Credit rating agencies are gearing up for increased activity following market regulator Sebi's decision to make grading of initial public offerings (IPOs) mandatory.Crisil, the biggest of the four rating agencies in the country, plans to expand its team shortly. R Ravimohan, managing director, Crisil said around 20 companies were currently in talks with the company for IPO grading.According to him, contrary to market perception, IPO gradings would not cost much to the issuers.Ravimohan said Crisil would be charging 10 basis points of the amount to be raised with a ceiling of about Rs 10-15 lakh. Thus, even in the case of a mega-IPO, there would be a cap on fees, he noted.Around a 100 IPOs hit the market on an average every year. However, despite this seemingly big number, the total receipts for the entire rating industry on account of grading fees would be only about Rs 10-15 crore.Naresh Takkar, managing director, ICRA, while not revealing the fee structure for IPO grading, said it would be similar to what the agency was charging for debt instruments."IPO grading will not be our main activity, it will be one among the many other activities we undertake."Incidentally, the experience of IPO grading, which started on a voluntary basis last year, has not been good with rating agencies having graded IPO plans of 17 companies but only 3-4 of them actually went ahead with their offerings.
