The Securities and Exchange Board of India (Sebi) has exempted rating agency Credit Analysis and Research (CARE Ratings) from the mandatory grading process before its initial public offering (IPO), set to hit the market next week.
Earlier, the company had approached Sebi, seeking exemption from the mandatory procedure, saying this would have resulted in a rival rating agency gaining access to its books and insider information. "While assigning the IPO grading, the grading agency evaluates the issuer company's business operations. This would imply sharing its business information with a competitor," said D R Dogra, managing director and chief executive, CARE Ratings.
Dogra said the company had made all the relevant disclosures pertaining to its business operations, financials and risk factors in its offer document to ensure investors took informed investment decisions.
An email sent to Sebi seeking comments on the matter didn't elicit any response.
According to Sebi regulations, companies have to secure grading for its offering from at least one credit rating agency registered with the regulator. In May 2007, to increase transparency and disclosures, Sebi had made IPO grading compulsory. Grading is aimed at helping investors assess the fundamentals of an IPO in relation to its peers.
An investment banker involved with the CARE Ratings issue said the rationale behind asking for an exemption wasn't hiding information from investors. The company didn't want rivals to know its business strategies, he added.
According to people in the know, CARE had suggested its issue be graded, based on information available in the public domain. However, most agencies were unwilling to grade the issue in this manner.