the option to withhold disclosure by providing valid reasons to SEBI.
This action comes in response to instances where startups have selectively disclosed KPIs in their offer documents. Notably, FirstCry recently faced additional disclosure demands from SEBI, leading the company to refile its offer document with additional KPI disclosures.
SEBI and FirstCry engaged in discussions for over a month before the regulator requested further clarity from the company last week.
Sources also indicated that all IPO filings are currently under scrutiny.
This heightened scrutiny from SEBI follows concerns raised over new-age internet companies failing to deliver returns to retail investors in the past, notably seen in cases like Paytm and others.
SEBI had introduced this rule in 2022 to bolster oversight of companies seeking to list, following widespread criticism of perceived leniency in overseeing large loss-making companies with high valuations.
