Indian retailer FirstCry is set to withdraw its papers for an up to $500 million IPO as early as next week, after India's markets regulator raised questions over key metrics it disclosed to investors, said three sources with direct knowledge of the issue.

FirstCry, backed by SoftBank, TPG and India's Mahindra and Mahindra sells baby products, including clothes, diapers and toys, seeking to tap the market for new parents in the world's most populous country.

FirstCry parent BrainBees filed papers with India's Securities and Exchange Board of India last December for an IPO that would have been one of the country's biggest this year. While it filed to raise about $215 million via fresh shares, it plans to raise $300 million more via sale of existing shares, the sources said.

However in recent weeks, SEBI told the company it had not complied with Indian regulations that mandate an IPO-bound company must share all key business metrics that in its papers that it has shared with prospective investors in the last three years, the three sources said.

FirstCry and SEBI did not return requests for comment.

SEBI introduced this rule in 2022, hightening scrutiny of companies looking to list, after wide-spread criticism on the seemingly lax oversight over large loss-making companies which have commanded lofty valuations.

FirstCry's Key Performance Indicators, or KPIs include its average order value, annual transacting customers and number of orders, its papers show.

FirstCry will now withdraw its IPO papers, make changes and refile them in the coming months, the sources said. That would delay the sale of shares by its investors, some of whose investments go back a decade.

For the year ended March 31, 2023, its losses jumped six times to $57.6 million, while its total income more than doubled to $684 million, its draft papers show.

($1 = 83.3125 Indian rupees)

(Reporting by M. Sriram; editing by David Evans)