Underpricing in Graded IPOs

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.

Keywords: IPOs, IPO Grading, underpricing, retail investors

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

Suggested Citation: Suggested Citation

Sharma, Dr. Sudesh Kumar and Mittal, Sanjiv and Gupta, Naresh, Underpricing in Graded IPOs (March 4, 2014). International Doctoral Convention (ISBN: 978-81-910118-6-9), pp. 497-505, February 20-22, 2013 at Sinhgad Institute of Management, Pune. , Available at SSRN: https://ssrn.com/abstract=2404213 or http://dx.doi.org/10.2139/ssrn.2404213