Post Issue Performance of Graded IPOs in India

Prajnan: Journal of Social and Management Sciences, Vil. XLI, No.2, 2012-13. pp 89-108. (ISSN: 0970-8448)

28 Pages Posted: 15 May 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: April 9, 2013

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 have strong positive effect on demand (oversubscription). Further, weak impact on returns, little or nil impact on underpricing and strong negative effect on proportion of issued share capital is also noted. Paper infers that all investor classes including retail investors benefit from IPO grading.

Keywords: IPOs, IPO Grading, underpricing, oversubscription, retail investors

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

Suggested Citation

Mittal, Sanjiv and Gupta, Naresh and Sharma, Dr. Sudesh Kumar, Post Issue Performance of Graded IPOs in India (April 9, 2013). Prajnan: Journal of Social and Management Sciences, Vil. XLI, No.2, 2012-13. pp 89-108. (ISSN: 0970-8448), Available at SSRN: https://ssrn.com/abstract=2247381

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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