Performance of IPOs on the stock exchange; DSP Financial consultants Ltd, Bombay

Abstract

During the past few years the increasing investor interest in stock markets has manifested itself in the almost 100% growth in the funds raised from the primary markets. As the investor becomes aware of the various avenues open to him in deploying his savings , the investment process itself will become more complex. The success of an issue will depend on the agreement reached between the issuer, the merchant banker and the investor. In this process, the pricing of the issue attains great importance. A high priced issue runs the risk of failure and a low priced one may deprive the firm of cheap funds. Thus the price has to be commensurate with the return expected by the investor. There are many factors which give an indication as to the return which can be expected from an issue. The important quantitative factors which affect rate of return can be established through a regression between IPO return and risk points denoted through the various factors.