Asian Journal of Management

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The Movement of IPOS in Indian Stock Market and IPO Grading


Affiliations
1 Department of Commerce, SGTB Khalsa College, University of Delhi, Delhi, India
2 Department of Economics, SGTB Khalsa College, University of Delhi, Delhi, India
     

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Through this study an effort is made in the study to investigate the relevance of IPO grading on the under pricing, long term returns, liquidity and the P/E ratio of the companies. For the purpose of the study, 83 IPOs are selected, which came after May 2007 through National Stock Exchange (NSE) and possess IPO grades at the time of issue. The IPO’s of different IPO grades have been analyzed in terms of under pricing, liquidity, P/E ratio and long term returns using t-test and regression analysis. The results indicate that the QIBs consider IPO grading significantly and hence also affects the overall subscription of the IPO. The listing day liquidity of higher graded IPOs is low but commands better liquidity in the long term. Long term performance of the higher graded IPO is better than lower graded IPO’s. However, the IPO Grading in not relevant in explaining the Listing Day returns. Also the IPO grading has no impact on the subscription behavior of retail investors.

Keywords

IPO Grading, Indian Stock Market.
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  • The Movement of IPOS in Indian Stock Market and IPO Grading

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Authors

Bibhu Prasad Sahoo
Department of Commerce, SGTB Khalsa College, University of Delhi, Delhi, India
Karman Kaur
Department of Economics, SGTB Khalsa College, University of Delhi, Delhi, India

Abstract


Through this study an effort is made in the study to investigate the relevance of IPO grading on the under pricing, long term returns, liquidity and the P/E ratio of the companies. For the purpose of the study, 83 IPOs are selected, which came after May 2007 through National Stock Exchange (NSE) and possess IPO grades at the time of issue. The IPO’s of different IPO grades have been analyzed in terms of under pricing, liquidity, P/E ratio and long term returns using t-test and regression analysis. The results indicate that the QIBs consider IPO grading significantly and hence also affects the overall subscription of the IPO. The listing day liquidity of higher graded IPOs is low but commands better liquidity in the long term. Long term performance of the higher graded IPO is better than lower graded IPO’s. However, the IPO Grading in not relevant in explaining the Listing Day returns. Also the IPO grading has no impact on the subscription behavior of retail investors.

Keywords


IPO Grading, Indian Stock Market.

References