{"id":55841,"date":"2022-02-23T11:37:23","date_gmt":"2022-02-23T06:07:23","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=55841"},"modified":"2022-02-23T11:38:42","modified_gmt":"2022-02-23T06:08:42","slug":"sebi-moots-new-disclosure-norms-for-start-up-ipos","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/sebi-moots-new-disclosure-norms-for-start-up-ipos\/","title":{"rendered":"SEBI moots new disclosure norms for start-up IPOs"},"content":{"rendered":"

The capital markets regulator has proposed strict pricing norms<\/strong><\/a> for start-up IPOs. SEBI has proposed for more justification and transparency from the new age tech-companies in respect of pricing their share in IPOs. A discussion paper was issued by SEBI inviting public comments by March 5 2022. Let us discuss more on this development.<\/p>\n\n\n\n

Proposed Rules for start-up IPOs<\/h2>\n\n\n\n

SEBI has proposed rules wherein it seeks from new age tech-companies to provide a detailed explanation on how they price their shares for IPOs, compare it with pre-IPO share sales and publish pre-IPO investor presentations to assist investors in making informed decisions.<\/p>\n\n\n\n

 SEBI’s Observations<\/u><\/strong><\/p>\n\n\n\n

It has come to the notice of SEBI that most of the new age tech-firms do not have any track record of profitable operations for minimum last three years and such companies have been launching IPOs. These companies have been loss making for a longer duration before achieving break-even because they opt for scale over profits during their growth phase.<\/p>\n\n\n\n

Some of them have made public listings in the last year seeking to capitalise on a record rally in the stock market<\/a> however a majority of them are currently trading at discounted levels. As of now, companies disclose earnings made per share, price to earnings, return on net worth and net asset value and comparison of these accounting<\/a> ratios with their peers like companies having similar size in the similar industry.<\/p>\n\n\n\n

SEBI[1]<\/a><\/sup><\/strong> said that such traditional parameters cannot be applied to the new age tech-firms and it further said that disclosure in the basis<\/a> of issue price section especially for the loss making company should be supplemented with parameters that are non-traditional like key performance indicators and disclosure of few additional parameters like valuation based on past transactions\/fund raising.<\/p>\n\n\n\n

Disclosure on KPIs<\/h2>\n\n\n\n

SEBI has proposed rule in which the issuer company will be required to make disclosures on KPIs of the business of issuer company that has been considered\/have a bearing for arriving at the basis of issue price. SEBI has proposed that the issuer shall provide-<\/p>\n\n\n\n