Test

EQUITY INSIGHTS

Companies with higher IPO

grades command higher

P/E: CRISIL Equities

Urmil Shah

Analyst, Equities - CRISIL Research

Chetan Majithia

Head, Equities - CRISIL Research

July 2010

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Companies with higher IPO grades command higher

P/E: CRISIL Equities

CRISIL Equities’ analysis of 71 listed initial public offerings (IPOs), with a trading history of at least six months, graded

by rating agencies reveals that companies with higher IPO grades enjoy higher price-to-earnings (P/E) multiples.

Companies with a high IPO grade of 4/5 (indicating above average fundamentals) command average P/E multiple of

28x compared to 11.2x for companies with an IPO grade of 1/5 (indicating poor fundamentals). Companies with IPO

grades of 2/5 and 3/5 have been trading at average P/E multiples of 17.4x and 23.5x, respectively. No IPO so far has

been graded 5/5 (indicating strong fundamentals). An earlier study of 56 listed companies carried out by CRISIL

Equities in January...