Does an IPO grade, which indicates 'Strong Fundamentals’ mean I could subscribe safely to the issue?

Does an IPO grade, which indicates ‘above average or strong fundamentals’ mean I could subscribe safely to the issue?

            1. Yes, because company will progress and give higher return in future.

            2. No, it should be read with disclosure in prospectus, risk factors and price at which shares are offered in the issue.

            3. Optional, because grading is not a guarantee for high return

Answer:

2. No, it should be read with disclosure in prospectus, risk factors and price at which shares are offered in the issue.

Explanation:

An Initial public offering (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 Scale

CRISIL IPO Grade Assessment.. 5 / 5 Strong fundamentals.. 4 / 5 Above average fundamentals.. 3 / 5 Average fundamentals.. 2 / 5 Below average fundamentals.. 1 / 5 Poor fundamentals..

Src:

http://investor.sebi.gov.in/

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