An Examination of the Pricing of IPOs:The Indian Perspective

Abstract

Companies opt for an initial public offer (IPO) to raise money from the capital market. It is observed that IPOs are generally underpriced and therefore investor subscribed for IPOs to earn listing day returns. This paper studies the pricing performance of 288 IPOs listed in India for the period of 2010-2021. Pricing performance of an IPO is assessed by calculating Market Adjusted Excess Return and Listing Day Return. Also, data visualization and regression analysis are used to identify the various variables which have significant impact on IPO. This study observes average positive listing day return indicating investors subscribing the IPOs can earn on listing the day of an IPO. An average 9.40 Market Adjusted Excess Return and 10.37 percent Listing Day Return is noted. Additionally, the analysis finds no significant correlation among issues price, issues size and Market Adjusted Excess Return. The study identifies that it is safe to invest in the IPO as average listing day return is positive. The findings presented using data visualization may be useful for content creators, stockbrokers to develop various modules to make qualitative information more attractive and appealing. This study provides an important insight in exploring parameters which have significant impact on IPO. The research contributes significantly to presenting data visualization as tool to measure the performance of IPO.