SEBI all set to make IPO grading mandatory

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SEBI all set to make IPO grading mandatory


KOLKATA: The Securities & Exchange Board of India’s is all set to make grading of initial public offers (IPOs) mandatory. Addressing newspersons at a workshop on capital market for journalists organised by the market regulator on Saturday, Sebi chairman M Damodaran said the primary market advisory committee headed by Deepak Parekh have recommended making grading of IPOs compulsory.

A final decision is expected to be taken by Sebi at its next board meeting scheduled for January 2007. Mr Damodaran said the onus of getting IPOs graded will not be with the concerned company primarily because they would then become the owner of that information. Instead, the cost will either be borne by Sebi’s investor protection fund as and when it is set up or by stock exchanges.

The gradings in the range of one to five will be done by credit rating agencies. Apart from strengthening retail investors understanding of an IPO, the gradings will also help investors obtain information about the quality of the offer and take an informed decision.

“In a regime of increasing disclosures, documents are getting voluminous discouraging investors from entering into the market. An expert rating agency will be able to capture in a few paragraphs the risk factors and whatever else is important to know about the offer,” Mr Damodaran added. Presently, grading of IPOs is not mandatory. Sebi is also addressing issues in mutual funds. It is working with them to reform fee structuresm and prevent distributor malpractices.

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SEBI proposes to make grading of IPOs mandatory

SEBI proposes to make grading of IPOs mandatory

Mumbai: The Securities and Exchange Board of India (SEBI) has proposed to make grading of initial public offers (IPOs) mandatory, its chairman M Damodaran said.

He was speaking at a workshop on capital market for journalists organised by SEBI.

He said the basic idea for making grading mandatory would to help investors in getting information about the quality of the IPO. Grading would be in the range from one to five, and would be done by the credit rating agencies, he said.

Damodaran said expenses for grading exercise would be either borne by SEBI or the stock exchanges and not by the company coming out with the IPO.

At present, grading of IPOs was not mandatory.

He said the primary market advisory committee, headed by Deepak Parekh, would soon give recommendations on these lines. SEBI would take a final decision after the panel submitted its report.

SEBI, meanwhile, was close to taking a call on the issue of allowing stocklending and short-selling by institutions.