Investor Preference and Promoter's Ownership Pattern in Graded IPOs of India

Indian Journal of Finance, Volume 6, Number 12, pp. 18 - 25 (ISSN 0973-8711)

20 Pages Posted: 10 Apr 2013

See all articles by Sanjiv Mittal

Sanjiv Mittal

Guru Gobind Singh Indraprastha (GGSIP) University - University School of Management Studies

Naresh Gupta

University of Delhi

Sudesh Kumar Sharma

Sinhgad Institute of Management & Computer Application; Sinhgad Institute of Management

Date Written: June 11, 2012

Abstract

SEBI, the Indian securities market regulator has set a unique example for the entire world by introducing IPO grading in India 2006 on optional basis and further mandating it from May, 2007. 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. But findings of this paper suggest that IPO grading does influence investor preference and demand. Further, strong negative effect on post-issue promoter’s ownership holding is noted. Paper infers that all investor classes including retail investors benefit from IPO grading.

Keywords: IPOs, IPO Grading, investor preference, oversubscription, promoters’ holding

JEL Classification: G11, G14, G15, G18, G32

Suggested Citation

Mittal, Sanjiv and Gupta, Naresh and Sharma, Dr. Sudesh Kumar, Investor Preference and Promoter's Ownership Pattern in Graded IPOs of India (June 11, 2012). Indian Journal of Finance, Volume 6, Number 12, pp. 18 - 25 (ISSN 0973-8711), Available at SSRN: https://ssrn.com/abstract=2081575

Sanjiv Mittal

Guru Gobind Singh Indraprastha (GGSIP) University - University School of Management Studies ( email )

New Delhi, 110065
India

Naresh Gupta

University of Delhi ( email )

India

Dr. Sudesh Kumar Sharma (Contact Author)

Sinhgad Institute of Management & Computer Application ( email )

Sinhgad Narhe Technical Campus, Narhe-Dhayari Road
Ambegaon Budruk
Pune, Maharashtra, Maharashtra 411041
India
9960290601 (Phone)

Sinhgad Institute of Management ( email )

Pune, Maharashtra 411041
India

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