IPO valuation and return volatily

Abstract

Initial Public offers (IPOs) are an efficient way of raising money for companies. But in spite of raising the required money, IPOs have traditionally been priced inaccurately. The pricing of IPOs is done by underwriters taking into account many factors like sales, income, cash-flows, assets and liabilities, demand for company’s stocks. Accessing this information may be difficult for underwriter, especially for firms of newly emerging industries like e-commerce. Because of these factors, the IPOs may be inaccurately priced both in positive and negative ways. In the current situation, Indian economy is growing at the fast pace and a lot of companies are going the IPO way for raising the money. Looking at the great potential of Indian economy, the IPOs trend is likely to grow in the future. Moreover, there are many differences in way of functioning of Indian and the US economy. These differences are not only legal and regulatory but also of the group structure of organization structure, the family ownership and dominance of public selector banks in credit markets.