Exploring Underpricing of Select NSE-listed IPOs in India with Respect to Differences in Age at the Time of Listing

Abstract

The primary capital market plays a vital role in money mobilisation in the capital formation in an economy using Initial Public Offerings (IPOs) mode. The IPOs are subscribed by the interested investors at the offer price or issue price. After the issuance of IPOs, their listing day performance may show underpricing or overpricing. There are many factors to influence the price performance of IPOs. In this backdrop, the current study analyses the first day price performance of IPOs on the basis of the age of the IPOs. The study examines the various measures of first day returns on the basis of the different groups formed considering differences in age for the sample 224 IPOs companies. Such measures of average returns are tested for statistical significance with the help of one-sample t-test. The study ultimately finds that underpricing exists when studied on the basis of different categories of age of the IPOs.

Keywords: Capital formation, Initial Public Offerings (IPOs), Initial Returns, MAAR, Underpricing, Age of the company, one-sample t-test.

DOI: 10.7176/RJFA/14-2-04

Publication date: January 31^st 2023