Initial Performances of IPOs in India: Evidence from 2010-14

Abstract

In this paper, we studied listing day performance pertaining to 113 IPOs in India during January, 2010 to December, 2014, listed in NSE India. We found that there is, on the average, significantly positive return on the listing day. The market adjusted abnormal returns of all sample IPO companies were 7.19 %. It is observed that IPOs are initially underpriced. We have applied t-test to verify the returns and mean initial return of 7.19 % and proved that average returns are significantly lower also compare to historical returns of IPO. Regression model has been used to analyse the relationship between degree of underpricing with independent variables such as issue price, issue size, issue oversubscription and market index return. The result of regression analysis shows that there was no significant relationship between the degree of underpricing and explanatory variables except oversubscription of issue. The study suggests that investors can make their investment in new issues as IPOs are underpriced in initial days.

Keywords: Market Adjusted Abnormal Returns (MAAR), Initial Public Offers (IPO), Issue Price, Issue Size, Issue Oversubscription, Underpricing

JEL Classification: G10