Sebi says IPO grading to help investors

NEW DELHI: Amid continuing debate on whether grading is mandatory for initial public offers, the market regulator Sebi chief M Damodaran today asserted that it was a step for helping average investors and the issue has not been understood properly.

While one section of market observers believe that the decision to make IPO grading mandatory was not warranted, others believe that it is a welcome step for stemming the "overheating" in this segment of primary market.

It's not just the economy whose "overheating" has become a matter of concern, the IPO market has got its own share and these measures, like mandatory grading and tightened disclosure norms, could just be the beginning of a prolonged process to tackle this issue, said an analyst.

According to IPO market tracking firm Prime Database, there are public issues worth 1,75,000 crore in the pipeline, while companies are estimated to raise as much as Rs 45,000 crore in 2007 alone from as many as 150 IPOs.

"Overheating has become a buzzword in Indian economy and while the broader macroeconomic issues are being addressed at institutions like Reserve Bank of India, Planning Commission and Finance Ministry, the market regulator Sebi is trying to do its own bit through measures like mandatory IPO grading and enhanced disclosure norms," said another broker.

However, another section believes there is no overheating and grading system could be a "waste" of time as India already has a good disclosure-based regime.

"There is no flooding in the IPO market, six to seven IPOs in a month is normal as our listed companies domain is still small," said, Primedatabase CEO Prithvi Haldea.