Securities and Exchange Board of India has thrown out a job spinner with its mandatory IPO (initial public offer) grading norms, which is making rating agencies firm up plans to expand their headcount to cope up to the sudden surge in this business.
The four rating agencies authorised for IPO grading are planning a huge expansion in the headcount of their analysts -- with some of them planning more than four-fold jump in the total employee strength for this business.
"Our IPO grading unit currently comprises 12 analysts and we plan to add another 30-40 analysts in next 2-3 months," Crisil managing director and chief executive officer R Ravimohan told PTI.
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The hiring would depend on the flow of the business and Crisil could even draw people from the equity and research wing if the flow of assignments is heavy, he said.
The four ratings agencies currently allowed to conduct IPO grading -- Crisil, ICRA, CARE and Fitch India -- are eyeing a market share of 25-35 per cent each.
On enhancing of employees strength catering to the new avenue of IPO grading, ICRA managing director Naresh Takkar said: Definitely ICRA plans to increase headcount but that would be specific to the demand.
If there are too many IPOs pertaining to specific sector, number of analysts in that particular sector would be increased, he said adding the decision would be taken once the business starts flowing.
It is estimated that over 150 IPOs are likely to tap the market to raise close to Rs 45,000 crore (Rs 450 billion) this year, which could result in over 250 IPO gradings as the companies are allowed to go for multiple ratings for their issues.
"We keep recruiting people and with business slated to grow in this segment we will also increase the headcount, CARE Ratings executive director D R Dogra said.
Another rating agency entrusted with the job of grading IPOs, Fitch India, which so far has no experience of this business is exploring the opportunity.
The agency was working out the modalities, but it has not taken any concrete decision so far, as the Sebi decision had come recently, Fitch India managing director Amit Tandon said.
The rating fee would be 10 basis points (0.1 per cent) of the issue amount, while the agencies could charge between Rs 10-20 lakh (Rs 1-2 million) per grading for big-ticket issues.
Besides, big size IPOs can go in for multi agency grading as well and the fee would vary from case to case basis, CRISIL managing director Ravi Mohan said, adding that the charges could be higher for multi-location and conglomerates companies.
The IPO grading business could account for about 10 per cent of a rating firm's annual turnover, analysts believe.
ICRA's total revenues stood at about Rs 56 crore (Rs 560 million) and Crisil's were Rs 250 crore (Rs 2.5 billion) in FY06.
Crisil has rated seven IPOs, CARE six grading and ICRA has also come out with about six ratings so far. Fitch India, which has not come out with any IPO grading so far, is also in the process of firming up its plans.
