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CRISIL: Higher IPO graded companies enjoy better valuation

Companies with higher IPO grades command superior valuation driven by stronger fundamentals, a study by Crisil shows.

"For the period under review (May 2007 - June 2012), these companies weathered the business cycles (global meltdown in 2008-2009, followed by a slowdown during 2011-2012) better on the back of robust business fundamentals, superior management strength and good governance practices," it said.

Since all these parameters are taken into account in the IPO grading process, it said, this finding is a reflection of the effectiveness of the grading methodology.

Companies with an IPO grade of 5/5 (indicating strong fundamentals relative to other listed securities in India) enjoyed a higher P/B than companies with IPO grades of 1/5 and 2/5, respectively, it said.

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