new Delhi: The Securities and Exchange Board of India (SEBI) has strengthened its probe into IPO-bound companies by questioning how key internal business metrics are used to arrive at valuations.
This new check and balance process has upset some bankers and companies, who now fear delays in listing plans, sources told Reuters.
It is said that after the Paytm debacle, the regulator has come up with stricter norms. Sebi’s decision hints at the flop listing of online payments firm Paytm’s $2.5 billion IPO in November last year, which, according to a Reuters report, criticized the loss-making firms’ loose monitoring of price issues, some People say there are high valuations. ,
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Last month, the markets regulator expressed concern in proposing stricter disclosures, saying more and more new-age tech firms that are “generally making losses over the long term” were filing for IPOs. , and traditional financial disclosures “may not help investors.” But even before the proposal is finalized, SEBI has in recent weeks asked several companies to get their non-financial metrics, KPIs, or key performance indicators audited, and then state that the valuations of IPOs, five banking how they were used to reach and legal sources said.
Typically for a tech or app-based startup, KPIs can be statistics such as the number of downloads or average time taken on a platform, metrics that are disclosed but difficult to audit or link to a company’s valuation, the sources said. it happens.
According to one lawyer, the regulator is asking us to “justify the assessment”, saying it is “creating uncertainty and increasing the cost of compliance.”
SEBI, however, did not respond to a request for comment.
Regulators in major global markets, including Hong Kong, follow practices that subject companies to stringent scrutiny regarding their business practices and financials, but they do not typically conduct close scrutiny on valuation metrics.
A February document includes Sebi’s remarks to the IPO-bound firm, asking for clarification on “how KPIs are grounded” to arrive at the IPO issuance price, saying they need to be “a certified by the Statutory Auditor”.
Digital healthcare platform PharmEasy, which filed papers for an $818 million IPO in November, is one such company that has come under scrutiny. A source with direct knowledge said the company has raised concerns with Sebi regarding auditing and supply of such details and some relaxation is likely. PharmEasy also did not respond to a request for comment.