Higher IPO graded cos continue to command high P/E: CRISIL

CRISIL Equities has come out with a research report on comparison between IPO grading and price to earnings (P/E). Their analysis of 117 listed initial public offerings (IPOs) graded by rating agencies reveals that companies with higher IPO grades continue to enjoy higher price-to-earnings (P/E) multiples, according to the report.

The report says, "Companies with an IPO grade of 5/5 (indicating strong fundamentals) command an average P/E multiple of 18.39x compared to 10.13x for companies with an IPO grade of 1/5 (indicating poor fundamentals). Companies with IPO grades of 2/5, 3/5 and 4/5 have been trading at average P/E multiples of 10.81x, 17.82x and 18.10x, respectively. This new analysis confirms three earlier studies (May 2009, January 2010 and July 2010) carried out by CRISIL Equities."

Tarun Bhatia, Director, Capital Markets, says,

Read More