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IPO Grading

IPO grading is a system used in India where credit rating agencies approved by the Securities and Exchange Board of India (SEBI) assign grades to initial public offerings of stock on a five point scale based on the company's fundamentals compared to other listed companies. Higher grades indicate stronger fundamentals. IPO grading provides investors with an assessment of the "quality" of a company conducting an IPO, but does not recommend whether to invest nor predict future stock performance or suitability for individual investors.

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Shemal Morjaria
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54 views1 page

IPO Grading

IPO grading is a system used in India where credit rating agencies approved by the Securities and Exchange Board of India (SEBI) assign grades to initial public offerings of stock on a five point scale based on the company's fundamentals compared to other listed companies. Higher grades indicate stronger fundamentals. IPO grading provides investors with an assessment of the "quality" of a company conducting an IPO, but does not recommend whether to invest nor predict future stock performance or suitability for individual investors.

Uploaded by

Shemal Morjaria
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering

(IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities inIndia. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below.

IPO grade 1: Poor fundamentals IPO grade 2: Below-average fundamentals IPO grade 3: Average fundamentals IPO grade 4: Above-average fundamentals IPO grade 5: Strong fundamentals
IPO Grading is provided by SEBI approved rating agencies including CRISIL, CARE and ICRA.

The grading of an initial public offer (IPO) is a new product, launched in mid-2007 by CRISIL. It is the first time that a product like this has been launched anywhere in the world. It is important for investors to understand how to use the product correctly, so that they can derive best value from it. Properly used, IPO grading can empower you, the investors, to take considered and informed investment decisions. An IPO grade reflects CRISILs opinion on how strong the company making the IPO is on fundamental parameters, business prospects, financial performance, management capability, and corporate governance compared with other listed Indian companies. In other words it is an expert opinion on the quality of the company. Investors have been getting equity research and research on IPOs that conclude with a simple Buy, Hold or Sell recommendation. An IPO grade, by contrast, is neither an opinion on the issue price, nor a recommendation to buy, sell, or hold the shares. It is also not an opinion on the shares future market price or their suitability for a particular investor. In other words, as an investor you should not use the IPO grade to assess whether the price of the IPO is right. And lastly, the IPO grade by itself does not tell whether the IPO is a suitable investment for the investor

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