SEBI, the Indian securities market regulator has set a unique example for the entire world by introducing IPO grading in India. The purpose of this grading was to provide retail investors with a ready-made assessment of the fundamental quality of the issuer of an IPO, so they could make a better and informed investment decision in an era of information overload. Grading of IPOs is subject to severe criticism. Critics question efficacy and effect of this process. Based on the study of 319 IPOs, inclusive of 97 graded IPOs, findings of this paper suggest that IPO grading do have fairly strong negative effect on underpricing.