Currently the mandatory grading of initial public offers (IPOs) in India by credit rating agencies will continue. SEBI's Primery Marekt Advisory Committee (PMAC), which had undertaken a review of the grading, has decided go with the process now.SEBI had asked PMAC to evaluate the grading of IPOs that was made mandatory in May, 2007. The industry is criticizing mandatory grading and wants the process to remain optional.
It has argued that the mandatory grading has increased the cost of raising funds along with delay in the IPO process which the market regulator was attempting to make faster and shorter. Grading expenses can be as high as one percent of the total issue size.
It has argued that the mandatory grading has increased the cost of raising funds along with delay in the IPO process which the market regulator was attempting to make faster and shorter. Grading expenses can be as high as one percent of the total issue size.
For getting rating from at least one agency, which is mandatory for an IPO, a company has to disclose all grades it obtains in the prospectus. Mandatory rating of debt offers has been in practice for sometime now.
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