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The capital market regulator SEBI is all set to do away with compulsory grading of IPOs.
Speaking at a conference organised by the Association of Investment Bankers of India in Mumbai on Tuesday, SEBI Chairman U.K. Sinha said: “In the next one week to 10 days, we will be taking up a suggestion that IPO grading should not be made compulsory.”
IPO grading is done by credit-rating agencies (CRAs) registered with SEBI.
The grade represents a relative assessment of the fundamentals of the issue in relation to the other listed equity securities in India.
The move will help companies planning to launch IPOs to save on costs related to IPO grading, as these expenses are borne by the respective companies.
Since May 1, 2007, any company planning to float an IPO, had to obtain a grade from at least one CRA. Sinha said the regulator also plans to expand the list of companies eligible to issue self prospectus. The SEBI chief said the regulator was planning to travel this month to various SME clusters, along with private equity players, to explain the new rules of fund raising for micro, small and medium enterprises.
He said SEBI would take the help of SIDBI in this regard to identify promoters, who are willing to move to the next level.
‘Reach out’ He urged the investment banking community to think and provide long-term suggestions for the development of the capital market.
“We need to know from you (investment bankers) what other measures need to be taken,” he said.
He also asked the investment bankers to reach out to potential issuers.
He was willing to put forward the suggestions of the investment banking fraternity to the Government.
Sounding a word of caution, Sinha said India was at a level of deceleration, which was higher than the rest of the world, as this year had been particularly bad.
He observed that the need for capital will be huge even if India’s GDP grew at about 5 per cent and this requirement would come from infrastructure and bank capitalisation to comply with Basel III norms.
> raghavendrarao.k@thehindu.co.in
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