SEBI makes grading of IPOs mandatory

Mumbai: The Securities and Exchange Board of India (SEBI) has made grading of initial public offers (IPOs) mandatory for all companies beginning May 1.

The new guidelines are issued to help investors make informed decisions, SEBI said in a statement.

The grading, to be done by the SEBI-registered credit rating agencies, would be applicable to all IPOs for which offer documents are filed after April 30, the market regulator said.

Companies would be required to obtain grading from at least one rating agency and disclose the grades in the prospectus, issue advertisements and all other places where the issuer is advertising for the IPO, SEBI said.

Expenses incurred for grading of IPOs would have to be borne by the issuer, the guidelines said.

Also, under the new guidelines, only companies having listed history of at least one year are allowed to make `qualified institutional placements'' (QIP).

SEBI has amended the disclosure and investor protection (DIP) guidelines to incorporate the changes.

For preferential allotment, the SEBI guidelines say companies with listed history of less than six months would be enabled to make preferential allotment, subject to certain conditions like compliance with modified pricing and disclosure norms.

At present, companies with a listed history of at least six months are allowed to make preferential allotment.

To provide more clarity with regard to promoters'' contribution, SEBI said that securities pledged with banks or financial institutions as collateral security will not be eligible for computation of promoter''s contribution.