IPO VALUATION AND POST-IPO PERFORMANCE ANALYSIS- CASE OF INDIAN STOCK MARKET

Abstract

Nobody in the system, including promoters, lead managers, rating agencies, and the regulator, can be held responsible for the pumping of profits and dumping of shares operations that appear to be typical in IPOs. A prospectus for a public offering contains a lot of information. However, ordinary investors lack access to one critical metric, predicted earnings, which determines the most important part of a public issue's valuation, whether it is overpriced or underpriced. Methodology/Design: Tabular calculation and correlation analysis was used to find the trend and relationship between the individual factors undertaken. Purpose: The purpose of the study is to gauge the IPO performance of the last 5 years, laying special emphasis to the IPOs listed during the covid-19 period and a comparison between the Mainboard and Small and Medium Enterprise (SME) IPOs. The study would try to find how many companies are undervalued, fairly valued and overvalued on the listing day, also ascertaining the average numbers and reasons for the same. It’s of immense benefit to the retail investor to know what would it cost to invest in the IPO and also, the benefits attached with the same. Research limitations/Future scope: The study is limited to the IPOs listed during a 5-year period starting from 2017 till 2021. Moreover, the individual factors are limited in the calculation of correlation analysis that includes firm’s age, IPO size, IPO rating among others whereas future research study could also include underwriter’s reputation, firm’s growth stage, financial leverage and macroeconomic factors like GDP and interest rates for a keener insight.