PERFORMANCE OF RECENT INDIAN IPOs
Sudindra V R
1. INTRODUCTION:
Initial public offerings (IPO’s) have generated gigantic amount of public interest in the last few decades. Three basic anomalies in Initial public offerings are short term underpricing of IPO’s, issue market and long run performance. It is observed that the issuers offer shares to investors at price considerably below the listing day price. The phenomena exist in both developing and developed countries. If the issues are underpriced, IPOs will be oversubscribed and overpriced, IPOs will be undersubscribed.
2. OBJECTIVE OF THE STUDY:
The main objective of the study is to measure the IPO’s initial performance on first day of trading against the market performance (Nifty)
3. METHODOLOGY:
For the purpose of study the sample of all Indian firms which went to public on the Stock exchange for the period of May 2015 to May 2016. Secondary data has been used to collect the data related to pre issue and listing and closing price of firms collected from NSE websites. Measure of underpricing: Firstly we calculate the Return on security, Index return and market adjusted abnormal return for each IPOs to analyze whether initial performance of the IPO relative to market.
Equation 1: Ri = (P1-P0)/P0 whereas Ri returns on the IPO stock, P1 closing price of
Stock on the day of listing, P0 offer price of IPO
Equation 2: Mi = (I1-I0)/I0 whereas Mi returns on the Nifty, I1 closing price of
Nifty on the day of listing, I0 previous trading day closing price
Equation 3: MAARO = (100* ((1+ Ri)/ (1+ Mi)) – 1)
Up to -5 | Poor performance |
>-5.1 | Very poor performance |
0 to 5 | Par performance |
5.1 to 10 | Good performance |
10.1 to 25 | Very good performance |
>25.1 | Exceptional performance |
4. DATA ANALYSIS:
Table 1: Table showing Return on Security, Return on Market and Market adjusted abnormal return for IPO’s listed period of 5th May 2015 to 10th May 2016.
SL NO | IPO COMPANY | LISTING DATE | Ri | Mi | MAARO |
1 | 10-May-16 | 0.1029 | 0.0028 | 10.0 | |
2 | 9-May-16 | 0.3859 | 0.0171 | 36.3 | |
3 | 21-Apr-16 | 0.2295 | -0.0003 | 23.0 | |
4 | 1-Apr-16 | 0.0089 | -0.0033 | 1.2 | |
5 | 18-Feb-16 | -0.2073 | 0.0117 | -21.7 | |
6 | 12-Feb-16 | 0.2023 | 0.0007 | 20.2 | |
7 | 8-Feb-16 | -0.0470 | -0.0136 | -3.4 | |
8 | 6-Jan-16 | 0.3468 | -0.0056 | 35.4 | |
9 | 23-Dec-15 | 0.3157 | 0.0103 | 30.2 | |
10 | 23-Dec-15 | 0.4985 | 0.0103 | 48.3 | |
11 | 16-Nov-15 | 0.1517 | 0.0057 | 14.5 | |
12 | 10-Nov-15 | 0.1483 | -0.0167 | 16.8 | |
13 | 2-Nov-15 | -0.1764 | -0.0019 | -17.5 | |
14 | 21-Sep-15 | 0.0117 | -0.0006 | 1.2 | |
15 | 16-Sep-15 | 0.0306 | 0.0089 | 2.1 | |
16 | 10-Sep-15 | -0.1152 | -0.0039 | -11.2 | |
17 | 10-Sep-15 | -0.0308 | -0.0039 | -2.7 | |
18 | 9-Sep-15 | 0.0735 | 0.0170 | 5.6 | |
19 | 26-Aug-15 | -0.0848 | -0.0198 | -6.6 | |
20 | 11-Aug-15 | 0.2416 | -0.0074 | 25.1 | |
21 | 9-Jul-15 | 0.0214 | -0.0041 | 2.6 | |
22 | 26-May-15 | -0.0471 | -0.0037 | -4.4 | |
23 | 14-May-15 | -0.0419 | -0.0014 | -4.1 | |
24 | 6-May-15 | -0.0325 | -0.0274 | -0.5 |
Sources: Author’s own calculation
5. CONCLUSION:
It is observed that: (1) MEP infrastructures, UFO movies, PNC infra tech, Shree Pushkar and Precision Camsh IPO’s are poor performance stocks. (2) Quick heal, Coffee day, Pennar Engineering and Power Mechanicals IPO’s are very poor performance stocks. (3) Bharath Wire Rope, Prabhat Dairy, Sadbhav Infrastructure and Manpasand Beverages IPO’s are par performance stocks. (4) Ujjiavn financial and Navkar Corporation IPO is good performance stock (5) Equitas holding, Teamlease, S H Kelkar, Interglobe Avi IPO’s are very good performance stocks. (6) Thyrocare, Narayana Hrudalaya, Alkem lab, Syngene International and Dr. Lal Prathap lal IPO’s are exceptional performance stock.
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