| The IPO of Varun Industries, which received a 1/5 grading by rating agency Crisil, was subscribed 40 times. Similarly, Empee Distilleries' IPO was awarded a grade of 3/5 but has managed to garner 1.16 times subscription with one more day for the issue to close. |
| Capital market regulator Securities and Exchange Board of India made IPO grading mandatory from May in a move to provide investors some indication on the fundamentals of the companies' that plan to raise funds through initial share issuances. |
| "Currently, IPOs are graded according to the companies listed in the market. The company, whose issue is being graded, should be compared to the sector to which it belongs rather than to all the companies listed in the market. If the graded issue is of a company that is one of its kind in the Indian markets, it does not get as high a grade," said Huzefa Sitabkhan, Investment Banking, IDBI Capital Market Services. |
| Religare Enterprises that was awarded a grade of 3/5 by ICRA got subscribed nearly 152 times including the retail portion that got subscribed 45 times. Interestingly, investors also lapped up the Mundra Port and SEZ IPO, undeterred by the fact that the issue was not graded. |
| According to the data available on the NSE website at 4.30 pm, the issue got subscribed by 7.14 times with 2 more days for the issue to close. |
| Investors are aware that IPO grading is still an evolving process. Since it is currently based on debt analysis, it doesn't totally reflect the company. As the process becomes more widespread, grading agencies will give a grade, which will be a better reflection of the company whose issue is being graded, added Sitabkhan. |
| In fact, issues like Central Bank of India with a grading of 4/5 by CARE and Consolidated Constructions with a grading of 3/5 by ICRA got fully subscribed and fetched handsome listing gains for investors. |
| According to one view, though grading takes into account the fundamentals of the company, investors don't necessarily look at the grade while subscribing to a public offer in a bull market unless it is actually pointed out to them. |
| Sources said these companies generally approach agencies after receiving observations from Sebi and before filing the prospectus with the Registrar of Companies. |
| While grading an IPO, Crisil takes into account the company's track record of strong clients and collaborator relationship over an extended period, healthy revenue growth potential and corporate governance standards. |
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