IPO grading: Do selection of Credit Rating Agencies affect under pricing?

In this paper we explored the Initial Public Offer (IPO) grading as introduced by the Indian Capital Market Regulator (SEBI). Around six years have passed after, IPO Grading was made mandatory. There are both proponents and opponents of this move, among the various stakeholders of the Indian capital market. The aim of this exercise was to disseminate relevant information in the public domain. There are five Credit Rating Agencies, registered with the regulator, and entrusted with the grading of the IPO bound companies. One of the expected outcome of the IPO grading is efficient price discovery. Post listing the stock price may settle down at the same level, lower or higher than the offer price, at the close of the first day's trading. If the price settles higher than the offer price, the issue was under priced. In this paper we explored whether IPOs graded by various credit rating agencies, have the same extent of under pricing. The statistical analysis showed, that there is no significant difference in under pricing, as far as different companies graded by the different credit rating agencies are concerned.