EVALUATING MANDATORY IPO GRADING REGIME IN INDIA: WHY WAS IT SCRAPPED?

IPO grading is once again in the news. SEBI has finally scrapped the controversial system of IPO grading in June, 2018. The objective of this study is to examine the effect of IPO grading on some important variables during the period when it was mandatory. The study covers all IPOs issued and listed on the NSE website during 2009 to 2013. It is found that IPO grading successfully captures investor demand and issue size but no significant relationship is found between grading and underpricing. The study brings into focus IPO certification issues and concludes that IPO grading was scrapped as grading process involved too many loopholes which prevented it from becoming a credible certification mechanism