Summer Internship Project Report

ON

Invester perception about primary market and its return

Submitted in the partial fulfilment of the requirements for the degree of Master in business administration(integrated)

Under the Guidance of

Submitted To:
DEPARTMENT OF MANAGEMENT STUDIES ,BHIMTAL

Submitted By: HIMANSHU JOSHI

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ACKNOWLEDGEMENT

Acknowledgement is not only a ritual, but also an expression of indebtedness to all those who have helped in the completion process of the project. One of the most pleasant aspects in collecting the necessary and vital information and compiling it is the opportunity to thank all those who have actively contributed to it. I express my deepest and sincerest gratitude and heart-felt thanks to my mentor mr neeraj misra for the invaluable guidance and constant encouragement which she extended to me throughout my research project.

I would also like to express my sincere thanks to the authors whose works I have had the privilege to consult and quote in my research project and to the faculty and staff of department of management studies for their constant support.

I extend my gratitude to my respected parents, and my brothers who have been a constant source of encouragement. I must not forget the generosity accorded by them.

Last, but by no means the least, we would like to pay obeisance to the Almighty God for bestowing on us his blessings & also for being on our side when the challenge seemed insurmountable & the going was tough. Our unshakeable faith in Him allowed us to take this research to its logical conclusion.

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CERTIFICATE

This is to certify that Ms Himanshu joshi, a student of MBA(integrated) 4th semester at Department of management studies, Bhimtal, has undertaken a project on Invester perception about primary market and its return in partial fulfilment of the requirement MBA (Integrated)2011-2016. The project has been successfully completed under my supervision and guidance. This research project is the original work of the student.

Prof. Bindu Nair

DEPARTMENT OF MANAGEMENT STUDIES

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EXECUTIVE SUMMARY

Empirical evidence suggests the existence of hot-issue markets for initial public offerings: in certain periods and in certain industries, new issues are underpriced and rationing occurs. In certain circumstances, firms with the most favourable prospects find it optimal to signal their type by under pricing their initial issue of shares, and investors know that only the best can recoup the cost of this signal from subsequent issues. Issues with high risk and/or smaller offer prices are more underpriced; and that returns are strongly correlated with subscription levels. The present study was undertaken to analyze the investors perception of Initial Public Offerings and its Return. This main objective was achieved by splitting it into two parts, the first dealing with the perception of investors about the IPO and the other with the factors affecting the pricing. For the first objective, a questionnaire was administered to investors who invested in IPOs. 70 respondents gave their perception about the IPO issue. The data collected from the survey was subsequently analyzed using SPSS 17 statistical analysis software. Based on the study and the analysis, five major parameters were selected which have the maximum impact on investors decision to invest in an IPO. For the second part of the study, a sample size of 15 companies was selected, belonging to different sectors. The data thus collected was analyzed by applying various statistical tools to it. On the basis of these tests it was concluded that only one variable contribute significantly to issue price: Return on Net Worth. This indicates that the investors should conduct a thorough research into the fundamentals of the company before investing into its IPOs. The first two chapters of the study deals with the introduction and research design and the next three chapters consist of the analysis of the objectives. The last chapter of the study deals with the findings. On the basis of these findings, adequate managerial recommendations were provided.

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TABLE OF CONTENTS
Chapter 1: Introduction 08-23

Chapter 2: Research Design 2.1 Literature Review 2.2 Need for the Study 2.3 Objectives of the Study 2.4 Research Methodology 2.5 Limitations of the Study 25 34 35 36 42

24- 42

Chapter 3: Analysis and Interpretation: Level I 3.1 Demographic Profile of the Respondents 3.2 Data Analysis 44 46

43-63

Chapter 4: Analysis and Interpretation: Level II 4.1 Correlation Analysis 65

64-66

Chapter 5: Analysis and Interpretation Level III 5.1 Post-Listing performance of individual IPO stocks 5.2 First week Performance of IPOs 77 68

67-85

Chapter 6: Findings and Suggestions 6.1 Findings 6.2 Managerial Recommendations 6.3 Scope for Further Research Bibliography Appendix-I Questionnaire 82 83 84 85 87

81-83

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Appendix-II Descriptive Statistics of first week Performance of recently listed IPOs

89

LIST OF TABLES
S. No. Table 1.1 Table 1.2 Table 1.3 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 TOPIC Difference between book building and fixed issues Recent IPO data with break-up Recent IPOs Performance Tracker Demographics: Gender Table Demographics: Age Table Demographics: Profession Demographics: Education Average Annual Investment with Corporate Image Average Annual Investment with Present Market conditions Table 3.7 Table 3.8 Average Annual Investment with Size Table Average Annual Investment with Performance of previous IPO Table 4.1 Correlations 66 69-76 77 78 78 79 80 61 62 PAGE NO. 11 17 18 44 44 45 45 59 60

Table 5.1-5.15 Short-term Performance of Individual IPO stocks Table 5.16 Table 5.17 Table 5.18 Table 5.19 Table 5.20 First-day Performance of IPO Stocks Second-day Performance of IPO Stocks Third-day Performance of IPO Stocks Fourth-day Performance of IPO Stocks Fifth-day Performance of IPO Stocks

LIST OF CHARTS

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S. No. Chart 1.1 Chart 3.1 Chart 3.2 Chart 3.3 Chart 3.4 Chart 3.5 Chart 3.6 Chart 3.7 Chart 3.8 Chart 3.9 Chart 3.10 Chart 3.11 Chart 3.12 Chart 3.13 Chart 3.14

TOPIC Distribution of Equity Allocation Corporate Image Members of the Company Present Market Conditions Figure Performance of previous IPO Size of the IPO IPO versus Secondary Market Objective of the issue Offer Price of the IPO Average Annual Investments with Age Average Annual Investment with Profession Average Annual Investment with Education Average Annual Investment with Gender Average Annual Investment with Corporate Image Average Annual Investment with Present Market Conditions

PAGE NO. 13 47 48 49 50 51 52 53 54 55 56 57 58 59 60

Chart 3.15 Chart 3.16

Average Annual Investment with Size of IPO Average Annual Investments with Performance of Previous IPOs

61 62

Chart 3.17

Average Annual Investment with Performance Criteria

63

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CHAPTER I INTRODUCTION

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FINANCIAL MARKET
A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods. Financial markets facilitate:

The raising of capital The transfer of risk Price discovery Global transactions with integration of financial markets The transfer of liquidity

Types of financial market

Money market
As money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in the money markets is done over the counter and is wholesale. Various instruments exist, such as Treasury bills, commercial paper, bankers' acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage-, and asset-backed securities. It provides liquidity funding for the global financial system. Money markets and capital markets are parts of financial markets. The instruments bear differing maturities, currencies, credit risks, and structure. Therefore they may be used to distribute the exposure.

Functions of the money market

The money market functions are:

Transfer of large sums of money Transfer from parties with surplus funds to parties with a deficit Allow governments to raise funds Help to implement monetary policy 3 6

Capital market
Capital markets are financial markets for the buying and selling of long-term debt- or equitybacked securities. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. The Indian capital market is an emerging stock market. This implies that market is in the process of transformation, growing in size and sophistication. Several liberalization measures announced by the Indian government and securities market watchdog, SEBI, over the last few years have created freer environment. The capital market today is sophisticated and swift to discount the micro and macro economic changes. In the last two decades, the pace of growth in capital market has almost been unparalleled in the history of any nation. These two decades have truly been the age of shares and bonds for the middle class investors in India, where millions of them have their first experienced of investing in securities. The capital market is further of two types:-

(A) PRIMARY MARKET

The primary market is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain bonds through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus. Primary markets create long term instruments through which corporate entities borrow from capital market. Features of primary markets are:

This is the market for new long term equity capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called the new issue market (NIM). In a primary issue, the securities are issued by the company directly to investors. The company receives the money and issues new security certificates to the investors. Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.

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The primary market performs the crucial function of facilitating capital formation in the economy.

(B) SECONDARY MARKET

The secondary market, also called aftermarket, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage bank to investors . It is also referred to as the stock market. Indian stock market stands among the top three stock markets of the world with respect to number of listed companies, market capitalization and magnitude of participating investors. The level of activities in stock market is measured through stock indices, major ones being BSE SENSEX and NIFTY in India.

Indian stock exchange may refer to:

(A)Bombay stock exchange

Bombay Stock Exchange, commonly referred to as the BSE is a stock exchange located on Dalal Street, Mumbai, Maharashtra, India. It is the 10th largest stock exchange in the world by market capitalisation. Established in 1875, BSE Ltd. (formerly known as Bombay Stock Exchange Ltd.), is Asias first Stock Exchange and one of Indias leading exchange groups. Over the past 137 years, BSE has facilitated the growth of the Indian corporate sector by providing it an efficient capitalraising platform. BSE is a corporatized and demutualised entity, with a broad shareholder-base which includes two leading global exchanges, Deutsche Bourse and Singapore Exchange as strategic partners. BSE provides an efficient and transparent market for trading in equity, debt instruments, derivatives, mutual funds. It also has a platform for trading in equities of small-and-medium enterprises (SME). More than 5000 companies are listed on BSE making it world's No. 1 exchange in terms of listed members. The companies listed on BSE Ltd command a total market capitalization of USD Trillion 1.32 as of January 2013. BSE Ltd is world's fifth most active exchange in terms of number of transactions handled through its electronic trading system. It is also one of the worlds leading exchanges (3rd largest in December 2012) for Index options trading .

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(B)National stock exchange

The National Stock Exchange is stock exchange located in Mumbai, India. It is the 11th largest stock exchange in the world by market capitalisation and largest in India by daily turnover and number of trades, for both equities and derivative trading.NSE has a market capitalization of around US$1 trillion and over 1,652 listings as of July 2012. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation.NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. In 2011, NSE was the third largest stock exchange in the world in terms of the number of contracts (1221 million) traded in equity derivatives.It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. Currently, NSE has the following major segments of the capital market:

Equities

Equities Indices Mutual Funds Exchange Traded Funds Initial Public Offerings Security Lending and Borrowing Scheme

Derivatives

Equity Derivatives (including Global Indices like S&P 500, Dow Jones and FTSE ) Currency Derivatives Interest Rate Futures

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Debt

Retail Debt Market Wholesale Debt Market Corporate Bonds

1.1.1 INITIAL PUBLIC OFFERING

An initial public offering is a specific case of public issue; it is the first equity offering by a company to the public at large. The shares are then listed on the stock exchange to facilitate trading in them. Thus IPO is basically companys first sale of stock to the public. Typically an IPO involves stocks from young and often times, little known companies. But occasionally well established and well known firms do go public. The various reasons for a firm to go public are: Increasing companys financial base Enhancing liquidity Setting right the capital structure of the company Regulatory compulsions

1.1.2 VALUATION OF PUBLIC ISSUES

Investment analysts say that IPO valuation process is as much art as science. Values are based on several factors: issuers historical and projected financial results: valuation of comparable companies and investment bankers assessment of market conditions and investors demand for new issues. There are various concepts regarding pricing of public issues: Issue Price it is the price at which equity shares are offered to the public. It can be priced at par, premium or discount. List Price it is the market price on the first day of trading after listing on stock exchange.

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Fair value it is the price which reflects the intrinsic value or true worth of a share.

1.1.3 IPO PRICING MECHANISM

There are two methods for making initial public issue:-

Fixed Pricing Method - where the company fixes a price at which the shares will be offered to the public.

Book Building method - where the company stipulates a floor price or a price band and leaves it to market forces to determine the final price.

TABLE 1.1 Features Pricing Fixed Price process Book Building process

Price at which the securities are Price at which securities will be offered/ offered/ allotted is known in advance allotted is not known in advance to the to the investor. investor. Only an indicative price range is known.

Demand

Demand for the securities offered is Demand for the securities offered can be known only after the closure of the known everyday as the book is built. issue.

Payment

Payment if made at the time of Payment only after allocation. subscription wherein refund is given after allocation.

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1.1.4 THE PROCESS OF BOOK BUILDING:

The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. The Issuer specifies the number of securities to be issued and the price band for orders. The Issuer also appoints syndicate members with whom orders can be placed by the investors. Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. A Book should remain open for a minimum of 5 days. Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes. On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include Price Aggression Investor quality Earliness of bids, etc. The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. Generally, the number of shares is fixed; the issue size gets frozen based on the price per share discovered through the book building process. Allocation of securities is made to the successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.

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In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner: a. 100% of the net offer to the public through the book building route. b. 75% of the net offer to the public through the book building process and 25% through the fixed price portion. c. Under the 90% scheme, this percentage would be 90 and 10 respectively

1.1.5 TYPES OF INVESTORS

There are three kinds of investors in a book-building issue: the retail individual investor (RII), the non-institutional investor (NII) and the Qualified Institutional Buyers (QIBs). RII is an investor who applies for stocks for a value of not more than Rs 100,000. Any bid exceeding this amount is considered in the NII category. NIIs are commonly referred to as high net-worth individuals. On the other hand QIBs are institutional investors who possess the expertise and the financial muscle to invest in the securities market.

CHART 1.1

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1.1.6. SEBI GUIDELINES

The primary authority for regulating IPO's is the SEBI (Securities and Exchange Board of India). It issues guidelines for regulating the procedures and activities of new public .issues. These guidelines are known as Disclosure and Investor Protection (DIP) Guidelines. Under this, SEBI has laid down following eligibility norms for entities accessing the primary market through public issues:A company can make an IPO if it meets the following requirements It has net tangible assets of at least Rs. 3 crores in each of the preceding 3 full years, of which not more than 50% should be in monetary assets.

It has distributable profits in at least three years as per the terms of the Companies Act.

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It has a net worth of at least Rs.1 crore in three years. The net worth is the aggregate value of paid-up equity capital and free reserves excluding the aggregate value of accumulated losses and deferred expenditure not written off.

In case of change of its name within the last one year, at least 50% of the revenue for preceding 1 year is earned by the company from the activity suggested by the new name.

The issue size does not exceed 5 times the pre-issue net worth.

1.1.7 IPO GRADING

IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities in India. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below:

IPO grade 1: Poor fundamentals IPO grade 2: Below-average fundamentals

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IPO grade 3: Average fundamentals IPO grade 4: Above-average fundamentals IPO grade 5: Strong fundamentals

1.1.8. BENEFITS OF IPO

Taking a company public through an Initial Public Offer (IPO) is a major task for any entrepreneur. The benefits of going public through IPO are: It allows companies to have greater access to the most substantial source of corporate funding. The companies can also return to the market for additional equity through secondary equity offerings. It helps the company to institute stock options for its employees and to attract more talent to their organization. It attracts media attention and helps in marketing the products of the company. It helps to expand business relationships of the companies with their partners, suppliers, debtors as well as customers. It facilitates the mergers and acquisitions activities of the companies and provide them with the greater flexibility in raising finances. For many entrepreneurs and top managers of companies, the process and event of going public mark the culmination of years of hard work, public recognition of success and long delayed financial rewards. Going public gives an opportunity for their business growth, brand equity as well as brings some legal responsibilities for them. It involves sharing of ownership of the company, business opportunities as well as the control over the company's future.

1.1.9 IPO PRICING:

The study of IPO mispricing is salient because it raises important questions concerning market efficiency and the existence of systematic stock patterns that can be employed by investors to generate excess market returns. Under traditional definitions of market efficiency, asset prices, 3 6

including IPO prices should fully reflect all available and relevant information (Fama 1970). An increasing body of empirical evidence, however, suggests that IPO prices are not efficient as evidenced both in the short run and the long run. The speed of incorporation of new information into stock prices is critical to many central issues in financial research, such as market efficiency, arbitrage, and market structure. The setting of the immediate aftermarket presents an opportunity to investigate the issue when little or no trading history exists. In such a setting, investors are more exposed to new information because they cannot observe the stock price behaviour or the reactions to previous information signals. Initial public offerings (IPOs) of common stock, on average, earn abnormally high initial returns in general. The initial abnormal return is defined as abnormal gains/losses of a new issue relative to the offer price during the first day of trading. The under-pricing/overpricing is the difference between the offer price and the last traded price on the first trading day. One method of testing whether the offer price or the first closing market price is a better measure of true value is to examine long-run returns. If the first closing market price is an unbiased measure of a firms fundamental value, then there should be no abnormal returns in the future. Several recent studies have looked at the relationship between investor demand for IPOs and aftermarket performance of these firms. Hanley (1993) Specifically, stocks that are priced above the initial filing range perform very well on the first day in spite of being offered at the higher price, while stocks that are priced below the initial filing range do poorly on the first day. Thus, the final offer price represents a partial adjustment to additional market information about investor demand received during the pre-issuing period. Her study clearly indicates a positive relationship between investor demand and the first trading day performance of IPOs. Overall, the IPOs with high investor demand have large positive initial returns but negative longerrun excess returns, while the IPOs with low investor demand have negative initial returns but positive longer-run excess returns. These results are not explained by information asymmetry hypothesis or under-pricing (or mispricing) hypothesis. Although the two hypotheses do not indicate a positive relationship between investor demand and the initial returns, information asymmetry hypothesis nor under-pricing hypothesis can successfully explain differences in long-run performance between high

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demand IPOs and low demand IPOs. Investor demand for an IPO is largely driven by the overoptimistic and over-pessimistic reaction by investors to the information about the firms prospects prior to offerings. Consequently, both high- and low-demand IPOs are not priced at intrinsic values in early aftermarket trading. But, eventually their true values are reflected in the evolution of the pricing process. Specifically, a high-demand IPO, which is due to investors over optimism, is more likely to create a speculative bubble. The speculative bubble may temporarily push the stock price above its intrinsic value, followed by long-run price correction. As a result, a relatively high positive initial return will be followed by a negative long-run return. On the other hand, since investors are more likely to underestimate the prospects of the low demand, these IPOs will experience relative low returns on the first trading day.

Why Go Public?
Basically, going public (or participating in an "initial public offering" or IPO) is the process in which a business owned by one or several individuals is converted into a business owned by many. It involves the offering of part ownership of the company to the public through the sale of debt or more commonly, equity securities (stock).Going public raises cash and usually a lot of it. Being publicly traded also opens many financial doors:

Because of the increased scrutiny, public companies can usually get better rates when they issue debt. As long as there is market demand, a public company can always issue more stock. Thus, mergers and acquisitions are easier to do because stock can be issued as part of the deal. 3 6

 Trading in the open markets means liquidity. This makes it possible to implement things like employee stock ownership plans, which help to attract top talent.

Being on a major stock exchange carries a considerable amount of prestige. In the past, only private companies with strong fundamentals could qualify for an IPO and it wasn't easy to get listed. The internet boom changed all this. Firms no longer needed strong financials and a solid history to go public. Instead, IPOs were done by smaller startups seeking to expand their businesses. There's nothing wrong with wanting to expand, but most of these firms had never made a profit and didn't plan on being profitable any time soon. Founded on venture capital funding, they spent like Texans trying to generate enough excitement to make it to the market before burning through all their cash. In cases like this, companies might be suspected of doing an IPO just to make the founders rich. This is known as an exit strategy, implying that there's no desire to stick around and create value for shareholders. The IPO then becomes the end of the oad rather than the beginning. How can this happen? Remember: an IPO is just selling stock. It's all about the sales job. If you can convince people to buy stock in your company, you can raise a lot of money.

1.2 IPO ADVANTAGES AND DISADVANTAGES:

The decision to take a company public in the form of an initial public offering (IPO) should not be considered lightly. There are several advantages and disadvantages to being a public company, which should thoroughly be considered. This memorandum will discuss the advantages and disadvantages of conducting an IPO and will briefly discuss the steps to be taken to register an offering for sale to the public. The purpose of this memorandum is to provide a thumbnail sketch of the process. The reader should understand that the process is very time consuming and complicated and companies

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should undertake this process only after serious consideration of the advantages and disadvantages and discussions with qualified advisors.

Advantages of going public:

Increased Capital
A public offering will allow a company to raise capital to use for various corporate purposes such as working capital, acquisitions, research and development, marketing, and expanding plant and equipment.

Liquidity
Once shares of a company are traded on a public exchange, those shares have a market value and can be resold. This allows a company to attract and retain employees by offering stock incentive packages to those employees. Moreover, it also provides investors in the company the option to trade their shares thus enhancing investor confidence.

Increased Prestige
Public companies often are better known and more visible than private companies, this enables them to obtain a larger market for their goods or services. Public companies are able to have access to larger pools of capital as well as different types of capital.

Valuation
Public trading of a company's shares sets a value for the company that is set by the public market and not through more subjective standards set by a private valuator. This is helpful for a company that is looking for a merger or acquisition. It also allows the shareholders to know the value of the shares.

Increased wealth
The founders of the company often have the sense of increased wealth as a result of the IPO. Prior to the IPO these shares were illiquid and had a more subjective price. These shares now have an ascertainable price and after any lockup period these shares may be sold to the public, subject to limitations of federal and state securities laws. 3 6

Disadvantages of going Public:

Time and Expense
Conducting an IPO is time consuming and expensive. A successful IPO can take up to a year or more to complete and a company can expect to spend several hundreds of thousands of dollars on attorneys, accountants, and printers. In addition, the underwriter's fees can range from 3% to 10% of the value of the offering. Due to the time and expense of preparation of the IPO, many companies simply cannot afford the time or spare the expense of preparing the IPO.

Disclosure
The SEC disclosure rules are very extensive. Once a company is a reporting company it must provide information regarding compensation of senior management, transactions with parties related to the company, conflicts of interest, competitive positions, how the company intends to develop future products, material contracts, and lawsuits.

Decisions based upon Stock Price

Management's decisions may be effected by the market price of the shares and the feeling that they must get market recognition for the company's stock.

Regulatory Review
The Company will be open to review by the SEC to ensure that the company is making the appropriate filings with all relevant disclosures.

Falling Stock Price

If the shares of the company's stock fall, the company may lose market confidence, decreased valuation of the company may effect lines of credits, secondary offering pricing, the company's ability to maintain employees, and the personal wealth of insiders and investors.

Vulnerability

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If a large portion of the company's shares are sold to the public, the company may become a target for a takeover, causing insiders to lose control. A takeover bid may be the result of shareholders being upset with management or corporate raiders looking for an opportunity. Defending a hostile bid can be both expensive and time consuming.

Motives for IPO

One of the most common reasons for going public is to gain access to this market, hence expand a companys capital due to issuing new shares. Further, many high-growth firms are often constrained financially and need a new way to acquire capital. Along with this, there is a time difference between the time of investment and the time it takes to generate capital, therefore debt financing may not be suitable. According to this an IPO may be a better alternative, since you evade debt financing (Huyghebaert & Van Hulle 2005). Publicity: By going public, the company will be analyzed by financial institutions, media, and several other entities, which will make the company and its business operations more known. This can have positive businesslike advantages, but if it is handled badly there is a chance for incorrect interpretations and negative spreading of rumours about the company. Status: When a company goes public it usually raises the status of the company, especially rewarding towards international companies and media. It can somewhat be seen as a sign of quality. Recruitment possibilities: Many companies have seen an advantage when recruiting staff after an IPO. The reason is surely somewhat psychological. The challenge and stimulation with a continuous external interest, is to many people a positive factor. This motive goes hand in hand with the motives of publicity and status. Ownership for employees: One motive could be that possibility to make employees owners of the company. The company can through different ownership-programs offer the employees partownership. For a person who believes in the company and in him-/herself, a positive personal dividend can be obtained.

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Generation change: An IPO can help to solve problems with a potential change of generations. The heirs of family, whose fortune lies primarily in a company, may have completely different interests and plans for the future. An IPO facilitates the possibility to divide the fortune without having to break up the company or sell it in its entirety.

What is the Registration Process?

Going public requires a Registration Statement which is a carefully crafted document that is prepared by your attorneys and accountants. It requires detailed discussions on information pertaining to: Business product/service/markets Company Information Risk Factors Proceeds Use (How are you going to use the money) Officers and Directors Related party transactions Identification of your principal shareholders Audited financials

After your registration statement is prepared, it is submitted to the Securities and Exchange Commission and various other regulatory bodies for their detailed review. When this process is completed, you and your management team will do a "road show" to present your company to the stock brokers who will then sell your stock to the public investors. Assuming they can successfully sell your issue, youll receive your money. Then it's simple, all you have to do is make a lot more money with the proceeds so as to increase the value of your, your teams and the primary investor stock.

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Parameters to judge an IPO

Good investing principles demand that you study the minutes of details prior to investing in an IPO. Here are some parameters you should evaluate:-

Promoters
Is the company a family run business or is it professionally owned? Even with a family run business what are the credibility and professional qualifications of those managing the company? Do the top level managers have enough experience (of at least 5 years) in the specific type of business?

Industry Outlook
The products or services of the company should have a good demand and scope for profit.

Business Plans
Check the progress made in terms of land acquisition, clearances from various departments, purchase of machinery, letter of credits etc. A higher initial investment from the promoters will lead to a higher faith in the organization.

Financials
Why does the company require the money? Is the company floating more equity than required? What is the debt component? Keep a track on the profits, growth and margins of the previous years. A steady growth rate is the quality of a fundamentally sound company. Check the assumptions the promoters are making and whether these assumptions or expectations sound feasible.

Risk Factors
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The offer documents will list our specific risk factors such as the companys liabilities, court cases or other litigations. Examine how these factors will affect the operations of the company.

Key Names
Every IPO will have lead managers and merchant bankers. You can figure out the track record of the merchant banker through the SEBI website.

Pricing
Compare the companys PER with that of similar companies. With this you can find out the P/E Growth ratio and examine whether its earnings projections seem viable.

Listing
You should have access to the brokers of the stock exchanges where the company will be listing itself.

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TABLE 1.2

RECENT IPO DATA WITH BREAK-UP

FRESH CAPITAL YEAR NO.O F IPOs 16 21 76 74 82 21 AMOUNT (Rs.crore) 1813.42 8099.59 9130.21 22745.44 38634.65 1985.08 OFFERS FOR SALE NO. OF IPOs 5 9 11 12 9 3 AMOUNT (Rs.crore) 1377.68 6562.73 1667.67 960.72 2688.81 48.92 NO. OF IPOs 19 23 76 76 84 21 TOTAL AMOUNT (Rs.crore) 3191.10 14662.32 10797.88 23706.16 41323.45 2033.99

200304 200405 200506 200607 200708 200809

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IPO PERFORMANCE TRACKER:

IPOs WITH TOP VOLUMES

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IPO BEST PERFORMERS:

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IPO TOP GAINERS:

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IPO TOP LOSERS

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IPO AVERAGE PRICE

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IPOs 52 WEEK HIGH-52 WEEK LOW

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CHAPTER-II

RESEARCH DESIGN

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The Indian capital market has made significant progress in spreading equity culture and broad basing the financial markets. Yet the capital market in India has not been the subject of investment research to the extent of its counterpart in advanced nations. In order to have a proper insight into different aspects of the problem under study, it is desirable to review the studies conducted in the past.

2.1 LITREATURE REVIEW

1.2.1 IPO Market Initial Public Offering (IPO) is the first sale of stock by a private company to the public (Shantaraman 2007). Initial Public Offering (IPO) in India means the selling of the shares of a company, for the first time, to the public in the country's capital markets. This is done by giving to the public, shares that are either owned by the promoters of the company or by issuing new shares. There are mainly two reasons why a company comes out with an IPO: either it can do so in the market because it is in a good position or it is doing so because it needs to raise funds from the market. The IPO provides a fresh source of capital that is critical to the growth of the firm and provides the founder and other shareholders such as venture capitalists a liquid market for their shares. From an institutional investor's perspective, the IPO provides an opportunity to share in the rewards of the growth of the firm (Janakiramanan, 2005). Thus it is important to understand the objectives of the firms decision so that an investor is able to make the right choice. (Rohinesh, 2006). Ritter (1998), in his article Initial Public Offerings surveys the market for Initial Public Offerings. It discusses the process of going public, valuation of IPOs, book building, price stabilization and costs and benefits of going public. It concludes that companies going public, especially young companies face a market which is subject to sharp swings in valuations. Pricing deals can be difficult, even in stable market conditions, because insiders presumably have more information than the potential outside investors. Brealey(1972) in his book titled Security Prices in Competitive Market evaluated the effect of dividend, P/E multiple, retained earnings , debt, splits and stock dividends, mergers and acquisitions

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and listings on stock price movements. It concluded that though dividend, P/E and retained earnings all have positive effect on share prices. Studies revealed that dividends are valued four times as highly as retained earnings. Regarding debt, it says reasonable amount of corporate borrowings have been shown to increase the value of common stock at least to the extent of reduction in corporate tax payments. It further says that events like splits and stock dividends, mergers and acquisitions and listing cannot bring about a permanent and worthwhile improvement in share price. Chandra (1975) in his book named Valuation of Equity Shares in India conducted a study to assess the effect of certain economic factors on share prices. In examining the determinants of share prices, he assumed five independent variables i.e. Return, Growth, Risk, Leverage and Size. Share price was measured as arithmetic average of the high and low prices over the financial year of the company. Chandra found significant relationship between share price and independent variables like dividend and size. Growth has positive but weak influence whereas risk and leverage have negligible influence on share prices. Welbourne and Wright (2002) in their paper titled What Resources Matter in IPO Firms examine that which resources, the executives in initial public offering firms, think are important to their success, two years after the IPO. Results indicate that managers recognized five resources such as human resource practices, management, technology, culture and production/marketing, considering themselves (i.e. the management) as most important resource. The effect of all five resources on both short and long term performance was studied. The results show that, management and technology, both effecting short run performance, are considered important by investment community. However, long term performance analysis point to the importance of the way a firm treat its relationship with management, employees and customers as a source of sustainable competitive advantage. Pagano et al (1998) in their survey Why Do companies Go Public analyzed the determinants of Initial Public Offering viz. Size, capital expenditure, growth, return on assets, leverage, market to book ratio and relative cost of credit, by using large data base of private firms in Italy. The study made a comparison of the ex-ante and ex-post characteristics of IPOs with those of private firms. The likelihood of IPO is increasing with companys size and the industry and market to book ratio. Companies appear to go public not to finance future investments and growth, but to rebalance their accounts after high investments and growth.

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The study explains the various costs and benefits of going public. It also analyzed after effects of decision to go public. It says that IPOs are followed by lower cost of credit and increased turnover in control. Arguments against IPO auctions come most stridently from investment banks. Their argument is that since it is impossible to price issues accurately, underwriters end up taking unquantifiable risk. Additionally, to ensure sufficient investor interest it is appropriate to have a conservative bias towards under pricing. Another argument used is that if the IPO issuer is not worried about leaving money on the table, why regulators should worry since retail investors benefit from under pricing. Thus book building results in under pricing IPOs. Such a pricing bias leads to a scramble for allotment. Under these circumstances, no matter how vigilant or efficient the regulating agencies, it is difficult if not impossible to stamp out wrongdoing. This is particularly true in India as we do not have national identity numbers, and our justice system finds it difficult to secure convictions (Bhagwati, 2006). Teoh et al (1998) in their research papers Earnings Management and Long Run Market Performance of IPOs find evidence suggesting that nave investors may be systematically fooled by earnings management operations of window dressing aimed at reporting earnings in excess of cash flows by taking opportunistic positive accruals. There is high information asymmetry between investors and the issuers at the time of IPO. If the buyers rely on earnings reported in the prospectus but are unaware that they are inflated by accruals, they will pay too high a price. They find a significant ability of discretionary accruals to predict IPO stock price under performance, suggesting that as information about the firms is revealed overtime, investors may recognize that earnings are not maintaining their momentum and adjust prices

1.2.2 IPO Pricing Discovery of price in an IPO is both a science and an art (Shailaja, Singh 2008).There are two methods for making initial public issue: Fixed Pricing Method - where the company fixes a price at which the shares will be offered to the public and the Book Building method - It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price (Bala, 2003). In recent times companies are going in for Book Building method for valuation of their IPOs. Rules governing book building is

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covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2 Book building is a comparatively new concept for the Indian investors as compared to their peers in the US or the UK, where it is a very common practice 2000. Once the issue period is over and the book has been built, the BRLM along with the issuer arrives at a cut-off price. The cut-off price is the price discovered by the market. It is the price at which the shares are issued to the investors. The most apparent reason for using book building process could be the price discovery mechanism, which is inherent in this process. Since institutional and retail investors have the option to bid for the equity, at or above a particular floor price, decided by the company in consultation with the merchant bankers, it helps the company realize the true value for its equity. It also gives the company an insight into its credibility factor amongst the investors. In its recent amendments, SEBI has reduced the allocation of equity to Qualified Institutional Buyers (QIBs), which includes financial Institutions, banks and the newly added insurance companies, and increased the share of retail investors. Another positive step taken by SEBI is the setting up of a price band, which will assist the retail participants in placing their bids. Also change made by SEBI in the rules governing primary market issues is that institutional bidders cannot withdraw their bids. Murthy (1998) in his article named Valuation of Shares: A Dividend Factor articulates the viewpoint that dividend is very important component in valuation of shares. He says that Indian stock market has been going through a bearish phase since 1994. The investors, by and large are the losers due to fall in value of shares. The only return that investors can expect in these circumstances is the dividend. So, the dividend is a very important factor in the valuation of a share. Indian companies are suffering because they have ignored the dividend factor. Kim and Ritter (1999) in their article Valuing IPOs have studied the pricing of IPOs using comparable firm multiples. The use of accounting information in conjunction with comparable firm multiples is widely recommended for valuing IPOs. They found that P/E, Market to Book Value and Price to Sales multiples of comparable firms have only modest predictive ability without further adjustment. This is largely due to wide variation of these ratios for young firms within an industry. P/E multiples using forecasted earnings, result in much more accurate valuations than multiple using trailing earnings. Mccarthy (1999) in his article Pricing of IPOs: Science or Science Fiction is of the view that IPO valuation is as much as an art as a science. Values are based on several factors: an issuers historical and projected financial result; valuations of comparable companies; investment bankers assessment of market conditions and investors demand for the new issue. The investment banker develop an

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offering price that is further influenced by factors such as most marketable price range , the percentage of company being sold and the stock markets float. This article also discusses various other issues relating to IPO pricing. Ritter(1998), in his article Initial Public Offerings surveys the market for Initial Public Offerings. It discusses the process of going public, valuation of IPOs, book building, price stabilization and costs and benefits of going public. It concludes that companies going public, especially young companies face a market which is subject to sharp swings in valuations. Pricing deals can be difficult, even in stable market conditions, because insiders presumably have more information than the potential outside investors. Lowry and Schwert (2002) through their paper IS the IPO Pricing Process Efficient seek to throw light on the inefficient pricing of IPOs by examining underwriters treatment of public information through out the entire IPO pricing process. The article focuses on two issues; first, is public information fully incorporated into the initial price range and secondly into the final offer price. Their results indicate that the investment banks systematicslly disregard certain information in their setting of final range. Second, they find that no significant relationship exists between initial returns and market returns prior to the offering, indicating that public information is fully incorporated into the final offer price. Even though the book building methodology is an improvement over fixed price, IPOs issues continue to be significantly under priced. (Bhagwati, 2006). Apparently, companies and their investment bankers do not incorporate all available information when setting the price range.(Lowry, Schwert 2001). In addition to this, a new concept of IPO rating has also been introduced in the Indian Capital Market. Unlike debt instruments equity does not lend itself to transparent rating hence the need is required. Reduction of issue expenses right from prospectus stage to the allotment stage along with simplification of the offer document and incorporating it in a ready to read format are some of the steps that have taken forward in this direction (Narsimhan, 2007). Opposition to the above idea has come from the merchant bankers quarters as they feel threatened with this very idea. In this exercise the company selling the instruments is not the rated but its debentures, fixed deposit schemes and other debt instruments are rated. Varma (1998) in his papers Bank of India: Pricing of IPOs and IndusInd Bank: Valuation of IPO analysed various quantitative as well as qualitative factors that go into pricing of an IPO, with the

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help of two case studies; Bank of India and IndusInd Bank and suggested a method to arrive at reasonable price band for the issue. He regarded profitability ratio, yield ratio, expense and cost ratio, and other efficiency parameters like business per employee and business per branch as quantitative factors. He grouped following factors into qualitative category; branch network, high profitability, global presence, interest spread, NPA level, high adaptability. Valuation of initial public offerings, IPOs, occupies an important place in finance perhaps because it provides public capital market participants their first opportunity to value a set of corporate assets. Valuation of IPOs is also quite relevant from an economic efficiency perspective: this is the first opportunity that managers of such (usually young) companies get to observe the price signals from the public capital markets. Such signals can either affirm or repudiate managements beliefs regarding its future growth opportunities with obvious implications for the real economy via employment and corporate investment.(Bhagat, Rangan) Berguland (1994) in his paper Pricing of IPOs: A Simple Model presented a simple model for pricing of IPOs in which pivotal agent in pricing decision is underwriter. In this paper, underwriters decision problem is expressed in the form of simple loss function. The optimal offer price is determined by the penalty that underwriter is facing as a consequence of pricing mistake. It says that the pricing error i.e. under pricing or over pricing, will always be costly for underwriters in terms of loss of reputation and cost will depend on the size of pricing error. Finally the results on corporate static analysis show that under pricing is expected to increase with an increasing size in offering, increase in uncertainty concerning demand, decrease in price elasticity of demand, and increase in expected cost due to overpricing or decrease in expected cost due to under pricing. Aggarwal et al (2002) in their paper titled Strategic IPO under-pricing, information momentum and lockup expiration selling developed a model that highlights the potential benefits of substantial under-pricing to owners/ managers is typically discouraged from selling shares at the time of the IPOs, their first opportunity to diversify their wealth is by selling the shares after the lock in period. They examined following implications: 1. Managers who retain greater number of shares in the IPOs will under-price more 2. Greater first day under-pricing, increase the level of interest coverage
3. Greater research coverage leads to increased stock prices at the end of lockup period.

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Their results coincide with implications. Paper concludes that managers strategically under price their IPOs in order to maximize their personal wealth from selling shares at the lock under pricing expiration.

Bachmann (2002) in his research Pricing of IPOs when IPO size and Investment choice are Endogenous said that cash constrained entrepreneur is faced with a dilemma of cutting back on IPO size to retain a greater portion of the valuable equity or forego the profitable investment opportunities. They had developed a model of IPO pricing which indigenizes the size of IPO and analyze the firms investment decision jointly with IPO pricing decision. The model predicts that under pricing of IPO will be used as signal by the firms that go public to finance highly profitable investment. The model also proves that IPO firms that underpriced Equity over debt invest in the activities for which ROI is highly dependent on firms quality and under invest in activities for which ROI is homogeneous across the firms. Lastly, the model suggests that entrepreneur who issues the undervalued equity, commit proceeds from equity offering to particular investment strategy prior to the IPO.

Narasimhan and Ramana (1995) in their paper Pricing of IPOs: Indian Experience conducted an empirical study to examine the IPO pricing scenario in post CCI regime. The focus of study is on the determination of short term returns of IPOs to test whether stock has been priced at its intrinsic worth. The sample includes the IPOs listed on BSE during two periods April- May 1994 (when market was bearish) and November 93 January (when market was bullish). They concluded that in India IPOs are underpriced irrespective of movement of market index movement. They further added that premium issues are for greater underpriced than par issues.

A perusal of review of literature brings home the fact that a good number of studies have been done on the behavior of share prices in secondary market. But the same is not true for about the pricing of IPOs. In the light of the findings of the studies reviewed, nothing can be said about pricing of shares in IPOs and the perception of investors about IPOs. Thus there is a need to make an effort to identify the various important factors that affect pricing of IPOs and how the investors perceive them. The present study is a step forward in this direction. 3 6

Under-pricing of IPOs is explained by various researchers in different ways and the same may be classified as under: Information Asymmetry Hypothesis: According to Rock (1986) investment community is characterized with two kinds of investors informed and uninformed investors. When a new issue comes to the market by virtue of their knowledge informed investors keep away from poor quality issues or will be investing only if the after-market returns are positive. While uninformed investors subscribe to all issues both good as well as poor quality issues and in all likelihood they will get higher allocation in the later type of issues. This may lead the uninformed investors to keep away from the new issues market. Therefore by under-pricing these investors will be lured to participate in the new offerings. Koh and Walter(1989) working on the Singapore market directly tested this hypothesis and their results corroborate this hypothesis. Signaling Hypothesis :Allen and Faulhaber (1989)propose that a good quality issuer by under-pricing the IPO will subsequently return to the market with a seasoned offering and raise money at better terms. Welch (1992) finds evidence that almost a third of the new issuers returned to the market with a seasoned offering. Other explanations include Tinic (1989) who suggested that under-pricing discourages investors to file lawsuits against the issuer and Benveniste and Spindt (1989)propose that investors with more information ill been ticed to reveal more information by under-pricing the IPOs. In the Indian context Shah (1995) documents a phenomenal 105.6% excess return over the offer pricein a study of 2056 new listings over the period January1991 to May 1995. However, this study provides evidence on the short run performance only while Madhusoodanan and Thiripalraju (1997) from a studyon IPOs offered on BSE during the period 1992 to 1995shows that under-pricing was higher than the international experiences in the short run and in the long run too they yield higher returns compared to the negative returns recorded from the international markets. Krishnamurti and Kumar (2002) working on a sample of IPOs that hit the market between 1992 and1994 demonstrate that the under-pricing is to the extent of 72.34% (market adjusted returns).Kakati (1999)analyzed the performance of a sample of 500 IPOs that came to the market during January 1993 to March 1996and documents that the short run under-pricing is to the tune of 36.6% and in the long-run the overpricing is 40.8%.

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From the literature review the following inferences can be made: Short-run under-pricing of IPOs is an international phenomenon and in the long-run the evidence is mixed. Under-pricing in the Indian market is quite high compared to the international experiences So far all the studies done in India were based on data pertaining to the post CCI regime and prior to the introduction of book building process. The IPOs in that period are priced by the issuers and were offered to the investors on take it or leave it basis, in other words the issue prices were purely determined by the sellers (issuing companies) but not by both buyers and sellers dealing with each other at arms length. Therefore it is possible that the IPO market was characterized by adverse selection and moral hazard problems. From 1999onwards most of the IPOs were issued through the book building process hence it will be of interest to examine the price performance of book built IPOs.

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2.2 NEED FOR THE STUDY

The following factors have led to the need for conducting this research: The investors normally hold financial assets for cash flow that they generate in the future. The valuation of bonds and preference shares is straightforward as the returns are constant and certain. But such is not the case in case of equity valuation. Thus fixing of an issue price is an important task which cannot be accomplished by mere guesswork. The worth of equity has to be quantified by taking into consideration various intangible factors pertaining to the company. After the abolition of Controller of Capital Issues it has been the era of free pricing. But this has created some problems of undue overpricing by the companies. Against this background of faulty valuation of the IPO the present research needs to be undertaken to identify the various factors that go into IPO pricing. Primary markets are more risky than secondary markets as there is no previous market, no stock price benchmark and thus consequently more uncertainty. In case of an IPO, what normally happens is that a company comes out with an IPO, it is heavily subscribed and within a month or even few hours of listing, there are astonishing gains. Such a potential for plutocracy and penury make capital market highly rewarding, highly risky and thoroughly irresistible for investors. As most of the investors have no clue to the intricacies of primary market, it is essential to identify and recommend various parameters for the guidance of the investor. In the present scenario, with the number of frauds and scams being committed such as falsification of accounting statements, it is essential for the investors to have some knowledge about the various aspects of IPO issue.

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2.3 OBJECTIVES OF THE STUDY

The research objective can be broadly divided into the following: 1. To examine the investors perception about IPOs. 2. To identify various determinants of issue price of new corporate securities. 3. To determine the under-pricing and over-pricing levels of recently listed IPOs. 4. To study the First-Week performance of the IPOs.

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2.4 RESEARCH METHODOLOGY

2.4.1 Measurement of the Variables

In order to determine the relative influence there is always a dependent variable and an independent variable. 1. DEPENDENT VARIABLES Issue price - the price at which the shares are offered to the public. Issue price to par value - ratio of issue price and par value.

2. INDEPENDENT VARIABLES Weighted Average Earning Per Share The equity owners are the sole claimants to the net earnings of the corporation after making payment of dividend to the preference shareholders. The EPS is one of the best measures of the profitability as it helps in projecting the value of security which depends upon the expected future benefits and risk associated with it. Higher the magnitude of expected future benefits, higher will be the value of security. The weighted average EPS of three years will be regressed with the issue price. The weighted average of EPS is taken as it gives normal earning capacity of the firm taking into consideration the boom and the recession periods.

Return on Net worth (RONW) Return on net worth defines the relationship between the net profits and proprietors funds. It basically indicates how well the resources provided to the firm by its shareholders are being used. RONW is expected to affect issue price in a positive way. It is calculated for three years preceding the year of issue.

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Where shareholders investment = equity share capital + preference share capital+ reserves and surplus- accumulated losses (if any).

Size size of the firm plays an important role in investment criterion. Large companies generally offer better investment opportunities than smaller ones. These companies by virtue of larger production occupy stronger and dominant position in the stock markets and thus can command high premium. The size of the firm can be measured in many ways viz. turnover, paid up capital, capital employed, net sales, total assets etc. In the present study size is measured with the help of sales and total assets. This is so because sales and book value of assets reflects the earning capacity of the firm to the investors.

Growth Literature on equity valuation confirms that growth is a pre- requisite for long run survival of the firm in an uncertain and constantly changing environment. The growing companies provide excellent opportunities to the investors. Specifically, in the case of young companies most of their value comes from growth opportunities. In a growing company, an increase in profits leads to continuous rise in rate of dividend in future and frequent bonus issue to investors. Thus an investor may prefer to subscribe to an IPO of a growing concern. Like in most empirical studies, growth is measured with the help of sales and fixed assets.

Where Sy = sales in the year 2008-09 Sx = sales in the year 2007-08

Where Ay = assets in the year 2008-09, Ax = assets in the year 2007-08

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Leverage (L) Financial leverage is an important tool of financial planning because it magnifies the residual profits that accrue to the equity shareholders in the favourable situation. It refers to the mix of debt and equity funds used to finance the firms activities. A mix of debt equity mix helps a company to charge a higher price. But if debt increases thereby adversely affecting issue price. Though different measures of leverage have been considered by the researchers, but in the present study it is measured as:

Where DL = deferred liabilities i.e. long term loans + debt, PC = preference share capital, Equity = Equity capital + shareholders reserves.

3. LIST PRICE It is the market price of the share on the first day of trading after getting listed.

4. SIMPLE RETURNS are computed as: R = (P-O)*100 O Where P is the opening/closing price of stock at time and O is the offer price of the stock. These returns measure whether an investor gained (or lost) by buying the shares during the IPO at the offer price and selling at the prevailing price on the opening day. If R is positive one can infer that the issue is under-priced; if R is negative it may be inferred that the issue is over-priced and if R is zero it means the issue is aptly priced.

5. IPO UNDER-PRICING Under-pricing refers to the price run up of the IPO on the first day of trading. It is also known as the initial return or first-day return of the IPO. Under-pricing = (First-day closing price Offer price)/Offer price 100%

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The first-day closing price represents what the investors are willing to pay for the firms shares. If the offer price is lower than the first-day closing price, the IPO is said to be underpriced and money is left on the table for new investors. Since existing shareholders settle for a lower offer price/proceeds than what they could have got, money left on the table represents the wealth transfer from existing shareholders to new shareholders.

2.4.2 Sample:
Sampling is an effective step in collection of primary data and has a great influence on a quality of results. The sampling plan includes the population, sample size and sampling design which tell us about the various data collection methods. For the sake of simplicity and the type of sample which forms part of the study, convenient sampling method will be used for the collection procedure.

2.4.3 Data Collection

Level I: To gauge the investors perception, a questionnaire was administered to the investors who have invested in IPOs. As mentioned previously the sampling for this study is based on convenience and judgmental techniques. The total sample size was 70. The sample size calculation was based on the number of investors who have invested in IPOs at any time in the past. Due to the limited time available and the restriction regarding the type of investors, a relatively smaller sample size was chosen.

Level II: Only secondary sources of data will be used to collect information. It refers to a data that is already available and does not need to be collected with the help of a questionnaire. It is collected through published data that is already available in books, magazines, reports, publications. Data would also be collected from prospectus, offer documents, annual published reports, interim financial reports, websites of the companies under the study, newspapers, magazines, journals etc. The last 15 IPOs that have been issued till May 2010 will be used to collect their IPO information.

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The various companies are: Jaypee Infratech Limited SJVN Limited Mandhana Industries Limited Tarapur Transformers Limited Nitesh Estates Limited Talwalkars Better Value Fitness Limited Goenka Diamond & Jewels Limited Shree Ganesh Jewellery House Limited IL&FS Investment Managers Ltd. Pradip Overseas Limited United Bank Of India Texmo Pipes & Products Ltd ARSS Infrastructure Projects Limited EMMBI Polyarns Limited Aqua Logistics Ltd

Level III: Here too only secondary data will be employed to collect the information with a purpose to analyse the short-term performance of the last 15 IPOs issued till May 2010, the time period of the analysis being the day of listing to first five trading days. The IPOs of the same 15 companies as used in Level II will be analysed.

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2.4.4 Data Analysis Methods

Level I: The data collected by means of the survey questionnaire was coded and analysed after the responses of the respondents were tabulated and plotted on charts.

Level II: Correlation Analysis To analyze the determinants of the issue price and the correlation analysis has been used. In this study the association between issue price of shares and independent variables, will be represented through y-x correlation matrix. It will give the degree of linear association between the variables. SPSS 17 software was used to find out the correlation coefficients among the various determinants.

Level III: Here, various statistical formulas were put into use to find out the earnings for the investors, by finding out the open price to offer price percentage earnings, high price to offer price earnings, low price to offer price earnings, and the average price to offer price earnings, each ratio calculated on an intra-day basis for the first five trading days for the sample stocks. The measures employed were: Average, Standard Deviation, Maximum, Minimum and Skewness.

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2.5 LIMITATIONS OF THE STUDY

While conducting the study certain hurdles/obstacles were encountered. These were due to the limitations of the study which are as follows:

Since certain parameters had to be used to select the sample size from the desired population, it led to a selection of a very small sample which in turn was not totally an accurate representative of the given population.

Stock markets are highly volatile in nature and thus they get affected even by the minutest of happenings. Therefore in the case of further studies it is quite a possibility that outcome might not be the same as the original study.

While applying sampling technique, convenience sampling was used to select the sample from the given population. A major drawback of convenience sampling is that the results in this case are not generalized hence they cannot be duplicated in case the study is replicated in the future.

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CHAPTER III
DATA ANALYSIS AND INTERPRETATION LEVEL I

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3.1DEMOGRAPHIC PROFILE OF THE RESPONDENTS:

3.1.1 GENDER: The respondents consisted of both males and females. Out of the total of 70 respondents, 44 were male that comprised of 62.9 percent of the total population and the rest 26 were females which was 37.1 percent of the total sample. TABLE 3.1: GENDER Gender Male Female
Total

Frequency 44 26 70

Percent 62.9 37.1 100

3.1.2 AGE: The Age was grouped into three categories. The maximum respondents i.e. 46 investors lie in the age group of 15 to 30 years comprising of 65.7 percent of the total population. Besides that, 14 people lei in the age group of 31 to 45 years and the rest 10 lie in the age group of 46 to 60 years forming 14.3 percent of the total population. TABLE 3.2: AGE Age 15-30 31-45
46-60 Total

Frequency 46 14 10
70

Percent 67 20.0 14.3

100

3.1.3 PROFESSION:

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In terms of profession, the majority of the sample comprises of professionals who form 37 percent of the total population. This is followed by Government Employees who form 24.3 percent of the sample. The rest of the respondents are students and self employed personnel. TABLE 3.3: PROFESSION Profession Student Govt. Employee
Professional Self employed Total

Frequency 13 17 26
14 70

Percent 18.6 24.3 37.1

20 100

3.1.4 EDUCATION: Investors are generally deemed to be well educated people. This holds true for the present study as well. The majority of the sample consists of respondents who hold a Post graduate degree. They form 64.3 percent of the total population. This is followed by Graduates who form 28.6 percent of the sample. TABLE 3.4: EDUCATION Education Matriculation Graduation
Post Graduation Diploma Total

Frequency 4 20 45
1 70

Percent 5.7 28.6 64.3

1.4 100

3.2 DATA ANALYSIS

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3.2.1 FACTORS AFFECTING IPO PERCEPTION

The following eight Figures depict the various frequencies for the eight factors that affect the consumers perception of IPOs. The respondents were asked their perception about these factors with options ranging from strongly disagree to strongly agree. The following bar charts efficiently summarize the outcome of the survey. It can be seen that the investors believe that only five out of these eight variables have a considerable impact on their decision of investing in an IPO. The other three factors do not have a major impact on the investment decision of the investor.

The five factors that influence the investment decision of the investors are: Corporate Image Present Market Conditions Price Performance of Previous IPOs Size

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(i) Corporate Image:

The following chart depicts the Investors perception about the corporate image of the company. It can be seen that 49 out of 70 respondents believe that the corporate image of the company is an important criteria when deciding over investing in a companys IPO. The investors who disagree are just 6, thus indicating that corporate image is indeed an important criterion for most.

CHART 3.1

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(ii) Members of the Board:

The chart depicts the influence that the members of the company i.e. the Board of Directors have on the decision of the investor to invest in that particular company. The chart shows that the members do not have much influence on the decision of the investor. The majority of the sample either disagrees or do not have any opinion about this factor.

CHART 3.2

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(iii) Present Market Conditions:

The present market conditions refer to the existing situation of the stock market and the economy as a whole. The following chart shows that the sample agrees that the present market conditions play an important role in the decision of the investor. Almost 88 percent of the sample agrees that present market conditions are important when deciding over the investment in an IPO.

CHART 3.3

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(iv) Performance of Previous IPOs:

The performance of previous IPOs seem to have a considerable impact on the investors decision. The following chart shows that a majority of the sample agrees that they keep in mind the performance of previous IPOs that have come out in the recent past before investing in a new IPO. Almost 80 percent of the population agreed upon the importance of this factor.

CHART 3.4

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(v) Size of the IPO:

The following chart shows the investors view regarding the size of the IPO issue and its impact on their investment decision. It can be seen that a major portion of the population i.e. around 50 out of the 70 respondents agree that size does play a major role in IPO investment.

CHART 3.5

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(vi) IPO versus Secondary Market:

In IPO versus the Secondary market we are trying to gauge the preference of the investor between these two markets. It can be seen that a majority of the respondents either do not have any preference or they mainly disagree. This means that they prefer to invest in secondary markets rather than in IPOs.

CHART 3.6

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(vii) Objective of the Issue:

In measuring the perception of the investors on the objective of raising an IPO it can be clearly seen that the majority of the sample agrees that they do keep this factor in mind. This means that the investor is interested in knowing the future plans of the company and how is it going to use the investors money and generate returns.

CHART 3.7

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(viii) Offer Price:

The following chart shows that the price of the IPO has a considerable impact on the decision of the investor. 80 percent of the sample agrees that the price of the public issue helps them determine whether they want to invest in the public issue or not.

CHART 3.8

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3.2.2 COMPARITIVE RELATIONSHIP ON THE BASIS OF DATA COLLECTION

Relationship of Average Annual Investment with Age

CHART 3.9:

The above chart shows the relationship of the average annual investment with the age. It can be clearly seen that the maximum number of investors lie in the category of 15- 30 years. This is because the youngsters have zeal to earn more and they tend to be more speculative in investing. However, since their disposable income is less and they generally have financial responsibilities they tend to invest in lesser investment brackets. We also see that respondents lying in the age group of 40-60 years invest in higher investment brackets because most of them are reinvesting the investments they had made earlier or have higher disposable income at hand.

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Relationship of Average Annual Investment with Profession

CHART 3.10:

The above chart shows the relationship of average annual investment with the profession of the respondents. It can be seen that maximum investment is made by professionals as they are generally more educated and have a limited salary which motivates them for higher returns. Since they have a limited disposable income they generally invest in lower amounts. It can also be seen that the people who invest in higher amounts are businessmen or self employed people. This is because they have higher earnings and therefore more disposable income. Student investors are generally those who are new in the market and willing to try out their luck. Since they do not have an income of their own they generally use their parents money and therefore can invest in lower investment brackets only. Government employees also include retired army personnel who have large ancient properties and have huge incomes from pension and other sources. Hence, they are willing to invest in larger amounts as shown by the chart.

Relationship of Average Annual Investment with Education

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CHART 3.11:

The above chart shows a comparative relationship between education and the average annual investment made by the respondents. The chart shows that people who invest the most in all levels of investment bracket are post graduates followed by graduates. This can be attributed to the fact that since IPO issue is completely new in the market so only well educated people who have knowledge about the company and its working plus the knowledge about the stock markets can invest in these. The rest of the investors who invest in stock markets generally do so on the basis of market trends or their intuition.

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Relationship of Average Annual Investment with Gender

CHART 3.12:

The comparative relationship of Gender with average annual investment has been summarized in the above graph. It can be seen that males generally tend to invest in higher amounts as they are more speculative. Women, on the other hand, invest in moderate amounts. This can also be due to the fact that women generally are homemakers or even if they earn do not have large amounts to spare. It can also be seen that a large number of men invest in lower investment brackets; this is because they have a lot of financial responsibilities and can only spare a small amount for speculative purposes.

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Relationship of Average Annual Investment with Corporate Image

TABLE 3.5: Average Investment Annually * Corporate Image Cross tabulation

Avg Annual Investment (Rs.) Disagree Neither disagree nor Agree Agree Strongly Agree Total

10000-50000 50000-100000 100000&above Total

0 5 1 6

8 6 1 15

22 11 7 40

6 2 1 9

39 24 10 70

CHART 3.13:

The above relationship of the average annual investment with the corporate image shows that investors investing in the bracket of 10000 to 50000 are the people who have the maximum impact of corporate image on their investment decision. 22 out of 70 respondents believe that corporate image of a company is an important criteria for them. The people in the investment bracket of 50000 to 100000 also agree to this.

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Relationship of Average Annual Investment with Present Market Conditions

TABLE 3.6: Average Investment Annually * Present Market Condition Cross tabulation
Avg annual Investment 10000-50000 50000-100000 100000&above Total Disagree 1 2 0 3 Neither Disagree Agree nor Agree 3 2 0 5 22 15 5 42 Strongly Agree 10 5 5 20 Total 36 24 10 70

CHART 3.14

The relationship of present market conditions with the average investment shows that investors investing in the bracket of 10000 to 100000 laid emphasis on the present market conditions while deciding on investing in a new public issue. However, investors investing in large amounts pay pretty much regard to this aspect while investing as their amount of investment is high and a lot of risk is involved. Around 62 people agreed that they consider the present market conditions before making an investment in a new public issue.

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Relationship of Average Annual Investment with Size

TABLE 3.7: Average Investment Annually * IPO Size Cross tabulation

Avg annual Strongly Investment Disagree 10000-50000 50000-100000 100000&above Total 3 1 0 4 Disagree Neither Agree Disagree nor Agree 3 8 0 11 26 11 7 44 Strongly Agree 1 2 1 4 Total

3 2 2 7

36 24 10 70

CHART 3.15

The size of an IPO when compared with the average annual investment made by the investors shows that all the respondents investing in all income brackets give a considerable importance to this aspect. 44 respondents in total agreed on the importance of size being a criterion of investment while 11 people were indifferent about it. Thus, it can be safely concluded that size does play an important role in influencing an investor.

Relationship of Avg. Annual Investment with Performance of Previous IPOs

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TABLE3.8: Average Investment Annually * Performance of previous IPOs Cross tabulation

Avg Annual Disagree Investment 10000-50000 50000-100000 100000&above Total 1 0 2 3 Neither Disagree Agree nor Agree 3 7 0 10 28 11 4 43 Strongly Agree 4 6 4 14 Total 36 24 10 70

CHART 3.16

The relationship of average annual investment with the performance of previous IPOs shows that a large number of people base their decision on the performance of previous public issues in the market especially the ones that have come out in the recent past. Investors who do not have much knowledge about the company and the financial ratios generally consider such parameters while investing in the market. It can be seen that around 57 people agree that they see the performance of previous IPOs before investing in a new one.

Relationship of Average Annual Investment with Performance Criteria

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CHART 3.17

The above chart shows the Perception of the people while measuring the performance of the company coming out with a public issue. It shows a comparative relationship between the investment made by the investors and their criteria for judging the performance of the company. It can be observed that the three categories of investors on the basis of investment amounts, give major emphasis on the growth of the firm. It needs to be noted that the investors investing the highest amounts of money usually base their decisions on the growth and profits, while those in the lowest investment bracket base their decisions on growth and do not give major emphasis on the number of years,, the company has been in business with, while it being a major parameter for middle investment bracket.

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CHAPTER IV

ANALYSIS AND INTERPRETATION LEVEL II

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Equity valuation is one of the most important and difficult area of corporate finance. Theoretically, price of the share depends upon two broad factors, namely, size of return and degree of fluctuation. But in practical scenario, fixation of issue price cannot be done on the basis of risk and return alone. There are few other factors, which the issuing company and merchant bankers take in to consideration while fixing the issue price. These are growth of the firm, size of the firm, level of debt in the company, various qualitative factors, i.e. business reputation, financial backing and macroeconomic factors like economic stability and growth in the industry. Given this back ground, this chapter of the study aims at identifying the various factors that determine the IPO price. Ten variables namely, weighted average earning per share, price earning multiple, net asset value, weighted average return on net worth, size measured by assets, size measured by sales, growth measured by assets, leverage and risk, have been selected for this purpose. Qualitative and macro economic factors have been kept out of the purview of the study.

4.1CORRELATION ANALYSIS:The relationship of each explanatory variable (measured by coefficient of correlation) with IPO issue price and among the explanatory variables have been discussed in this section. The zero order correlation matrices of all groupings have been prepared. The main inferences from these Figures have been discussed below. Correlation Results: Issue Price* Return On Net Worth: 0.533
Correlation is significant at the 0.05 level (2-tailed).

The above results show that Return on net worth of the company plays the most significant role in the setting of issue price of an IPO. Only Return on net worth was found to be positively correlated with issue price. High RONW percentage is always considered as a strong point and adds to the credibility of the company. So the companies with higher RONW generally bank on this criterion and set a high price for the IPO.

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TABLE 4.1 Correlations

Growth RONW RONW Pearson Correlation Sig. (2-tailed) N Assets Pearson Correlation Sig. (2-tailed) N Sales Pearson Correlation Sig. (2-tailed) N Growth (Assets) Pearson Correlation Sig. (2-tailed) N Growth (Sales) Pearson Correlation Sig. (2-tailed) N Leverage Pearson Correlation Sig. (2-tailed) N Issue Price Pearson Correlation Sig. (2-tailed) N 15 -.348 .203 15 -.163 .561 15 .614* .015 15 .208 .457 15 -.296 .284 15 .533* .041 15 15 .911** .000 15 -.171 .542 15 -.171 .542 15 .968** .000 15 -.173 .537 15 15 -.023 .935 15 -.097 .731 15 .839** .000 15 -.052 .855 15 15 .522* .046 15 -.255 .360 15 .261 .347 15 15 -.226 .418 15 .444 .098 15 15 -.180 .521 15 15 1 Assets -.348 .203 15 1 Sales -.163 .561 15 .911** .000 15 1 (Assets) .614* .015 15 -.171 .542 15 -.023 .935 15 1 Growth (Sales) .208 .457 15 -.171 .542 15 -.097 .731 15 .522* .046 15 1 Leverage -.296 .284 15 .968** .000 15 .839** .000 15 -.255 .360 15 -.226 .418 15 1 Issue Price .533* .041 15 -.173 .537 15 -.052 .855 15 .261 .347 15 .444 .098 15 -.180 .521 15 1

*. Correlation is significant at the 0.05 level (2-tailed). **. Correlation is significant at the 0.01 level (2-tailed).

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CHAPTER V
ANALYSIS AND INTERPRETATION LEVEL III

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POST LISTING PERFORMANCE OF IPOs

The purpose is to find out the effectiveness of the pricing of the IPO stocks- inferring whether the stocks were over-priced or under-priced. And then to investigate the informational efficiency of IPO market prices with respect to the first five trading days. This part analyzes the speed of price adjustment to information events for IPOs.

The following part of the study shows the performance as shown by the individual stocks for the last 15 IPOs issued in the Indian Primary Market till May 2010. The detailed data of the pre-issue priceband of the IPO, its listing price, and the intra-day prices of the same can be referred to in AnnexureII. On an individual stock basis, the Open to Offer ratio signifies the percentage change the price of the stock has undergone with respect to its offer price. For the first day, this ratio signifies the percentage change in the price at which the stock was listed on the very first day of trading as compared to its offer price. High to Offer ratio depicts the maximum returns the stock promised over its offer price during the trading hours of a particular day. Similarly, Low to Offer ratio shows the maximum loss that could have been suffered by the investors over its offer price. Average to Offer ratio presents the percentage difference between the average returns of the day and the offer price of the stock. Negative sign denotes that the price at which the stock is traded is lower than the offer price, signifying a loss to the investors. Positive sign denotes the price of trading is higher than the offer price and is favourable to the stocks investors.

The ratios, when calculated on a regular basis for the first five trading days, thus, clarify the trend as shown by the stocks performance. Due to informational inefficiency of an IPO stock, the market forces come into play, as per the efficient market hypothesis, and as the information gets incorporated

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in the stock prices gradually over the first few days, the prices tend to under-go a correction phase. This price correction brings out the intrinsic value of the stock, thus clarifying the standing of the stock- is the stock under-priced or over-priced? Positive returns on all successive five days shows that the price for the stock is on the rise, and the market has acted favourably towards the stock, suggesting that the stock has been under-priced. Likewise, continuous negative returns depict that the stock had been over-priced, and the market forces make corrections in the price to bring it to its true value.

TABLE 5.1: JAYPEE INFRATECH LTD. Open to Offer day1 day2 day3 day4 day5 Avg -3.92% -8.82% -11.76% -17.65% -18.73% -12.18% High to Offer -3.14% -7.40% -11.76% -15.74% -17.45% -11.10% Low to Offer -11.76% -12.50% -20.00% -21.08% -20.83% -17.24% Average to Offer -7.81% -10.99% -17.42% -18.61% -18.86% -14.74%

OVERRPRICING= OVERRPRICING= 10.34% 10.34%

Close to offer -10.34% -11.62% -19.22% -19.80% -18.19% -15.83%

For JayPee Infratech Ltd., the prices have been on a decline since its listing day. The offer price which was Rs 102, was the highest ever price, and the stock was listed at a loss of 3.92% over the offer price. Even the intra-day high price was lower than the offer price. And ever since its listing, the price has been decreasing, and even its Last Trading Price as on 23 June 2010, Rs 85.90, was below its offer price. The price correcting mechanism operational in the market brought out a decline in the prices, the decrease equalling to around 20% on the fifth day itself. This clearly indicates that the stock was considered to be over-priced.

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TABLE 5.2: SJVN LTD. Open to Offer day1 day2 day3 day4 day5 4.23% -5.38% -3.85% -5.77% -6.73% High to Offer 4.23% -2.88% -2.31% -5.19% -5.38% Low to Offer -7.69% -6.92% -5.38% -7.69% -6.92% Average to Offer -2.15% -4.69% -3.77% -6.65% -6.23%

OVERPRICING= OVERPRICING= 3.46% 3.46%

Close to offer -3.46% -5.00% -4.62% -7.50% -6.35%

Avg -3.50% -2.31% -6.92% -4.70% -5.38% SJVN Ltd. though opened at 4% higher than its offer price, but that was the highest price for its stock on that day. And since the listing day, to next four days, the stock price had been on a decline, averaging to a loss of 4.70% to its investors in the first five days. The Closing Price for SJVN Ltd. stock has been below Offer Price for each of the first five traded days, clearly indicating the market considered the stock to be a bit overpriced. TABLE 5.3: MANDHANA INUSTRIES LTD. Open to Offer day1 day2 day3 day4 day5 0.77% 4.58% 1.62% 5.31% 5.23% High to Offer 7.31% 8.19% 5.12% 5.88% 6.54% Low to Offer 0.00% 0.77% 1.15% 3.15% 1.54% Average to Offer 3.32% 3.30% 3.35% 4.57% 4.24%
UNDERPRICING= UNDERPRICING= 3.46% 3.46%

Close to offer 2.73% 2.77% 4.19% 4.65% 5.12%

Avg 3.50% 6.61% 1.32% 3.75% 3.89% Mandhana stock prices have been received favourably by the market. Opening at a price just slightly higher than the offer price, the highest intra-day brought about a 7.31% increase over its offer price. And for the next five days too, the prices have been seeing the bright side, even the lowest price on any of the following five trading days never going below the offer price. The offer price was thus considered to be underpriced, giving a return of just around 3.89% on an average for the first five trading days.

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TABLE 5.4: TARAPUR TRANSFORMERS LTD. Open to Offer day1 day2 day3 day4 day5 0.00% -30.67% -31.93% -35.33% -42.67% High to Offer 29.93% -27.07% -29.60% -35.33% -37.87% Low to Offer -27.60% -34.93% -34.93% -45.20% -47.00% Average to Offer 3.64% -31.33% -32.32% -42.05% -41.47%

OVERPRICING= OVERPRICING= 23.47% 23.47%

Close to offer -23.47% -32.40% -34.13% -44.00% -43.07%

Avg -28.12% -19.99% -37.93% -28.71% -35.41% Tarapur had witnessed high speculations on its listing day as is indicated by the volatility in the intraday prices. Opening at its offer price, the intra-day high went as far as 30% over its offer price. Meanwhile the intra-day low price too registered a maximum of 27% loss to investors, and as the market came to a close, the bearish sentiments were high thereby decreasing the closing price by around 30%. And the prices as recorded on the fifth trading day showed a decrease at the level of over 40% below its offer price, thus making the stock to be over priced at the time of the issue, the first day closing price being 23% below Offer Price. TABLE 5.5: NITESH ESTATE LTD. Open to Offer day1 day2 day3 day4 day5 0.00% -6.48% -16.67% -22.13% -23.89% High to Offer 7.41% -5.93% -16.48% -17.87% -21.48% Low to Offer -10.37% -18.52% -22.78% -22.87% -26.85% Average to Offer -4.69% -10.54% -20.59% -21.11% -23.98%
OVERPRICING= OVERPRICING= 4.81% 4.81%

Close to offer -4.81% -5.`9% -21.02% -21.94% -25.83%

Avg -13.83% -10.87% -20.28% -16.18% -17.76% Nitesh Estate, as was the case with SJVN Ltd., opened at its offer price. Its intra-day high was 7.41% over its offer price and the intra-day low registering a 10% decline, averaging a loss of 4.69% to its investors. For the first five trading days, the average loss for the investors had been to the tune of 16%. The open day decrease in its prices has been 13.83% per day, below its offer-price. Thus, the stock was over-priced in this case as well.

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TABLE 5.6: TALWALKARS BETTER VALUE FITNESS UNDERPRICING= LTD. Open to Offer day1 day2 day3 day4 day5 15.59% 29.69% 54.69% 45.70% 40.63% High to Offer 31.95% 52.97% 58.75% 46.48% 42.50% Low to Offer 3.13% 28.91% 40.12% 37.73% 33.28% Average to Offer 22.19% 42.13% 47.76% 41.27% 39.27% Close to offer 27.46% 50.12% 43.09% 41.48% 35.90%

UNDERPRICING= 27.46% 27.46%

Avg 37.26% 46.53% 28.63% 38.52% 39.61% The data for the first five trading days for Talwalkars stock shows that the stock was considered to be highly underpriced, the stock registering an increase of 40% on the fifth trading day over its offer price the stock opened at a profit of 15% over the offer price, the intra-day highest went as far as 32% on the first day itself, and the lowest intra-day price too was above the offer price. The average earnings for its investors for the first five days were around 38%.

OVERPRICING= TABLE 5.7: GOENKA DIAMOND & JEWELS LTD. OVERPRICING=

Open to Offer day1 day2 day3 day4 day5 -8.15% -10.11% -15.07% -12.52% -17.93%

High to Offer 4.44% -9.41% -11.11% -12.11% -17.63%

Low to Offer -31.70% -16.63% -17.04% -20.15% -23.22%

Average to Offer -9.49% -13.77% -14.02% -17.23% -20.90%

5.48% 5.48%

Close to offer -5.48% -15.41% -13.00% -18.81% -22.04%

Avg -12.76% -9.16% -21.75% -15.08% -14.95% Goenka stocks have also declined in their Prices when compared to what the stock was offered at to the investors. The first day loss to the investors was around 10%, which over the next four days doubled up. The closing price at end of the fifth trading day was at 22% lower than the Offer Price. Thus, the Goenka stocks can also be said to have been overprices at the time of their issue.

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TABLE 5.8: SGJHL Open to Offer day1 day2 day3 day4 -3.85% -35.12% -36.58% -35.77% High to Offer -3.85% -34.46% -35.08% -35.38% Low to Offer -37.79% -38.29% -37.04% -38.29% Average to Offer -32.91% -36.20% -36.17% -36.92%

OVERPRICING= OVERPRICING= 36.71% 36.71%

Close to offer -36.71% -36.60% -36.52% -38.06%

Avg -27.83% -27.19% -37.85% -35.55% -36.97% Shree Ganesh Jewellery House Ltd. listed on the opening day at a discount of 3.85% over the Offer Price, the decline in prices increased as the trading day passed on. The highest price that the stocks could reach on the first day was the opening (listing price in this case). The second day returns were far lower than the first day, registering a loss of 35% over the offer price. Almost every day, the stocks closed to the low price of the respective day, and the next day open was still a few points lower, clarifying the overpriced position of SGJHL IPO.

TABLE 5.9: IVC Open to Offer day1 day2 day3 day4 day5 Avg 2.50% 2.00% 1.25% 3.50% 7.25% 3.30% High to Offer 3.50% 2.00% 4.13% 6.00% 7.25% 4.58% Low to Offer -0.50% 0.12% 0.50% 2.00% 4.00% 1.23% Average to Offer 1.50% 0.70% 2.33% 4.05% 5.35% 2.79%

UNDERPRICING= UNDERPRICING= 0.75% 0.75%

Close to offer 0.75% 0.25% 1.75% 5.00% 5.25% 2.60%

IVC stocks opened at 2.50% increase in return over the offer price, the marginal positive returns being maintained by the stock over the next four days. The close to offer ratio has increased over the five days, 0.75% on the first day to 5.25% on the fifth day. But comparing the first day closing price to the offer price, it can be deduced that the stock was aptly priced.

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TABLE 5.10: PRADIP OVERSEAS LTD. Open to Offer day1 day2 day3 day4 day5 4.55% -1.82% -7.27% -7.18% -7.05% High to Offer 11.55% -1.18% -4.55% -4.09% -6.64% Low to Offer -7.14% -7.95% -7.82% -8.59% -15.09% Average to Offer 0.35% -5.52% -6.66% -6.03% -11.84%

OVERPRICING= OVERPRICING= 2.68% 2.68%

Close to offer -2.68% -7.32% -7.00% -7.82% -14.27%

Avg -3.75% -0.98% -9.32% -5.94% -7.82% The Pradip stock though listed and opened at a premium of 4.55%, and the intra-day high was 11.55%, but as the day progressed, the stock prices went down, and closed at 2.68% below the offer price. And every day since then, for the next four days, the closing price has been lower than the opening price for that day. This indicates that the stock was considered to be marginally overpriced by the market. It is one of the very IPO stocks issued this year that despite being listed at premium, closed below the offer price.

TABLE 5.11: UNITED BANK OF INDIA Open to Offer day1 day2 day3 day4 day5 13.48% 4.24% 2.27% 2.27% 3.03% High to Offer 16.67% 7.05% 3.33% 5.15% 4.55% Low to Offer 3.03% 3.56% 0.15% 1.21% 2.42% Average to Offer 8.06% 5.32% 2.11% 2.55% 3.48%

UNDERPRICING= UNDERPRICING= 4.02% 4.02%

Close to offer 4.02% 4.62% 1.06% 3.86% 3.56%

Avg 5.06% 7.35% 2.08% 4.30% 3.42% The United Bank stock was considered to be under-priced, the first day closing price at 4% premium over the offer price. The first day speculation were high as is evident from the different between the high to offer and low to offer ratios, but the stock has brought only positive returns to its investors for the first five days.

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UNDERPRICING= TABLE 5.12: TEXMO PIPES & PRODUCTS LTD. UNDERPRICING= 52.39% 52.39%

Open to Offer day1 day2 day3 day4 day5 3.11% 54.44% 65.33% 55.56% 72.22%

High to Offer 55.44% 77.11% 65.33% 71.67% 78.67%

Low to Offer 3.11% 52.22% 51.50% 55.56% 66.39%

Average to Offer 46.20% 65.71% 58.03% 65.68% 73.30%

Close to offer 52.39% 63.56% 56.17% 69.61% 77.50%

Avg 50.13% 69.64% 45.76% 61.78% 63.84% Texmo Pipes stocks are one of the few stocks of this year that have shown very high positive returns. Opening at just 3.11% over the offer price, the closing price was 50% over the offer price, close to the high price of the day. And for the next four days, the prices have only risen, the closing price earnings for the fifth day being as high as 75%. This stock was considered to be highly underpriced.
UNDERPRICING= TABLE 5.13: ARSS INFRASTRUCTURE PROJECTS LTD. UNDERPRICING= 63.88% 63.88%

Open to Offer day1 day2 day3 day4 day5 40.00% 66.67% 81.87% 76.00% 76.44%

High to Offer 67.07% 83.78% 86.31% 81.11% 81.11%

Low to Offer 40.00% 59.50% 70.80% 72.97% 75.73%

Average to Offer 56.63% 71.33% 79.27% 77.50% 78.48%

Close to offer 63.88% 81.14% 76.01% 78.77% 77.37%

Avg 68.20% 79.88% 63.80% 72.64% 75.43% ARSS Infra, like Texmo pipes, is one of the few IPO stocks of this year that have given high positive returns to their investors. The stocks opened at a 40% premium over the offer price, this being the lowest intra-day price for ARSS stocks. The first day closed at a price of 63.88% higher than the offer price. The second day opened at higher than the first day closing price. For this stock, the third day recorded the highest returns for the first five trading days, but the same day the closing price marginally lowered down below the opening price of the day. And in the following days, there was lesser volatility in the stock prices. The stock was highly underpriced at Rs. 630, first day closing price being Rs 737.45.

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TABLE 5.14: EMMBI POLYARNS LTD. Open to Offer day1 day2 day3 day4 day5 2.22% -35.67% -34.44% -37.78% -41.56% High to Offer 7.33% -29.44% -32.67% -36.22% -38.78% Low to Offer -40.78% -38.67% -38.67% -42.00% -43.56% Average to Offer -15.24% -33.20% -36.02% -40.47% -40.98%

OVERPRICING= OVERPRICING= 36.11% 36.11%

Close to offer -36.11% -34.78% -38.11% -41.67% -42.22% -38.58%

Avg -29.44% -25.96% -40.73% -33.18% EMMBI stocks though opened at a marginal premium of 2% over the offer price, the stock plummeted to 36% below the price at which the stock was offered. And throughout the first five trading days, the stocks prices have only declined, thus making it absolute that EMMBI stock was highly overpriced even at Rs. 46.

TABLE 5.15: AQUA LOGISTICS LTD. Open to Offer day1 day2 day3 day4 day5 2.27% 10.18% 5.45% 6.57% 7.23% High to Offer 11.82% 16.43% 10.11% 8.09% 10.82% Low to Offer 1.70% 5.55% 4.23% 4.59% 6.39% Average to Offer 7.97% 10.84% 7.06% 6.40% 9.11%

UNDERPRICING= UNDERPRICING= 11.18% 11.18%

Close to offer 11.18% 7.02% 6.16% 5.82% 8.86% 7.81%

Avg 6.34% 11.45% 4.49% 8.28% Aqua Logistics stocks too opened at premium of 2% above the offer price, but unlike the EMMBI stock, it continued to give positive returns for the first five days, thus showing by this short term performance that its stocks were a bit under-priced at Rs 220, the first day closed at the price of Rs 242.5. The stock has given positive returns to its IPO investors.

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FIRST WEEK PERFORMANCE OF IPOs

This study examined the price performance of the IPOs in the short-run, where short-run means the behaviour of initial returns upon listing. As in other studies on this theme, the return realized over the period from the offering of the shares to the first trading day on NSE, called as open-to-offer return was computed. The short-run analysis was extended by examining offer-to-open returns which will give a fair idea of how much the IPOs gained or lost upon opening trades and an intra-day return on the listing day defined as the open-to-offer and low-to-offer returns on the listing day was also computed. The next 5 days returns in a similar manner with reference to the first day's closing price were also examined.

TABLE .516 PERFORMANCE Open to Offer AVERAGE STD DEV MAX MIN SKEWNESS N N(Price>Of fer) 5.45% 0.12 40.00% -8.15% 1.87 15 12 High to

FIRST DAY

Low to

Average to 6.11% 0.22 56.63% -32.91% 0.81 15 9

Close to Offer 3.52% 0.27 63.88% -36.71% 0.75 15 7

Offer Offer Offer 17.33% -6.47% 0.21 0.2 67.07% -3.85% 1.21 15 13 40.00% -40.78% 0.21 15 6

The above analysis shows the first day performance of the IPOs. The study reveals the average earnings of the offer open IPO is 5.45% and it ranges to the maximum of 17.33% and the minimum of -6.47% and at an average of 6.11% return on the first day of listing. Standard deviation is also calculated and presented in the above table. The maximum average return on the first day 56.63% and minimum average return on the first day is -32.91%. Out of 15 IPOs studied only 3 are listed below the issue price and 9 issues went below the issue price during the trading day. It is interesting to note that except 2(JP Infratech 3 6

and SGJHL), all the issues went above the issue price during the trading day (listing day). But as the first trading day ended, out of those that opened at a premium, only 7 stocks closed above the offer price.

TABLE 5.17 AVERAGE STD DEV MAX MIN SKEWNES S N N(Price>O ffer) Open to Offer 3.08% 0.28 66.67% -35.67% 0.82 15 7

SECOND DAY PERFORMANCE High to Low to Average to Offer 8.80% 0.35 83.78% -34.46% 1.09 15 7

Close to

Offer Offer Offer -0.94% 3.88% 4.07% 0.29 0.32 0.34 59.50% 71.33% 81.14% -38.67% -36.20% -36.60% 0.80 0.99 1.10 15 7 15 7 15 7

The second day's performance of the IPOs return analysis shows that most of the IPO investors gain on the listing day's performance and also on the second day. The investors who waited for the second day also gained considerably. The average return on the second day ranges from 8.80% to -0.94%. The maximum return on the second day ranged from 83.78% to 59.50% and the minimum return on the second day ranged from -34.46% to -38.67%.On the second day trading out of 15 IPOs 7 stocks opened higher than the issue price and all those 7 shares are opened below the issue price, thus showing that there was high price correction going on in the market.

TABLE 5.18 Open to Offer AVERAGE STD DEV MAX MIN 4.09% 0.35 81.87% -36.58%

THIRD DAY PERFORMANCE High to Offer 6.20% 0.35 86.31% -35.08% Low to Average to Close to

Offer Offer Offer -0.39% 2.60% 1.53% 0.31 0.33 0.33 70.80% 79.27% 76.01% -38.67% -36.17% -38.11%

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SKEWNES S N N(Price>O ffer)

1.13 15 7

1.13 15 7

0.98 15 7

1.07 15 7

1.02 15 7

The above analysis shows the third day performance of the IPOs. The average earnings of the offer open IPO is 4.09% and it ranges to the maximum of 6.20% and the minimum of -0.39% and at an average of 2.60% return on the third day of listing. Thus, though the intra-day highest average price for the 15 stocks has gone down, but these is less speculation as the information is getting incorporated in the stock prices, and the price correction has come into play. The average maximum return on the third day 81.87% and minimum average return on the first day is -36.58%. Out of 15 IPOs studied 8 opened below the issue price and only these issues went below the issue price during the trading day. It is interesting to note that all those stocks that opened above the issue price, remained so during the day as well not going below their issue price even for a single time, and vice-versa.

TABLE 5.19 Open to Offer AVERAGE STD DEV MAX MIN SKEWNES S N N(Price>O ffer) 1.81% 0.33 76.00% -37.78% 0.98 15 7

FOURTH DAY PERFORMANCE High to Offer 4.43% 0.35 81.11% -36.22% 1.05 15 7 Low to Average to Close to

Offer Offer Offer -1.36% 1.33% 1.27% 0.33 0.35 0.36 72.97% 77.50% 78.77% -45.20% -42.05% -44.00% 0.89 0.97 0.96 15 7 15 7 15 7

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The forth day performance of freshly issued IPOs shows that on an average, the stocks opened at just 1.81% higher than the respective offer prices, the intra-day high being 4.43% and the intra-day low being -1.36%, thus suggesting that even the intra-day low prices were higher than the offer prices. But there has been high difference in the stock prices, the average maximum being 77.50% higher, and at the same time, the average intra-day minimum being at -42.05%. There is a high degree of skewness in the averaging of the data. Out of the 15 IPOs listed, the 7 stocks which showed positive results on the third trading day continued to do so, and the 8 stocks that were giving negative results remained on that side.
TABLE 5.20 Open to Offer AVERAGE STD DEV MAX MIN SKEWNES S N N(Price>O ffer) 3.94% 0.35 76.44% -42.67% 0.92 15 7 High to Offer 6.05% 0.36 81.11% -38.78% 1.05 15 7 Low to Average to Close to Offer Offer Offer 0.74% 3.59% 3.22% 0.35 0.36 0.37 75.73% 78.48% 77.50% -47.00% -41.47% -43.07% 0.92 1.00 1.02 15 7 15 7 15 7 FIFTH DAY PERFORMANCE

IPOs in the short-run: It is clear from the five day analysis, that much of the speculation that went into the stock prices of newly listed issues was on the first trading day as is evident from the difference between the high and the low prices, which led as many as 13 stocks to go beyond the offer price, but as the day came to a close, only 7 stocks remained on the positive side. It may also noted that not all IPOs that opened with gains also closed the day with positive returns, in fact some of them closed at a discount to the offer price by the end of the day. Hence it is observed that the number of IPOs that ended the day at a premium is lower than the IPOs that opened at a premium, as 12 stocks opened to at a premium, but only 7 stocks managed to stay above the issue price throughout the day, not going below the issue price even a single time. And from the second day onwards, the 7 stocks continuously closed at a premium over the offer price.

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Thus it is seen from the above analysis that 8 out of the 15 IPOs listed were over-priced, and the fluctuations in the stock prices in the stock over the next four days were an attempt to discover the true prices. And these 8 stocks traded with their negative returns during the first week. Out of rest the 7 stocks, one was almost aptly priced, with the first day closing price being higher than the offer price, by just 0.75% (in case of IVC). The intra-day returns were also examined, i.e., if an investor buys the shares at the opening price and sells by the end of the day at the closing price, here it was observed that there were negative returns statistically not distinguishable from zero, therefore it may also be inferred that IPOs listing do not provide economically significant trading opportunities for day traders.

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CHAPTER VI
FINDINGS AND SUGGESTIONS

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5.1 FINDINGS:After the findings were obtained, they were used to reach the conclusions of the study. The various conclusions are as follows: In the correlation analysis only size measured by sales was found to be the dominant variable both in the case of issue price and the ratio of issue price to par value When investing in IPOs, investors generally consider five main factors i.e. the corporate image, size, performance of previous IPOs, price and present market conditions. Males generally have a tendency to invest in smaller amounts whereas females are likely to be more speculative. People in the age group of below 30 invest in small and medium amounts (below 100000) and people above the age of 45 tend to invest in higher amounts. It can be observed that the three categories of investors on the basis of investment amounts, give major emphasis on the growth of the firm. It needs to be noted that the investors investing the highest amounts of money usually base their decisions on the growth and profits, while those in the lowest investment bracket base their decisions on growth and do not give major emphasis on the number of years the company has been in business, while it being a major parameter for middle investment bracket. It can also be concluded that most of the investments is done by investors having either graduate or post graduate qualifications. Out of the last 15 IPOs that were listed this year till May 2010, 6 were underpriced, 1 was aptly priced and 8 were overpriced. Out of 15 IPO studied, only 3 were listed below the issue price but 8 closed below the offer price, thus confirming high speculation prevalent on the listing day. Since the second day to the fifth day, the 7 stocks which were underpriced did not go below the offer price even for once, thus indicating the direction

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of price movements. Likewise, the 8 overpriced stocks could not manage to go beyond the offer price.

5.2 RECCOMENDATIONS:
History of Indian capital market is replete with incidents of frauds committed by unscrupulous issuers and fly by night operators. These issuers play with the sentiments of investors and raise substantial sums of money without justifiable investment proposals. These issuers, when unable to fulfill promises made to investors elope in oblivion, leaving investors high and dry. Investors in this world must take care of their own interests. For the guidance of the investors some of the suggestions which emerge from the study are: The investors should look into the variables which make a company fundamentally strong before taking any concrete decisions. It was also observed during the course of the study that merchant bankers and accountants possess an art and tendency of manipulating accounting figures and present inflated results. Investors should be cautious and should see that these ratios are calculated on the basis of correct data. The investors are advised not to take figures at full value. Often the companies paint a rosy picture of their future earnings at the time of making public issues. The investors should not be swayed away by these forecasts. A degree of reservation and conservatism is always good at the time of investment in IPOs especially of new companies. An investor should not have herd mentality and should invest into IPO only when he is satisfied with working and financial strength of the company. He should also look into qualitative factors like promoters strength, future prospects of the company, risk factors and industry outlook before subscribing to an IPO. The companies coming out with a public issue should strive to achieve a good corporate image for their company as it is one of the important criteria for an investor while deciding on investing in an IPO.

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The present market conditions also have considerable impact on investors so the timing of coming out with a public issue should also be evaluated carefully.

The growth of the company is one of the most important judging criteria for a companys performance; therefore the company should make sure it projects a good growth rate before coming out with a public issue.

5.3 SCOPE FOR FURTHER RESEARCH: The present study concentrated on internal factors affecting valuation of equity issues in India. Factors external to the company were kept out of the purview of the study. Further research can be conducted on external and qualitative factors affecting the issue price. Detailed study is also required which should look into reasons of under pricing of IPOs in India. Present study was focused on short term performance i.e. listing performance. Another study is needed to gauge long term performance of IPOs in India.

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BIBILOGRAPHY Websites:
www.nseindia.com www.economictimes.com www.smcindiaonline.com www.moneycontrol.com www.chittorgarh.com www.ipo.org www.indianipoblog.com www.allipo.com

Published Reports:
Short and Long-run Performance of Book-built IPOs in India by Dr. S.S.S.Kumar, Associate Professor, Indian Institute of Management, Kozhikode Investors preference on IPOs in India by K.C.John Sasi Kumar, PhD Research Scholar Anna University, Coimbatore & Dr.P.Vikkraman, Assistant Professor School of Management Studies, Anna University, Coimbatore Determinants of ipo under pricing in the National Stock Exchange of India by Alok Pande, IIM Bangalore, R.Vaidyanathan, IIM Bangalore

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ANNEXURES

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APPENDIX - I
QUESTIONNAIRE
Dear Respondent, As a part of a Research Project being carried at Institute of Marketing and Management, New Delhi concerned with The Investor Perception on IPOs, I would like to request you to contribute by taking a few minutes to answer the following questions in the manner described. Your valuable inputs would be Please answer the following questions by ticking on the appropriate option. appreciated. I thank you for cooperating. 1. You are Male 2. Your Age 15-30 yrs 3. Job/ Profession 31-45 yrs 46-60 yrs Above 60 yrs Female For Office Use Only Respondent No. ______

Student
4. Education Matriculation

Govt. Employee Graduation

Professional

Business/ Self Employed Professional Diploma

PostGraduation Above Rs 100000

5. How much on an average do you invest in shares annually? Rs 10000Rs50000 Rs 50000Rs100000

6. How do you check the performance of the company? Years in Business Profits 7. What kind of industry/sector would you like to invest in? Oil/Energy Sector Others FMCG Telecom IT Size Growth rate Market share

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8. The corporate image of the company has an impact on your investment decision Strongly disagree Strongly disagree Agree Strongly agree nor disagree 9. The size of the issue has an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree Disagree Neither agree

10. The members of the Management have an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

11. The price of the IPO has an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

12. The objective of raising the IPO has an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

13. You prefer to invest in IPOs over secondary market Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

14. The present market conditions have an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

15. The performance of previous IPOs has an impact on your investment decision Strongly disagree Disagree Neither agree nor disagree Agree Strongly agree

THANK YOU

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APPENDIX - II
DESCRIPTIVE STATISTICS of first week Performance of Recently Listed IPOs:

Date

Prev Close

Ope n Price 98 93 90 84 82.9

JAYPEE INFRATECH LIMITED High Low Last Close Avera Price Price Price Price ge Price 98.8 94.45 90 85.95 84.2 90 89.25 81.6 80.5 80.75 92.2 89.7 83 83 83.8 91.45 90.15 82.4 81.8 83.45 94.03 90.79 84.23 83.02 82.76

Total Traded Quantity 3626348 0 7027985 2689887 1935465 1440326

Turno ver in Lacs 34097. 43 6380.7 3 2265.6 6 1606.7 5 1192

21-May10 24-May10 25-May10 26-May10 27-May10

102 91.45 90.15 82.4 81.8

Date

Prev Clos e 26 25.1 24.7 24.8 24.05

Ope n Pric e 27.1 24.6 25 24.5 24.2 5

High Price

SJVN LIMITED Low Last Clos Price Price e Price 24 24.2 24.6 24 24.2 25 24.7 24.7 24 24.35 25.1 24.7 24.8 24.05 24.35

Avera ge Price 25.44 24.78 25.02 24.27 24.38

Total Traded Quantit y 1.35E+0 8 110854 54 584155 2 369779 5 324845 2

Turno ver in Lacs 34433. 2 2746.6 9 1461.5 9 897.41 792.13

20-May10 21-May10 24-May10 25-May10 26-May10

27.1 25.25 25.4 24.65 24.6

MANDHANA INUSTRIES LIMITED

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Date

Prev Close

Open Price

High Pric e 139.5 140.65 136. 65 137.6 5 138.5

Low Price

Last Price

Clo se Pric e

Avera ge Price 134.3 1 134.2 9 134.3 5 135.9 4 135.5 1

Total Traded Quantity

Turno ver in Lacs

19-May10 20-May10 21-May10 24-May10 25-May10

130 133.5 5 133.6 135.4 5 136.0 5

131 135.9 5 132.1 136.9 136.8

130 131 131. 5 134. 1 132

133 134.7 135.85 137 137.15

133.5 5 133.6 135.4 5 136.0 5 136.6 5

169194 22724. 52 65 254522 3417.9 0 6 736253 989.16 395442 264950 537.57 359.03

TARAPUR TRANSFORMERS LIMITED Date Pre v Clos e 75 57.4 50.7 49.4 42 Open Price High Price Low Price Last Price Close Price Avera ge Price 77.73 51.5 50.76 43.46 43.9 Total Traded Quanti ty 813218 69 149076 66 262029 3 286026 1 712987 1 Turno ver in Lacs 63212. 07 7677.5 4 1330.1 1 1242.9 8 3129.6 8

18-May10 19-May10 20-May10 21-May10 24-May10

75 52 51.05 48.5 43

97.45 54.7 52.8 48.5 46.6

54.3 48.8 48.8 41.1 39.75

55.2 50.9 48.85 41.9 42.5

57.4 50.7 49.4 42 42.7

NITESH ESTATE LIMITED Date Prev Clos e 54 51.4 Open Price High Price Low Price Last Price Close Price Avera ge Price 51.47 48.31 Total Traded Quanti ty 226254 58 278287 Turno ver in Lacs 11644. 49 1344.4

13-May10 14-May-

54 50.5

58 50.8

48.4 44

51.2 44.75

51.4 45.8

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10 17-May10 18-May10 19-May10

45.8 42.6 5 42.1 5

45 42.05 41.1

45.1 44.35 42.4

41.7 41.65 39.5

42.85 42 39.75

42.65 42.15 40.05

42.88 42.6 41.05

4 182371 2 923431 541976

7 781.96 393.43 222.47

TALWALKARS BETTER VALUE FITNESS LIMITED Date Prev Close Open Price High Price Low Price Last Pric e 168. 3 195. 8 185. 8 183 171. 1 Clos e Price 163.1 5 192.1 5 183.1 5 181.1 173.9 5 Averag Total e Traded Price Quantit y 156.4 181.93 189.13 180.82 178.26 2602977 9 2170472 5 1941874 4 6358084 4026696 Turnov er in Lacs 40710.0 1 39487.1 2 36726.3 11496.4 4 7178.14

10-May10 11-May10 12-May10 13-May10 14-May10

128 163.1 5 192.1 5 183.1 5 181.1

147.9 5 166 198 186.5 180

168.9 195.8 203.2 187.5 182.4

132 165 179.3 5 176.3 170.6

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GOENKA DIAMOND AND JEWELS LIMITED Date Prev Close Open Price High Price Low Price Last Price Close Price Averag Total e Traded Price Quanti ty 122.19 116.41 116.07 111.74 106.79 368306 19 710332 1 332818 1 336124 5 405898 5 Turno ver in Lacs 45003. 37 8269.0 4 3862.9 3 3755.9 4 4334.4 1

16-Apr10 19-Apr10 20-Apr10 21-Apr10 22-Apr10

135 127.6 114.2 117.4 5 109.6

124 121.3 5 114.6 5 118.1 110.8

141 122.3 120 118.65 111.2

92.2 112.5 5 112 107.8 103.6 5

123.1 114.1 117.7 109.4 104.7 5

127.6 114.2 117.4 5 109.6 105.2 5

SHREE GANESH JEWELLERY HOUSE LIMITED (SGJHL) Date Prev Close Ope n Pric e 250 168. 7 164. 9 167 High Price Low Price Last Price Close Price Avera ge Price 174.4 3 165.8 8 165.9 6 164.0 2 Total Traded Quanti ty 303341 25 425760 6 214135 9 101490 9 Turno ver in Lacs 52912. 06 7062.5 3 3553.7 9 1664.6 4

09-Apr10 12-Apr10 13-Apr10 15-Apr10

260 164.55 164.85 165.05

250 170.4 168.8 168

161.7 5 160.4 5 163.7 160.4 5

163.5 164.3 164.2 160.6

164.5 5 164.8 5 165.0 5 161.0 5

IL&FS INVESTMENT MANAGERS LTD. Date Prev Clos e Open Price High Price Low Price Last Price Close Price Avera ge Price Total Trade d Quant ity Turno ver in Lacs

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30-Mar10 31-Mar10 01-Apr10 05-Apr10 06-Apr10

40 40.3 40.1 40.7 42

41 40.8 40.5 41.4 42.9

41.4 40.8 41.65 42.4 42.9

39.8 40.05 40.2 40.8 41.6

40.6 40.25 40.7 42.4 42.25

40.3 40.1 40.7 42 42.1

40.6 40.28 40.93 41.62 42.14

12883 1 36105 21511 5 79518 49242

52.31 14.54 88.05 33.09 20.75

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PRADIP OVERSEAS LIMITED Date Prev Close Ope n Pric e 115 108 102 102. 1 102. 25 High Price Low Price Last Price Close Price Avera ge Price 110.3 9 103.9 3 102.6 7 103.3 7 96.98 Total Traded Quanti ty 250226 85 348786 2 155176 7 152575 0 113285 0 Turno ver in Lacs 27622. 77 3624.9 1 1593.1 5 1577.1 6 1098.6 3

05-Apr10 06-Apr10 07-Apr10 08-Apr10 09-Apr10

110 107.05 101.95 102.3 101.4

122.7 108.7 105 105.5 102.7

102.1 5 101.2 5 101.4 100.5 5 93.4

106.8 101.7 5 102.0 5 100.7 93.9

107.0 5 101.9 5 102.3 101.4 94.3

UNITED BANK OF INDIA Date Prev Clos e 66 68.6 5 69.0 5 66.7 68.5 5 Open Price High Price Low Price Last Price Close Price Avera ge Price 71.32 69.51 67.39 67.68 68.3 Total Traded Quanti ty 551144 10 835760 0 252832 4 354869 7 153168 0 Turno ver in Lacs 39308. 59 5809.2 1703.7 9 2401.8 7 1046.1 8

18-Mar10 19-Mar10 22-Mar10 23-Mar10 25-Mar10

74.9 68.8 67.5 67.5 68

77 70.65 68.2 69.4 69

68 68.35 66.1 66.8 67.6

68.75 69.05 66.25 68.6 67.85

68.65 69.05 66.7 68.55 68.35

TEXMO PIPES & PRODUCTS LIMITED Date Prev Close Ope n Pric e High Price Low Price Last Price Close Price Avera ge Price Total Traded Quanti ty Turno ver in Lacs

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10-Mar10 11-Mar10 12-Mar10 15-Mar10 16-Mar10

90 137.15 147.2 140.55 152.65

92.8 139 148. 8 140 155

139.9 159.4 148.8 154.5 160.8

92.8 137 136.3 5 140 149.7 5

139 146.8 143 154 159.9

137.1 5 147.2 140.5 5 152.6 5 159.7 5

131.5 8 149.1 4 142.2 3 149.1 1 155.9 7

405237 03 285622 29 709750 7 102075 98 121854 38

53321. 18 42598. 91 10094. 67 15220. 43 19005. 75

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ARSS INFRASTRUCUTRE PROJECTS LIMITED Date Prev Close Open Price High Price Low Price Last Price Close Price Avera ge Price 704.8 4 770.9 7 806.7 798.7 6 803.1 5 Total Traded Quanti ty 157594 50 115743 51 900810 5 412356 5 193630 4 Turno ver in Lacs 111079 89234. 61 72668. 47 32937. 44 15551. 37

03-Mar10 04-Mar10 05-Mar10 08-Mar10 09-Mar10

450 737.4 5 815.1 5 792.0 5 804.4 5

630 750 818.4 792 794

751.8 827 838.4 815 815

630 717.7 5 768.6 778.3 5 790.8

750 809.1 5 785.3 804 796

737.4 5 815.1 5 792.0 5 804.4 5 798.1 5

EMMBI POLYARNS LIMITED Date Prev Close Open Price High Price Low Price Last Price Close Price Avera ge Price 38.14 30.06 28.79 26.79 26.56 Total Traded Quanti ty 614826 82 127450 26 302494 4 197582 7 307124 7 Turno ver in Lacs 23451. 26 3830.5 3 870.77 529.4 815.62

24-Feb10 25-Feb10 26-Feb10 02-Mar10 03-Mar10

45 28.75 29.35 27.85 26.25

46 28.95 29.5 28 26.3

48.3 31.75 30.3 28.7 27.55

26.65 27.6 27.6 26.1 25.4

28.2 29.25 27.75 26.2 25.95

28.75 29.35 27.85 26.25 26

AQUA LOGISTICS LIMITED Date Prev Close Open Price High Price Low Price Last Price Close Price Avera ge Price Total Traded Quanti ty Turno ver in Lacs

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23-Feb10 24-Feb10 25-Feb10 26-Feb10 02-Mar10

220 244.6 235.4 5 233.5 5 232.8

225 242.4 232 234.4 5 235.9

246 256.1 5 242.2 5 237.8 243.8

223.7 5 232.2 229.3 230.1 234.0 5

243.2 234 233 234.6 5 240

244.6 235.4 5 233.5 5 232.8 239.5

237.5 4 243.8 4 235.5 4 234.0 8 240.0 4

270080 71 925327 9 200425 7 656046 911967

64154. 51 22562. 82 4720.8 2 1535.6 9 2189.1 3

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