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Performance of IPOs in India

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Introduction:
Underpricing of IPOs has been reported in almost all equity markets and across time for a comparison of 45 countries (Loughran, Ritter, and Rydqvist 1994). In Indian context, Ranjan and Madhusoodanan (2004) studied under pricing for 92 IPOs listed on NSE and BSE during January 1999-November 2003.They found that on average money left by fixed price route is 38 percent while through book building route it is 6 percent. Aggregated Indian IPOs in this period left 17 percent money on the table. Ghosh (2005) found under pricing in Indian market over a decade 1991-2001.Kumar (2007) found 27 percent under pricing for 156 book built IPOs during 1999-2006. Shelly and Singh (2008) studied 1963 fixed price IPOs listed on BSE during July 1992-August 2006 and found that on an average IPOs are under priced by around 70 percent. Thus under pricing of IPOs is an international phenomenon.

Public issues of equity shares are broadly of two types, viz. Initial Public Offerings (IPO) and seasoned security offerings. In an IPO (new issue), a company which was earlier closely held (wherein shares held by promoters and their relatives i.e. shares issued earlier through private placement) is opened up for public by issue of shares to the public.

Most companies start out by raising capital from a small number of investors through private placements. Such stocks are highly illiquid as there is no liquid market existing if these investors wish to sell their stocks. If the company prospers and hence needs more capital or otherwise if (any of) the promoters want to sell off their company (share of holding) they have to do so by selling their holdings to another party through private placement as there is no liquid market for the company's stock. It is therefore desirable to 'go public' by selling stock to a large number of diversified investors. Once the stock is listed, this enhanced liquidity allows the company to raise capital on more favorable terms than if it had to compensate investors for the lack of liquidity associated with privately held companies.

There are many costs associated with a firm becoming public--indirect cost relating to providing information continuously to the stock exchanges and adhering to their requirement relating to reporting and disclosure and direct costs that are related to the fees and charges and other expenses relating to the issue of stocks such as underwriting fees, legal and auditing fees, etc. Another important cost associated with IPO is the dilution associated with selling shares to the public (Ibbotson & Ritter, 1995). Ibbotson & Ritter, 1995 actually referred to the underpricing of IPO shortly after the IPO as the dilution cost. So the trade off is between the liquidity and huge capital base that the company can acquire vis-a-vis the cost associated with going public.

Number of Pages of Project Report: 72
Package Includes: Synopsis/Project Proposal + Project Report + Excel Sheet
Project Format: Document (.doc)

Table of Contents of Project Report:
EXECUTIVE SUMMARY
CHAPTER 1: INTRODUCTION
1.1 INITIAL PUBLIC OFFERINGS: GOING BY THE BOOK
1.2 BUILDING THE BOOK
1.3 THE NATURE AND VALUE OF INVESTOR INFORMATION
1.4 HOW BOOK-BUILDING WORKS
1.5 STRATEGIC CONSIDERATIONS FOR THE ISSUING FIRM
1.6 CHARACTERISTICS OF SUCCESSFUL INVESTMENT BANKS
1.7 PUBLIC POLICY CONSIDERATIONS
CHAPTER 2: LITERATURE REVIEW
CHAPTER 3: IPO INDIA
3.1 LEADING IPOS IN INDIA
3.2 IPO STOCKS
3.3 IPO MARKET IN INDIA
3.4 LARGEST IPO IN INDIA
3.5 IPO SCAMS
3.6 FUTURE OF IPOS IN INDIA
3.7 IPO FUNDINGS
CHAPTER 4: RESEARCH METHODOLOGY
4.1 NEED FOR STUDY
4.2 OBJECTIVE OF STUDY
4.3 SAMPLE PROFILE
4.4 DATA TYPE
4.5 DATA SOURCE
4.6 DATA PERIOD
4.7 ANALYSIS TECHNIQUES
4.8 HYPOTHESIS TESTED
CHAPTER 5: DATA AND ANALYSIS
CHAPTER 6: FINDINGS & CONCLUSION
CHAPTER 7: RECOMMENDATIONS/SUGGESTIONS
REFERENCES
APPENDIX: IPOS IN INDIA 1999 - 2012


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