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Journalism of Courage
Sebi8217;s decision to make grading of IPOs mandatory has triggered a negative reaction in industry circles. Standard Chartered Mutual Fund head of investments Rajiv Anand said, 8220;I am not sure what is being graded. One can rate various aspects of an IPO, but the IPO as a whole cannot be graded.8221; The grades would be given on a scale of one to five.
Crisil MD and CEO R Ravimohan noted, 8220;The assessment of the fundamentals of a company would be based on five parameters 8212; earnings per share, financial risks, accounting quality, corporate governance and management quality.8221; However, market players are pointing out that the grading process will not take into account price valuation, a key parameter in any stock investment decision.
Ravimohan pointed out, 8220;Fundamental research will be provided by us. But we can8217;t be talking about 8216;what price8217; and 8216;at what point in time8217; because that varies across investors, and it is difficult for a centralised agency to become so detailed. The question of 8216;at what price8217; will be answered by investment advisors. So we will answer whether the company is good or bad and investment advisors will answer whether to buy or not.8221;
The grading fee will be borne by the companies. But the method by which a company would approach a rating agency 8212; which company would go to which agency 8212; is still not clear. Said ICRA managing director Naresh Thakkar, 8220;The fees charged will be a nominal percentage of the size of the issue. The percentage will be similar to what we charge for our normal debt ratings.8221;
