Small Monsters + Improved Grab?

[grep]

I'm specifically talking about the darkmantle here, but it could apply to other monsters as well. The description for improved grab says that it can only use the ability on creatures at least one size category smaller than itself. This means that it can only use the ability on tiny creatures. Is this correct? Can it use any aspect of the improved grab ability (grapple checks carry no size penalty), or is it just not very useful? It certainly makes sense if you think about catching prey, but the most that the ability would threaten would maybe be a wizard's familiar.