Security and Exchange Board of India (SEBI), has decided to continue the compulsory grading of IPOs. Earlier, it was determined that the decision would be reviewed as per the experience gained. There were doubts on the significance of the present system as the grading does not reflect in the performance of these issues in the markets.
According to a source, they have decided to maintain a status quo that is to continue to have a mandatory grading for IPOs. As per the members of the Primary Market Advisory Committee (PMAC), the decision is taken as it is too early to come to a conclusion on the effectiveness of the present policy of mandatory IPO grading.
However, many analysts believe that mandatory grading requires modification since grading does not reflect in the performance of issues in the market.SEBI had made grading mandatory for all IPOs where draft offer documents filed with the regulator on or after May 1, 2007, and made issuers accountable for the cost of grading. After that, about 100 IPOs have been graded by credit rating agencies.
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