FEATURES OF PRODUCT

SMERA’s Initial Public Offer Grading (IPO Grading) is a tool to provide independent, unbiased and relative assessment of the fundamentals of the IPO issue. IPO Grades are assigned on a five-point point scale, where IPO Grade 5 indicates the highest grading and IPO Grade 1 indicates the lowest grading, i.e. a higher score indicates stronger fundamentals. IPO grade needs to be read together with the disclosures made in the prospectus including the risk factors as well as the price at which the shares are offered in the issue.  The emphasis of the IPO Grading will help investors understand in a simple manner the risks, if any, associated with the issue, to the extent they relate to the fundamental analysis of the issuer company. The grade assigned to any individual issue represents a relative assessment of the 'fundamentals' of that issue in comparison to the universe of the other listed equity securities in India. The Grading is a one- time exercise and is done at the time of the issue

SMERA considers the following parameters for evaluation of IPO Grading:

1. Business fundamentals and prospects
2. Management evaluation
3. Corporate governance
4. Financial risk evaluation
5. Project related factors
6. Compliance and litigation history

IPO Grading involves rigorous evaluation of the business prospects, industry in which the company operates and volatility in earnings, analysis of the audited financials, auditor’s report and notes to accounts; consistent treatment of financials play an important role. The management evaluation includes assessment of their track record, the current position – role and responsibilities, and future sustainability of the issuer’s management. The evaluation of governance practices focuses on the board composition of the company, management practices, stakeholder relationship, transparency and adequacy of disclosure. Further, the pending & historical litigations and its impact on the fundamentals of the company are also assessed during the evaluation. Similarly, risks associated while implementing new projects such as: time over runs, cost escalation  and in extreme cases even non-completion of projects during construction phase is covered while assessing financial/operational and market risks for grading IPOs.

WHAT IPO GRADING IS NOT

• An IPO grade is NOT a suggestion or recommendation as to whether one should subscribe to the IPO or not. IPO grade needs to be read together with the disclosures made in the prospectus including the risk factors as well as the price at which the shares are offered in the issue.
• IPO Grading is NOT a recommendation to buy sell or hold the securities graded. 
• It is NOT a comment on the valuation or pricing of the IPO graded nor is it an indication of the likely listing price of the securities graded.
• IPO grading is NOT due-diligence or audit exercise or forensic exercise to detect fraud.
• The Grading does not have an ongoing validity.

IPO Grading Process






IPO Grading Scale

The SMERA IPO grading is  a five point  grading scale. The issuers with strong fundamental relative to its peers are assigned highest score “SMERA IPO Grade 5” and the issuers with poor fundamentals relative to its peers are assigned lowest score i.e. “SMERA IPO Grade 1”.

SMERA IPO Grade	Evaluation
SMERA IPO Grade 5	Strong fundamentals
SMERA IPO Grade 4	Above Average Fundamentals
SMERA IPO Grade 3	Average Fundamentals
SMERA IPO Grade 2	Below Average Fundamentals
SMERA IPO Grade 1	Poor Fundamentals

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