Sustainability analysis of Covid-induced IPO boom in India

Abstract

Recently the Indian financial market has witnessed a plethora of public listings of many Indian firms, a lot of them considered unicorns. But story turned out to be different post IPO though in 2021 onwards. In many cases the market valuation dropped down a lot, for example Paytm and Zomato. This poses high risks to the investors while investing in IPOs. In this context, we want to critically analyse the post Covid era IPO valuation processes and its mechanisms. We would also attempt to answer questions regarding how realistic a particular proposed valuation is, given the information available and the macroeconomic factors involved also with attempt to find out the right timeframe to hold on to investments in current volatile markets to maximize the short term returns. The project also emphasizes the recent spate of IPOs by new-age companies. Between April and November 2021, 75 IPOs raised Rs 89,066 crore, far more than in any previous year. This topic interests us as we have followed some events recently and realized that this might be a phenomenon where financial analysis can help uncover underlying assumptions and behaviour. Thus this study has been undertaken to give explanations to why the IPO Under/Overpricing happens and the variation in the pricing among different firms with comparison with US and Indian markets.