A RESEARCH STUDY TO FIND OUT PERCPTION OF INVESTOR

TOWARDS IPO IN INDIAN

A PROJECT SUBMITTED TO UNIVERSITY OF MUMBAI FOR

PARTIAL COMPLETION OF THE DEGREE OF MASTER
IN COMMERCE PART II (SEM-III) UNDER THE
FACULTY OF COMMERCE

BY

AHIRE YOGESH CHANDRAKAKNT RANJANA

ROLL NO: 38

UNDER THE GUIDANCE OF

DR AMIT PRAJAPATI

THE GOKHALE EDUCATION SOCIETY’S

DR. T.K.TOPE ARTS & COMMERCE NIGHT SENIOR COLLEGE
SIR DR. M. S. GOSAVI INSTITUTE OF POST GRADUATE STUDIES & RESEARCH

NOVEMBER, 2018

I
 DECLARATION BY LEARNER

I the undersigned AHIRE YOGESH CHANDRAKANT hereby declare that the work
embodied in this project work titled “A RESEARCH STUDY TO FIND OUT
PERCEPTION OF INVESTOR TOWARDS IPO IN INDIAN” forms my own
contribution to the research work carried out under the guidance of Dr. Amit Prajapati
is a result of my own research work and has not been previously submitted to any other
University for any other Degree/Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been clearly
indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Ahire Yogesh Chandrakant Ranjana

Certified by
Name and signature of the Guiding Teacher
Dr. Amit Prajapati
The Gokhale Education Society’s
Dr. T.K.Tope Arts & Commerce Night Senior College
Sir Dr. M. S. Gosavi Institute of Post Graduate Studies & Research

II
 Certificate

This is to certify that AHIRE YOGESH CHANDRAKANT has worked and duly
completed her/his Project Work for the degree of master in Commerce under the faculty
of Commerce in the subject of PROJECT MANAGEMENT and her/his project is
entitled “A RESEARCH STUDY TO FIND OUT PERCEPTION OF INVESTOR
TOWARDS IPO IN INDIAN” under my supervision. I further certify that the entire
work has been done by the learner under my guidance and that no part of it has been
submitted previously for any Degree or Diploma of any University.

It is her/his own work and facts reported by her/his personal findings and investigation.

Principal M.Com Coordinator

V. B. Rokade Prof. Pankaj Pandagale

Internal guide
Dr. Amit Prajapati External examiner

III
 Acknowledgement
(Model structure of the acknowledgement)

To list who all have helped me is difficult because they are so numerous and the depth is
so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University Of Mumbai for giving me chance to do this
project.

I would like to thank my Principal, Prof. V.B.Rokade for providing the necessary
facilities required for completion of this project.

I would also like to express my sincere gratitude towards my project guide Dr. Amit
Prajapati whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books
and magazines related to my project.

Lastly, I would like to thank each and every person who directly helped me in the
completion of the project especially my Parents and Peers who supported me throughout
my project.

IV
 LIST OF TABLE
PAGE
Sr. No. PARTICULAR
NO.

4.1 Age Group of Respondent 46

4.2 Gender Group of Respondent 47

4.3 Education Group of Respondent 48

4.4 Occupation Group of Respondent 49

4.5 Investor group In IPO 50

4.6 Reason for not invest In IPO 51

4.7 Advice to new investor 52

4.8 Investors in IPO 53

4.9 Purpose of Investment 54

4.10 Percentage gained on IPO listing 55

4.11 Group of Respondent for IPO 56

4.12 Respondent gained from IPO 57

4.13 Investors perception towards Procedure of IPO 58

4.14 Difficulties faced by Investors 59

V
 LIST OF CHART
PAGE
Sr. No. PARTICULAR
NO.

4.1 Age Group of Respondent 46

4.2 Gender Group of Respondent 47

4.3 Education Group of Respondent 48

4.4 Occupation Group of Respondent 49

4.5 Investor group In IPO 50

4.6 Reason for not invest In IPO 51

4.7 Advice to new investor 52

4.8 Investors in IPO 53

4.9 Purpose of Investment 54

4.10 Percentage gained on IPO listing 55

4.11 Group of Respondent for IPO 56

4.12 Respondent gained from IPO 57

4.13 Investors perception towards Procedure of IPO 58

4.14 Difficulties faced by Investors 59

VI
 INDEX
SR. NO. PARTICULARS PAGE NO.

TITLE PAGE I

DECLARATION II

CERTIFICATE III

ACKNOWLEDGEMENT IV

LIST OF TABLES V

LIST OF CHARTS VI

A RESEARCH STUDY TO FIND OUT

CH.1
EMERGING TREND OF IPO IN INDIA 1

1.1 INTRODUCTION 2

1.2 HISTORY 3

1.3 GENERAL TERMS INVOLVED IN IPO 4

1.4 FACTORS TO BE CONSIDERED BEFORE 5

APPLYING FOR AN IPO
1.5 ADVANTAGES 5

1.6 PROCEDURE 7

FACTORS TO BE CONSIDERED BEFORE

1.7 13
APPLYING FOR AN IPO

1.8 RECENT IPO’s IN INDIA 14

VII
1.9 HOW DOES IPO WORK IN INDIA 15

1.10 APPLYING FOR AN IPO IN INDIA 16

1.11 RECENT IPO’s IN INDIA 16

CH.2 REVIEW OF THE LITERATURE 17

2.1 INTRODUCTION 18

2.2 INDIAN SCENARIO 18

2.3 GLOBAL ASPECTS 29

2.4 CONCLUSION 35

2.5 REFERENCE 36

CH.3 RESEARCH METHODOLOGY 37

3.1 SCOPE OF THE STUDY 38

3.2 DATA TYPES & SOURCES 39

POPULATION, SAMPLING FRAME & SAMPLE

3.3 41
SIZE

STUDY AREA, SAMPLE TYPE – SAMPLING

3.4 42
PROCEDURE

3.5 DATA COLLECTION TECHNIQUES 42

3.6 OBJECTIVES OF THE STUDY 43

VIII
3.7 HYPOTHESIS OF THE STUDY 44

DATA ANALYSIS, INTERPRETATION AND

CH.4 45
PRESENTATION

METHOD OF DATA PRESENTATION AND

4.1 46
ANALYSIS
4.2 PROFILE OF RESPONDANTS 46
4.3 ANALYSIS OF QUESTIONNAIRE 46

CH.5 FINDING, SUGGESTION AND CONCLUSION 60

5.1 FINDING OF THE STUDY 61

5.2 SUGGESTION OF THE STUDY 63

5.3 CONCLUSION OF THE STUDY 64

BIBLIOGRAPHY 66

APPENDIX 70

IX
 1
A RESEARCH STUDY TO FIND OUT EMERGING TREND,
MERITAND DEMERITS OF IPO IN INDIAN

1.1 INTRODUCTION

1.2 HISTORY

1.3 GENERAL TERMS INVOLVED IN IPO

1.4 FACTORS TO BE CONSIDERED BEFORE APPLYING FOR AN

IPO

1.5 ADVANTAGES

1.6 PROCEDURE

1.7 APPLYING FOR AN IPO IN INDIA

1.8 RECENT IPO’s IN INDIA

1.9 OBJECTIVE OF STUDY

1.10 HYPOTHESIS OF STUDY

1.11 LIMITATION OF SYUDY

1.12 CONCLUSION

1
 1
A RESEARCH STUDY TO FIND OUT EMERGING TREND,
MERIT OF IPO

1.1 INTRODUCTION

Initial public offering (IPO) or stock market launch is a type of public offering in
which shares of a company usually are sold to institutional investors that in turn, sell to the
general public, on a securities exchange, for the first time. Through this process, a privately
held company transforms into a public company. Initial public offerings are mostly used
by companies to raise the expansion of capital, possibly to monetize the investments of
early private investors, and to become publicly traded enterprises. A company selling
shares is never required to repay the capital to its public investors. After the IPO, when
shares trade freely in the open market, money passes between public investors. Although
IPO offers many advantages, there are also significant disadvantages, chief among these
are the costs associated with the process and the requirement to disclose certain
information that could prove helpful to competitors. The IPO process is colloquially
known as going public.

Details of the proposed offering are disclosed to potential purchasers in the form of a
lengthy document known as a prospectus. Most companies undertake an IPO with the
assistance of an investment banking firm acting in the capacity of an underwriter.
Underwriters provide several services, including help with correctly assessing the value of
shares (share price) and establishing a public market for shares (initial sale). Alternative
methods such as the Dutch auction have also been explored. In terms of size and public
participation, the two most notable examples of this method is the Google IPO and Snap

2
chat’s parent company Snap Inc. China has recently emerged as a major IPO market, with
several of the largest IPOs taking place in that country.

1.2 HISTORY
The earliest form of a company which issued public shares was the case of
the publican during the Roman Republic. Like modern joint-stock companies,
the publicans were legal bodies independent of their members whose ownership was
divided into shares, or parts. There is evidence that these shares were sold to public
investors and traded in a type of over-the-counter market in the Forum, near the Temple of
Castor and Pollux. The shares fluctuated in value, encouraging the activity of speculators,
or questers. Mere evidence remains of the prices for which parts were sold, the nature of
initial public offerings, or a description of stock market behavior. Publican lost favor with
the fall of the Republic and the rise of the Empire.

In the early modern period, the Dutch were financial innovators who helped lay the
foundations of modern financial system. The first modern IPO occurred in March 1602
when the Dutch East India Company offered shares of the company to the public in order
to raise capital. The Dutch East India Company (VOC) became the first company in
history to issue bonds and shares of stock to the general public. In other words, the VOC
was officially the first publicly traded company, because it was the first company to be
ever actually listed on an official stock exchange. While the Italian city-states produced the
first transferable government bonds, they did not develop the other ingredient necessary to
produce a fully-fledged capital market: corporate shareholders. As Edward String
ham (2015) notes, "companies with transferable shares date back to classical Rome, but
these were usually not enduring endeavors and no considerable secondary market existed.
In the United States, the first IPO was the public offering of Bank of North
America around 1783.

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 1.3 GENERAL TERMS INVOLVED IN IPO

1) Primary market: It is the market in which investors have the first opportunity to buy a
newly issued security as in an IPO.

2) Prospectus: A formal legal document describing the details of the company is created
for a proposed IPO, also making the investors aware of the risks of an investment. It is
also known as the offer document.

3) Book building: It is the process by which an attempt is made to determine the price at
which the securities are to be offered based on the demand from investors.

4) Over Subscription: A situation in which the demand for shares offered in an IPO
exceeds the number of shares issued.

5) Green shoe option: It is referred to as an over-allotment option. It is a provision

contained in an underwriting agreement whereby the underwriter gets the right to sell
investors more shares than originally planned by the issuer in case the demand for a
security issue proves higher than expected.

6) Price band: Price band refers to the band within which the investors can bid. The
spread between the floor and the cap of the price band is not be more than 20% i.e. the
cap should not be more than 120% of the floor price. This is decided by the company
and its merchant bankers. There is no cap or regulatory approval needed for
determining the price of an IPO.

7) Listing: Shares offered in IPOs are required to be listed on stock exchanges for the
purpose of trading. Listing means that the shares have been listed on the stock
exchange and are available for trading in the secondary market.
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8) Flipping: Flipping’s reselling a hot IPO stock in the first few days to earn quick profit.
The reason behind this is that companies want long-term investors who hold their
stock, not traders.

1.4 FACTORS TO BE CONSIDERED BEFORE APPLYING FOR

AN IPO

There are certain factors which need to be taken into consideration before
applying for Initial Public Offerings in India:

1) Historical record of the firm providing the Initial Public Offerings.

2) Promoters, their reliability and past records.

3) Products offered by the firm and their potential going forward.

4) Whether the firm has entered into a collaboration with technological firm.

5) Project value and various techniques of sponsoring the plan.

6) Productivity estimates of the project.

7) Risk aspects engaged in the execution of the plan.

1.5 ADVANTAGES

When a company lists its securities on a public exchange, the money paid by the
investing public for then newly issued shares goes directly to the company (primary
offering) as well as to any early private investors who opt to sell all or a portion of their
holdings (secondary offerings) as part of the larger IPO. An IPO, therefore, allows a
company to tap into a wide pool of potential investors to provide itself with capital for
future growth, repayment of debt, or working capital. A company selling common shares is
never required to repay the capital to its public investors. Those investors must endure the
unpredictable nature of the open market to price and trade their shares. After the IPO,
when shares trade freely in the open market, money passes between public investors. For
5
 early private investors who choose to sell shares as part of the IPO process, the IPO
represents an opportunity to monetize their investment. After the IPO, once shares trade in
the open market, investors holding large blocks of shares can either sell those shares
piecemeal in the open market, or sell a large block of shares directly to the public, at a
fixed price, through a secondary market offering. This type of offering is not dilutive, since
no new shares are being created.

Once a company is listed, it is able to issue additional common shares in a number of

different ways, one of which is the follow-on offering. This method provides capital for
various corporate purposes through the issuance of equity (see stock dilution) without
incurring any debt. This ability to quickly raise potentially large amounts of capital from
the marketplace is a key reason many companies seek to go public.

An IPO accords several benefits to the previously private company:

1 Enlarging and diversifying equity base

2 Enabling cheaper access to capital
3 Increasing exposure, prestige, and public image
4 Attracting and retaining better management and employees through liquid equity
participation
5 Facilitating acquisitions (potentially in return for shares of stock)
6 Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans,
etc.

1.5.2 Some Advantages and Disadvantages of coming up with an IPO:

Advantages Disadvantages
 Stronger capital base  Short-term growth pressure
 Increases other financing prospects  Disclosure and confidentiality
 Better situated for making acquisitions  Costs – initial and ongoing
6
  Owner diversification  Restrictions on management
 Executive compensation  Loss of personal benefits
 Increase company and personal prestige  Trading restrictions

1.6 PROCEDURE

IPO procedures are governed by different laws in different countries. In the United
States, IPOs are regulated by the United States Securities and Exchange Commission under
the Securities Act of 1933. In the United Kingdom, the UK Listing Authority reviews and
approves prospectuses and operates the listing regime.

1.6.1 ADVANCE PLANNING

Planning is crucial to a successful IPO. One book suggests the following 7 advance
planning steps:

1. develop an impressive management and professional team.

2. grow the company's business with an eye to the public marketplace.
3. obtain audited financial statements using IPO-accepted accounting principles.
4. clean up the company's act.
5. establish antitakeover defenses.
6. develop good corporate governance.
7. Create insider bail-out opportunities and take advantage of IPO windows.

1.6.2 RETENTION OF UNDERWRITERS

IPO is done through the process called underwriting. Underwriting is the process of
raising money through debt or equity.

The first step towards doing an IPO is to appoint an investment banker. Although,
7
theoretically a company can sell its shares on its own, but on realistic terms, investment
bank is the prime requisite. The underwriters are the middlemen between the company and
the public. There is a deal negotiated between the two.
E.g. of underwriters: Goldman Sachs, Credit Suisse and Morgan Stanley to mention a few.
The different factors that are considered with the investment bankers include:
 The amount of money the company will raise
 The type of securities to be issued
 Other negotiating details in the underwriting agreement

The deal could be a firm commitment where the underwriter guarantees that a certain
amount will be raised by buying the entire offer and then reselling to the public, or best
efforts agreement, where the underwriter sells securities for the company but doesn’t
guarantee the amount raised. Also to off shoulder the risk in the offering, there is a
syndicate of underwriters that is formed led by one and the others in the syndicate sell a
part of the issue.

1.6.3 FILING WITH THE SEBI

Once the deal is agreed upon, the investment bank puts together a registration
statement to be filed with the SEBI. This document contains information about the offering
as well as company information such as financial statements, management background,
any legal problems, where the money is to be used etc. The SEBI then requires acooling
off period, in which they investigate and make sure all material information has been
disclosed. Once the SEBI approves the offering, a date (the effective date) is set when the
stock will be offered to the public.

1.6.4 ALLOCATION AND PRICING

The sale (allocation and pricing) of shares in an IPO may take several forms. Common

8
methods include:

 Best efforts contract

 Firm commitment contract
 All-or-none contract
 Bought deal

1. Public offerings are sold to both institutional investors and retail clients of the
underwriters. A licensed securities salesperson (Registered Representative in the
USA and Canada) selling shares of a public offering to his clients is paid a portion
of the selling concession (the fee paid by the issuer to the underwriter) rather than
by his client. In some situations, when the IPO is not a "hot" issue
(undersubscribed), and where the salesperson is the client's advisor, it is possible
that the financial incentives of the advisor and client may not be aligned.

2. The issuer usually allows the underwriters an option to increase the size of the
offering by up to 15% under certain circumstance known as the greenshoe or
overallotment option. This option is always exercised when the offering is
considered a "hot" issue, by virtue of being oversubscribed.

3. In the USA, clients are given a preliminary prospectus, known as a red herring
prospectus, during the initial quiet period. The red herring prospectus is so named
because of a bold red warning statement printed on its front cover. The warning
states that the offering information is incomplete, and may be changed. The actual
wording can vary, although most roughly follow the format exhibited on
the Facebook IPO red herring. During the quiet period, the shares cannot be
offered for sale. Brokers can, however, take indications of interest from their
clients. At the time of the stock launch, after the Registration Statement has become
effective, indications of interest can be converted to buy orders, at the discretion of
9
 the buyer. Sales can only be made through a final prospectus cleared by the
Securities and Exchange Commission.

4. The Final step in preparing and filing the final IPO prospectus is for the issuer to
retain one of the major financial "printers", who print (and today, also
electronically file with the SEC) the registration statement on Form S-1. Typically,
preparation of the final prospectus is actually performed at the printer, where in one
of their multiple conference rooms the issuer, issuer's counsel (attorneys),
underwriter's counsel (attorneys), the lead underwriter(s), and the issuer's
accountants/auditors make final edits and proofreading, concluding with the filing
of the final prospectus by the financial printer with the Securities and Exchange
Commission.
5. Before legal actions initiated by New York Attorney General Eliot Spitzer, which later
became known as the Global Settlement enforcement agreement, some large investment
firmshad initiated favorable research coverage of companies in an effort to aid corporate
finance departments and retail divisions engaged in the marketing of new issues. The
central issue in that enforcement agreement had been judged in court previously. It
involved the conflict of interest between the investment banking and analysis departments
of ten of the largest investment firms in the United States. The investment firms involved
in the settlement had all engaged in actions and practices that had allowed the inappropriate
influence of their research analysts by their investment bankers seeking lucrative fees. A
typical violation addressed by the settlement was the case of CSFB and
Salomon Smith Barney, which were alleged to have engaged in inappropriate spinning of
"hot" IPOs and issued fraudulent research reports in violation of various sections within the
Securities Exchange Act of 1934.

1.6.5 PRICING

A company planning an IPO typically appoints a lead manager, known as a book

runner, to help it arrive at an appropriate price at which the shares should be issued. There

10
are two primary ways in which the price of an IPO can be determined. Either the company,
with the help of its lead managers, fixes a price ("fixed price method"), or the price can be
determined through analysis of confidential investor demand data compiled by the book
runner ("book building").

Historically, many IPOs have been underpriced. The effect of underpricing an IPO
is to generate additional interest in the stock when it first becomes publicly
traded. Flipping, or quickly selling shares for a profit, can lead to significant gains for
investors who were allocated shares of the IPO at the offering price.

However, underpricing an IPO results in lost potential capital for the issuer. One
extreme example is theglobe.com IPO which helped fuel the IPO "mania" of the late 1990s
internet era. Underwritten by Bear Stearns on 13 November 1998, the IPO was priced at $9
per share. The share price quickly increased 1000% on the opening day of trading, to a
high of $97. Selling pressure from institutional flipping eventually drove the stock back
down, and it closed the day at $63. Although the company did raise about $30 million from
the offering, it is estimated that with the level of demand for the offering and the volume of
trading that took place they might have left upwards of $200 million on the table.

The danger of overpricing is also an important consideration. If a stock is offered to

the public at a higher price than the market will pay, the underwriters may have trouble
meeting their commitments to sell shares. Even if they sell all of the issued shares, the
stock may fall in value on the first day of trading. If so, the stock may lose its marketability
and hence even more of its value. This could result in losses for investors, many of whom
being the most favored clients of the underwriters. Perhaps the best known example of this
is the Facebook IPO in 2012.

Underwriters, therefore, take many factors into consideration when pricing an IPO,
and attempt to reach an offering price that is low enough to stimulate interest in the stock,
but high enough to raise an adequate amount of capital for the company. When pricing an
IPO, underwriters use a variety of key performance indicators and non-GAAP
11
measures.[29] The process of determining an optimal price usually involves
the underwriters ("syndicate") arranging share purchase commitments from leading
institutional investors.

Some researchers (Friesen & Swift, 2009) believe that the underpricing of IPOs is
less a deliberate act on the part of issuers and/or underwriters, and more the result of an
over-reaction on the part of investors (Friesen & Swift, 2009). One potential method for
determining underpricing is through the use of IPO underpricing algorithms.

1.6.6 QUIET PERIOD

Under American securities law, there are two time windows commonly referred to
as "quiet periods" during an IPO's history. The first and the one linked above is the period
of time following the filing of the company's S-1 but before SEC staff declare the
registration statement effective. During this time, issuers, company insiders, analysts, and
other parties are legally restricted in their ability to discuss or promote the upcoming IPO
(U.S. Securities and Exchange Commission, 2005).

The other "quiet period" refers to a period of 10 calendar days following an IPO's
first day of public trading. During this time, insiders and any underwriters involved in the
IPO are restricted from issuing any earnings forecasts or research reports for the company.
When the quiet period is over, generally the underwriters will initiate research coverage on
the firm. A three-day waiting period exists for any member that has acted as a manager or
co-manager in a secondary offering.

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 1.6.7 DELIVERY OF SHARES

Not all IPOs are eligible for delivery settlement through the DTC system, which
would then either require the physical delivery of the stock certificates to the clearing agent
bank's custodian, or a delivery versus payment (DVP) arrangement with the selling group
brokerage firm.

1.6.8 STAG PROFIT (FLIPPING)

"Stag profit" is a situation in the stock market before and immediately after a company's
Initial public offering (or any new issue of shares). A "stag" is a party or individual who
subscribes to the new issue expecting the price of the stock to rise immediately upon the
start of trading. Thus, stag profit is the financial gain accumulated by the party or
individual resulting from the value of the shares rising. This term is more popular in the
United Kingdom than in the United States. In the US, such investors are usually called
flippers, because they get shares in the offering and then immediately turn around
"flipping" or selling them on the first day of trading.

1.7 APPLYING FOR AN IPO IN INDIA

When a firm proposes a public issue or IPO, it offers forms for submission to be
filled by the shareholders. Public shares can be bought for a limited period only. The
submission form should be duly filled up and submitted by cash, cheque or DD prior to the
closing date, in accordance with the guidelines mentioned in the form.

13
 1.8 RECENT IPO’S IN INDIA

Current Current
Issue Price Price Gain /
Listing Price at BSE at NSE Loss
Company Name Date (Rs) (Rs) (Rs) (%)
Bandhan Bank Limited Mar 375 685.55 685.05 82.81
27,
2018
RITES Limited Jul 02, 185 313.25 313.25 69.32
2018
HDFC Asset Management Company Limited Aug 1100 1760.65 1763.6 60.06
06,
2018
Mishra Dhatu Nigam Limited Apr 04, 90 143.95 144.3 59.94
2018
Lemon Tree Hotels Limited Apr 09, 56 78.75 79 40.63
2018
Fine Organic Industries Limited Jul 02, 783 895.9 898.45 14.42
2018
Sandhar Technologies Limited Apr 02, 332 376.05 375.4 13.27
2018
Amber Enterprises India Limited Jan 30, 859 932.45 934.8 8.55
2018
Varroc Engineering Limited Jul 06, 967 1009.9 1012.1 4.44
2018
Karda Construction Ltd Apr 02, 180 181.8 181 1
2018

A fair number of the upcoming IPOs plan to raise at leastRs.1, 000 crore or more. For
example, InterGlobe Aviation Ltd (Indigo Airlines), Coffee Day Enterprises (Cafe Coffee
Day), Syngene International Ltd (Subsidiary of Biocon) and Matrix Cellular Services Ltd are
some of the names that can lure investors with the charm of a differentiated business.

Examples:

Some of the key IPOs that were the talk of the town in the recent past include:

 Inox Wind: The shares were priced at about $5.2 apiece. It startedtradingat the
Indian bourses at around $6.45 a piece, 35% jump over offer-price a bumper
listing.
 Snowman Logistics: The stock had debuted at a premium of 68% to the IPO
price.
14
  VRL Logistics: With the strong demand from all categories of investors, and the
positive sentiment in the markets, the IPO was oversubscribed 74 times and the
shares listed at a premium of 40% to the offer price of Rs 205.

On the other hand, a classic example of the changes in market sentiment overnight
affecting the IPO is Reliance Power IPO. The IPO had indicated huge demand when the
IPO was introduced. However, after the closure of the IPO, global financial crisis started
creeping in, and the applications worth Rs800,000crore that were riding on the Reliance
Power IPO, had the investors to wait for an excruciating three weeks for the company to
list and redeem their money. As market sentiment had undergone a sea change in the
interim, shares of the company also tanked on listing.

1.9 OBJECTIVE OF STUDY

There are several parties of IPO such as sponsor, the trustees, the custodians and investors as
beneficiaries. To gain an overview of the current performance trends of the Indian Capital Markets
industry and investors’ preference, the present thesis is intended to evaluate the performance of IPO
and its impact of diversification of portfolio on risk and risk potential of IPO, in particular.

1. To present the trends in the growth of Indian mutual funds.

2. To appraise the performance of selected schemes on the basis of performance

measures.

3. To evaluate the performance of the select equity growth schemes and compare
it with the benchmark to find out whether there is equality of means (returns).

4. To compare the risk and return of equity and debt funds for a period of 10
years to study the long run performance.

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1.10 HYPOTHESIS OF STUDY
The presemt study is based on following Hypotheses:

Hypothesis Ho:
Most of the investor take IPO as a profitable sources of investments for long term.

Hypothesis H1:
Most of the investor do not take IPO as a profitable sources of investments for long term.

1.11 CONCLUSION
1. An initial public offering (IPO) is the first sale of stock issued by a company to the public.

2. Private companies typically have a small number of closely knit shareholders.

3. Public companies can have thousands of different shareholders.

4. Going public raises cash and provides many benefits for a company.

5. Getting in on a hot IPO is very difficult, if not impossible.

6. An IPO company is difficult to analyze in the market because there isn't a lot of historical info.

7. In IPO tracking stocks to be the same as a normal IPO, as you are essentially a second-
class shareholder.

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 2

REVIEW OF THE LITERATURE

2.1 INTRODUCTION

2.2 INDIAN SCENARIO

2.3 GLOBAL ASPECTS

2.4 CONCLUSION

2.5 REFERENCE

17
 2

REVIEW OF THE LITERATURE

2.1 INTRODUCTION

In India, IPOs seems to be low-hanging fruits for the investors. If investors were
to get allocations in IPOs and sell these shares on the listing day, then on an average they
would be able to get returns higher than the market. However the risk of blocking one’s
money in IPOs and getting no allocations is associated with investments in IPOs. The
behavior and the determinants of IPO returns on the listing day as well as in long term
period has been researched extensively in almost all the major stock exchanges of the
world. Here the literature reviews of the previous researches done on the returns behavior
of IPOs all over the world including Indian stock market are mentioned below

2.2 INDIAN SCENARIO

Reena Aggarwal (1993) found the initial one-day returns to be 78.5 percent, 16.7
percent, and 2.8 percent for Brazil, Chile, and Mexico. The long-run mean market-
adjusted returns were found to be -47.0 percent in Brazil after three years. The three-year
mean excess return was -23.7 percent for Chile and the one-year mean excess return was
-19.6 percent for Mexico. They indicated long-run underperformance. For Brazil, there
seems to be a negative relationship between the initial returns and the long-run returns,
suggesting the overpricing of IPOs on the first trading day. These findings for the Latin
American markets were similar to the U.S. and UK pattern of long-run
underperformance. Based on the international evidence, it appears that these long-run

18
patterns were not just sample or country-specific. This phenomenon, in fact, existed in
nearly all markets except the U.S. and UK.

Kasim Alli (1994) analyzed the underpricing of IPOs of financial institutions and found
that in general, IPOs of financial institutions are significantly less underpriced than those
of non- financial institutions. These results are consistent with previous empirical studies
on the testing of information asymmetry hypothesis that the less ex ante uncertainty about
the value of the new issues, the smaller the average underpricing. These results hold even
after controlling for differences in underwriters' reputation, aftermarket volatility, and
years since establishment. However, results also show that the difference in the
underpricing between S&L conversion and nonfinancial firm IPOs disappears once the
differences in underwriters' reputation, aftermarket volatility, and years since
establishment have been controlled for. This suggested that the difference in the
underpricing between the non- financial institutions and the financial institutions was
primarily due to the underpricing of the non-S&L conversion IPOs. Furthermore, results
generally indicated that the level of ex ante uncertainty was lower for financial
institutions than for non- financial firms. Judging by the size of the average underpricing
of the non-S&L conversion financial institution sample (3.84 percent), the ex ante
uncertainty associated with the financial institutions (represented by the non-S&L
conversions) seemed to be bigger than those of equity carve-outs (1.7 percent) or
leveraged buyouts (2.04 percent). The results from this study were more consistent with
the information asymmetry hypothesis than the insurance-against- legal- liability
hypothesis. The lower level of underpricing for non-S&L conversion financial
institutions was also consistent with the regulation hypothesis that the regulations
imposed on depository financial institutions helped reduce ex ante uncertainty.

Narsinhan and Raman (1995) Analyzed the performance of 103 IPOs and found that
the initial returns from the IPOs are higher. Shah (1995) carried out a study on IPOs for
the period January 1991 to April 1995 of 2056 IPOs and reported that underpricing on an
average was 105.6 percent above the offer price on equally weighted basis and 113.75
19
percent if weighted by size of the issue. The commonest delay between issue date and

20
listing date is 11 weeks, and it is highly variable. This delay is strongly associated with
issue size, where bigger issues tend to have shorter delays. The listing delay had
diminished over the years. Because the listing delay is variable, it is incorrect to use
simple averages in expressing IPO underpricing; this would be clubbing together returns
obtained over different lengths of time. Because this delay is long, it is necessary to
measure returns on IPOs in excess of returns on the market index. Hence the focus is on
the weekly returns on IPOs in excess of weekly returns on the market index. It is found
that the average IPO underpricing comes to 3.8 percent per week by this metric. Very
small as well as very large issues had higher initial returns than the issues of medium
size.

Madhusoodan and Thripalraju (1997) conducted a study on data set of 1992 IPOs
covering time period 1992-1995 and found that winner’s curse explanation does not hold
good. The insurance against legal liability explanation is also not valid as it is not allowed
in India. This research paper analyzed the Indian IPO market for the shortterm as well as
long-term underpricing. They also examined the impact of the issue size on the extent of
underpricing in these offerings and the performance of the merchant bankers in pricing
these issues. The study indicated that the underpricing in the Indian IPOs in the short-run
was higher than the experiences of other countries. In the long-run too, Indian offerings
have given high returns compared to negative returns reported from other countries. The
study also revealed that none of the merchant bankers showed any better pricing
capabilities.

Raghuram Rajan and Henri Servaes (1997) examined data on analyst following for a
sample of initial public offerings completed between 1975 and 1987. They did this to
observe three well-documented IPO anomalies. They found that higher underpricing
leads to increased analyst following. Analysts are overoptimistic about the earnings
potential and long term growth prospects of recent IPOs. More firms complete IPOs
when analysts are particularly optimistic about the growth prospects of recent IPOs. In
the long run, IPOs have better stock performance when analysts ascribe low growth
21
potential rather than high growth potential. These results suggested that the anomalies
may be partially driven by over optimism.

Pandey and Arun Kumar (2001) explored the impact of signal on underpricing. Based
on cross sectional data of 1243 IPOs in Indian Market during 1993-1995, they found that
realized excess initial returns on IPOs were high on approx 68 percent. They also
reported that smaller sized issues tend to have higher initial returns as compared to large
issues.

Krishamurti and Kumar (2002) described the environment for making initial public
offerings (IPOs) in India and the process itself; and discussed the applicability of various
research explanations for underpricing to the Indian Market. It suggested that it will be
greater for new firms and issues managed by reputable merchant bankers. The research
paper analyzed 1992-1994 data on 386 IPOs to assess their performance and found that
the issues with high risk and/or smaller offer prices are more underpriced; and that
returns are strongly correlated with subscription levels.

Jaitley (2004) studied the extent of underpricing shortly following the deregulation of
new issue market and found that first day return was on an average 72 percent. This study
investigated the pricing of new issues in the Indian equity market during the period
shortly following the deregulation of the market for new issues and evaluated the
importance of book value and market value estimates in determining issue prices as well
as prices on the first day of trading. The study also used variables that may reduce
uncertainty (age to proxy for awareness of the company) and information asymmetry (the
extent of the promoter’s contribution to the new issue) in order to test whether
uncertainty and information asymmetry have an impact on pricing of new issues. The
result indicated that pricing of new issues appears to be consistent with rational decision-
making. No significant differences were found in first day returns between the two
groups of companies. There were, however, significant differences between the two
22
groups with respect to relative size of the issue and the difference between the forecasted
and current book value. This indicated that the CCI price might be used as a
benchmark,which is, then adjusted upwards or downwards to place greater emphasis on
expected performance.

Marisetty and Subrahmanyam (2005) documented the effect of group affiliation on the
2713 IPOs made in India during three regulatory regimes during the period 1990-2004.
The study found that, the average under pricing of group companies was higher than that
of standalone companies. In particular, they reported that under pricing was higher for
companies affiliated to private foreign (multinational) and private Indian groups.

Pandey (2005) examined the difference in under pricing of IPOs caused by difference in
allocation mechanism. On a sample of 84 Indian IPOs (20 book-build and 64 fixed price
from the period 1999-2000, he found the initial returns were higher on fixed offer pricing.
It may be noted that fixed price method was used for allocating of IPOs until 1999 when
book building was allowed. Now both book building and fixed offer price method are
available. This provides opportunity to compare both mechanisms
under similar market conditions.

Ghosh (2005) carried out a study to find out the factors explaining IPO under pricing
using 1842 companies that got listed on Bombay Stock Exchange from 1993-2001. His
study supported the signaling theory. Contrary to the international experience, he
reported that under pricing was less during the high volume (hot) period as compared
to the slump period in the Indian stock market.Alexander Ljungqvist and William J.
Wilhelm, JR. (2005) derived a behavioral measure of the IPO decision- maker’s
satisfaction with the underwriter’s performance based on Loughran and Ritter (2002) and
assess its ability to explain the decisionmaker’s choice among underwriters in subsequent
securities offerings. Controlling for other known factors, it was found that the IPO firms
were less likely to switch underwriters when behavioral measure indicated they were

23
satisfied with the IPO underwriter’s performance. Underwriters also extracted higher fees
for subsequent transactions involving satisfied decision- makers. Although the results
suggested that the behavioral model has explanatory power, they do not speak directly to

24
whether deviations from expected utility maximization determine patterns in IPO initial
returns.

Ravi Lonkani and Michael Firth (2005) studied IPO prospectus in Thailand and found
that this type of direct disclosure is especially important in a developing economy such as
Thailand where financial intermediaries and information vendors are relatively sparse,
and where investors are rarely professionals. It was also found that the managers'
earnings forecasts were much more accurate than extrapolations of historical earnings.
The forecast accuracy is related to underpricing, and it has a directional, but not
statistical, association with one-year stock returns and one-year wealth relatives.

Ansari V. Ahmed (2006) studied the IPO underpricing in India during the period of
2005 and found that the average first-day return (underpricing) was 40.9 percent which is
quite substantial. He also found that during the period 84 percent of the IPOs were
underpriced and 16 percent were overpriced.

Dev Prasad, George S. Vozikis, and Mohamed Ariff (2006) examined the impact of
government initial public offering (IPO) regulation intending on promoting public policy.
The study examines the results of the implementation of a Malaysian government policy
in 1976, which mandated that at least 30 percent of any new shares on an IPO offer be
sold to the indigenous Bumiputera population or to IPOs owned by them. The study
examined the short-run and long-run under pricing of Malaysian IPOs and found that
Malaysian IPOs are highly underpriced compared to IPOs in developing countries,
creating a market microstructure effect. It also confirmed that the Malaysian
government’s regulatory intervention in spite of noble public policy intentions appeared
to be the significant factor for the emergence of an average first day under pricing
increase of Malaysian IPOs by 61 percent during the period after the regulatory economic
policy was instituted. Fur there more, the study found that this high under pricing persists
even for the long run, in contrast to the long run performance of IPOs in the United
25
States.

Guntur Anjana Raju and Rudresh R. Kunde (2009) found that a public company
issuing IPOs have seen dramatic listing gains on their first day of trading. Of the 110
IPOs floated between January 2006 and April 2007, 104 recorded listing gains. In 70 of
them, the listing day gain exceeded 20 percent of the issue price. IPOs had given good
returns for the short term as well as the long term and could be considered to be a good
investment avenue for wealth creation. In the year 2007, as well, taking advantage of the
strength in the secondary market, many high profile companies lined up to raise money
from the market. The average returns provided on listing during the period January 2005
to March 31, 2007, was 33 percent, with these returns being realized immediately, within
approximately 40 days of the issue being floated. These attractive returns coupled with
the short returns realization period are making IPOs a rewarding investment option.

P. Ishwara (2009) analyzed 107 companies which entered capital market through IPOs
in the financial year 2007-08 and found that the private companies are dominated in the
new issues. Out of 107 issues, 86 companies gained in listing their shares in BSE and
NSE and rest of the companies reported negative return to the investors. As far as the
listing gains are concerned individual stock like Global Broad Caste News Ltd gained
above 88.0 per cent return in the financial 2007-08. At the same time some stocks listed
below offer price and incurred nearly 19.0 per cent loss for example Orbit Corporation.
During the peak market (Bullish) conditions i.e. when BSE SENSEX Indices 20,728 and
NSE 6206.80 on 15th January 2008, out of 107 companies, most of the companies i.e. 80
companies share are traded for high prices and reported handful return to the investors. In
the peak market, many individual stocks like Orbit Corporation, Evernon Systems Ltd,
MIC Electronics gave high rate of returns to the investors. In the bearish trend (declining)
when BSE SENSEX 16,783.87 and NSE 5049 on 22nd April 2008, some of the
individual stocks like Evernon System India Ltd gave 380.71 per cent returns and
maximum loss incurred companies like House and pearl fashions Ltd (i.e. -70.44
percent). The study showed that, Market forces and Individual companies’ performance
26
reflect stock performance.

Soumya Guha Deb (2009) examined the underpricing in Indian IPOs during the period
from 2001 to 2009. Using a sample of 187 IPOs, the results indicated evidence of
underpricing on the average in Indian IPOs during this period. It is also observed that the
mispricing adjusts very quickly and no excess returns are available to investors in the
aftermarket in the short run which is consistent with the notion of efficient market
hypothesis. A strong positive relationship was found between underpricing and ex-ante as
well as ex-post measures of uncertainty. The level of activity in the issues measured by
the daily trading volume is also found to have strong correlation with underpricing.

Alok Pande and R Vaidyanathan (2009) looked at the pricing of IPOs in the NSE, in
particular, it sought to empirically explain the first day underpricing in terms of the
demand generated during the book building of an issue, the listing delay between the
closure of the book building and the first day listing of the issue, and the money spent on
the marketing of the IPOs by the firms. It also sought to understand any emerging pattern
in Indian IPO market with reference to the previous studies. Moreover, it sought to find
the Post-IPO returns for one month in the NSE. The results suggests that the demand
generated for an issue during book building and the listing delay positively impact the
first day underpricing, whereas the effect of money spent on the marketing of the IPO is
insignificant. It was also found that in consonance with the extant literature, the Post-IPO
performance in one month after the listing for the firms under study is negative.

G Sabarínathan (2010) found some interesting changes in the characteristics of the

companies that made IPOs during the period 1993-94 to 2008-09. The changes in
characteristics are in terms of the size of the issue, size of the issuer as measured by the
post issue paid capital, the stage of evolution of the issuer, the pricing of the issue,
fraction of shareholding of the issuer that has been offered for public ownership, the
Industry/business that the issuer is engaged in and the exchanges on which the shares
were listed. Over the years the market has been receiving fewer issues, but of increasing
27
size from larger firms with an established track record. Issuers seem to be offering a
smaller fraction for public ownership at the IPO and have been listing on fewer
exchanges. Fewer issues were priced at par during the later part of the period of analysis

than the initial years. The sector-wise analysis of issuances points to fundamental
changes in the Indian industrial economy such as the emergence of new sectors such as
media, banking and information technology. The listing pattern across SEs pointed to
significant changes in the marketplace for securities trading and suggests a strong
preference for large national SEs.

Seshadev Sahoo and Prabina Rajib (2010) evaluated the price performance of IPOs
with respect to short-run underpricing and long-run underperformance for 92 Indian IPOs
issued during the period 2002-2006 up to a period of 36 months including the listing day.
The result indicated that on an average the Indian IPOs are underpriced to the tune of
46.55 per cent on the listing day (listing day return vis-à-vis issue price) compared to the
market index. The long-run performance of IPOs up to a period of 36 months measured
by using the two most promising evaluation techniques, i.e., wealth relative (WR) and
buy-and-hold abnormal rate of return (BHAR), both being adjusted with market index,
CNX-Nifty. Further, it was found that the underperformance is most pronounced during
the initial year of trading, i.e., up to 12 months from the listing date followed by over–
performance. To get possible explanations for long-run underperformance for Indian
IPOs, factors like underpricing rate (listing day return), offer size, leverage at IPO date,
ex-ante uncertainty, timing of issue, age of IPO firm, rate of subscription, promoter
groups retention, and price-to-book value (as proxy for growth) were considered.
Evidence found, that initial day return, offer size, leverage at IPO date, ex-ante
uncertainty, and timing of issue are statistically significant in influencing
underperformance. However, there was no evidence favorable to the age of the IPO firm,
rate of subscription, promoter group’s retention, and price-to-book value impact on the
long-run underperformance. The empirical results suggest that the investors who invest in
IPOs through direct subscription earn a positive marketadjusted return throughout the

28
period of study. But investors who bought shares on the IPO listing day earned negative
returns up to 12 months from the listing date and expect to earn positive market-adjusted
return thereafter.

2.3 GLOBAL ASPECTS

Ritter (1984) analyzed the “hot issue” market of 1980, the 15-month period starting from
January 1980 and extending through March 1981 during which the average initial return
on unseasoned new issues of common stock was 48.4 percent. This average initial return
compares with an average of 16.3 percent during the “cold issue” market comprising the
rest of the 1977-82 periods. An equilibrium explanation for this difference in average
initial returns is investigated but is found to be insufficient. Instead, this hot issue market
is found to be associated almost exclusively with natural resource issue. For firms in
another industry, a hot issue market is barely perceptible. This research paper
documented tremendous disparities between the initial returns from natural resource
issues vis-à-vis non natural resource issues in the United States during 1977–82,
underlining the role of industry classification in IPO underpricing.

Rock and Kelvin (1986) demonstrated that retail uninformed investors might suffer from
a winner’s curse problem. They might get all the allocations that they have asked for in
IPOs, which are going to earn very low returns on the day of listing, but may be rationed
out in IPOs, which will give very high returns on the day of listing, because of the high
demand that such issues will generate. Thus, retail uninformed investors might not be
able to utilize the underpricing inherent in IPOs to their advantage. Besides this,
uninformed investors might not be able to fully comprehend the risk factors which are
outlined in the offer documents of the IPOs. To this extent, the rating mechanisms
introduced in the Indian IPO markets would prove to be useful for the retail investors.

Rock (1986) proposed the “Winner Curse hypothesis” to reasonably explain an IPO’s
positive initial return. The hypothesis implies that more uncertain issues should have
29
higher initial returns. Issuers and their investment bankers attempt to reduce information
asymmetry and initial returns by disseminating information about the IPO firm. Investors,
on the other hand, try to judge the growth potential of a company going public from the
available information, which includes age, size, information about promoters, and
industry classification.

Allen and Faulhaber’s (1989) empirical evidence suggested the existence of `hotissue'
markets for initial public offerings: in certain periods and in certain industries, new issues
are underpriced and rationing occurred. This research paper develops a model consistent
with this observation, which assumes the firm itself best knows its prospects. In certain
circumstances, firms with the most favorable prospects find it optimal to signal their type
by underpricing their initial issue of shares, and investors know that only the best can
recoup the cost of this signal from subsequent issues. Grinblatt and Hwang (1989)
developed a signaling model with two signals, two attributes, and a continuum of signal
levels and attribute types to explain new issue underpricing. Both the fraction of the new
issue retained by the issuer and its offering price convey to investors the unobservable
"intrinsic" value of the firm and the variance of its cash flows. Many of the model's
comparative statics results are novel, empirically testable, and consistent with the existing
empirical evidence on new issues. In particular, the degree of underpricing, which can be
inferred from observable variables, is positively related to the firm's post- issue share
price. This research paper concentrated on asymmetric information prevailing in the IPO
market. It assumed that a firm possesses the most valuable information about the
prospects of a new project, and that the issuers explicitly consider the possibilities of
future equity issues when deciding IPO prices. Signaling theory argued that high-quality
firms signal the true value of their shares by offering them at a discount, and then retain
some of the shares of the new issues in their personal portfolio. Underpricing created a
good impression in investors’ minds, which helped the firm to sell the subsequent
seasoned equity offerings (SEOs) at attractive prices. Low-quality firms deterred from
mimicking the high-quality firms, because they were less likely to reap the benefits of
IPO underpricing by selling their seasoned issues at higher prices. Thus, signaling models
suggested by the authors that greatly underpriced issues are more likely to reissue or
come back with SEOs. Jegadeesh et al. (1989) empirically examined the implications of
30
signaling theory, using firm, commitment IPOs in the United States over 1980–86. But
they found only a weak association between IPO underpricing and subsequent SEOs,
which questioned signaling theory’s explanatory power. This research paper investigated
the long-term performance of firms that issued seasoned equity relative to a variety of

enchmarks and found that these firms significantly underperform all of the chosen
benchmarks over the five years following the equity issues. Across SEOs, similar levels
of underperformance is found for both small and large firms, and both growth firms and
value firms. The paper also indicated that factor-model benchmarks are misspecified.
Hence inferences on SEO underperformance based on such benchmarks are misleading.
The SEOs underperform their benchmarks by twice as much within earnings
announcement windows as they do outside these windows.

Ritter (1991) found that the underpricing of initial public offerings (IPOs) that have been
widely documented appeared to be a short-run phenomenon. Issuing firms during 1975-
84 substantially underperformed a sample of matching firms from the closing price on the
first day of public trading to their three- year anniversaries. There was a substantial
variation in the underperformance year-to-year and across industries, with companies that
went public in high-volume years faring the worst. The patterns were consistent with an
IPO market in which (1) investors are periodically overoptimistic about the earning
potential of young growth companies, and (2) firms take advantage of these "windows of
opportunity."

Ritter and Loughran (1995) found that the companies issuing stock during 1970 to
1990 whether an initial public offering or a seasoned equity offering, have been poor
long-run investments for investor. During the five year after the issue, investors had
received average returns of only 5 percent per year for companies going public and only
7 percent per year for companies conducting a seasoned equity offer. Book-tomarket
effects accounted for only a modest portion of the low returns. An investor would have
had to invest 44 percent more money in the issuers than in non- issuers in the same size to
have the same wealth five years after the offering date. The research paper documented
that larger and more established IPOs had given better returns to their investors over the
31
long run compared to their smaller and younger counterparts. These arguments
highlighted investor uncertainty as a prime factor in IPO underpricing.

Douglas A Hensler et al (1997) estimated an accelerated failure time (AFT) model to

investigate the effects of several characteristics suggested as indicators of firm survival
for initial public offerings (IPOs). The results indicated that the survival time for IPOs
increases with size, age of the firm at the offering, the initial return, IPO activity level in
the market, and the percentage of insider ownership, while the survival time decreases
with increases in the general market level at the time of offering and the number of risk
characteristics. Additionally, the survival time is negatively affected if the IPO is in the
computer and data, wholesale, restaurant, or airline industries and positively if the IPO is
in the optical or drug industries.

Lawrence M Benveniste and Walid Y Busava (1997) compared two mechanism for
selling IPOs, the fixed price method and American Book Building. They found that the
book building generated higher expected proceeds but exposed the issuer to greater
uncertainty, and that it provided the option to sell additional shares that were not
underpriced on the margin.

Barnal and Obadullah (1998) analysed the 433 IPOs and also found the initial returns to
be higher.

Ritter and Welch (2002) focused on three areas of research on IPOs. These were (1)
reasons for going public, (2) the pricing and allocation of shares, and (3) long-run
performance and found that that market conditions are the most important factor in the
decision to go public. The stage of the firm in its life cycle seemed to be the second
important factor. The theories based on asymmetric information were unlikely to explain
average first-day returns of 65 percent. Underwriters did not bundle multiple offerings
together, which would have lowered the average uncertainty and the need for
underpricing in the context of information models.

32
Ritter (2003) cited behavioral finance to explain severe underpricing of IPOs, noting that
if an IPO were underpriced, pre issue stockholders were worse off because their wealth
had been diluted. The entrepreneur, on the other hand, received the good news that he or
she was suddenly and unexpectedly wealthy because of a higher than expected IPO price.
Integrating the wealth increase and dilution, the issuer could be better off on balance.
Underwriters take advantage of this mental accounting and severely underpriced many
IPO deals.

Onur Arugaslan et. al. (2004) examined the arguments for “why monitoring
considerations create incentives for managers to underprice their firms’ IPOs” using a
sample of U.S. IPOs. They found that the determinants of initial returns, institutional
shareholdings, and post-IPO likelihood of acquisition were not consistent with these
arguments. They concluded that monitoring considerations are not important
determinants of IPO underpricing.

Francois Derrien (2005) explored the impact of investor sentiment on IPO pricing.
Using a model in which the aftermarket price of IPO shares depends on the information
about the intrinsic value of the company and investor sentiment, it was found that the
IPOs can be overpriced and still exhibit positive initial return. A sample of French
offerings with a fraction of the shares reserved for individual investors supported the
predictions of the model. Individual investors’ demand was found to be positively related
with market conditions. Moreover, large individual investors’ demand leads to high IPO
prices, large initial returns, and poor long-run performance

Lee and Wahal (2004) studied all IPOs from 1980 to 2000. An analogy to the
certification role of external agencies is that of the role of credit rating agencies. A credit
rating agency gives its opinion on the credit risk involved in investing in a firm or a
security. In the recent global meltdown, the role of such agencies has come under
scanner. Even earlier, the credit rating agencies continued to rank Enron as a good credit
risk company till 4 days before the company declared bankruptcy (Securities and

33
Exchange Commission, 2003). To summarize, so far, international evidence recognizes
that asymmetric information among issuers and investors is the prime factor explaining
IPO underpricing. Some studies argued that promoters use underpricing to signal their
better quality and, subsequently, raise large amounts of funds from the market. Rooted as
they are in theory, many of these explanations are likely to be true for emerging
economies as well as developed ones. However, there could be institutional features
specific to developing countries, such as underdeveloped capital markets, the existence of
business groups, and IPO regulations, especially regarding small and young firms, that
might impinge on both the causes and the extent of underpricing in emerging countries.
In India, the earlier research efforts on IPOs were mainly focused on to study their initial
returns and on their underpricing. In this research study the efforts will be done to
investigate the patterns of the short term (listing day) returns and long term (post listing)
returns with respect to Indian stock market using event study approach. The other
exogenous variables such as subscription, age, issue size, promoters holding etc will be
considered to understand the behavior of IPOs in short and long term. The IPOs came in
Indian stock market will be divided with respect to different feature of the companies
such as age, issue size, industry and IPO grading etc. The world renowned anomalies of
underpricing in short term and underperformance in long run will also be tested in Indian
context.

2.4 CONCLUSION

Many theoretical studies have been conducted regarding the reasons that explain
IPO underpricing and some of these theories have been tested empirically. In general,
most of the theories converge to some factors that affect underpricing. These factors can
be summarized to the following: the information asymmetry between investors, between
issuers and underwriters or between underwriters and institutional investors; the desire to
stand out as high quality investment; the likelihood of future litigation; the desire of the
owners or the managers to achieve ownership dispersion and to retain control; and other
behavioral explanations that make the shares attractive.

Empirical evidence on IPOs shows that initial underpricing is observed in all

34
countries but the level of underpricing varies from country to country over time.
According to Gajewski and Gresse (2006) and Ljungqvist (2005), this is a result of the
different legal frameworks, the different periods of examination, the different
characteristics of the various sectors and the different IPO mechanisms (underpricing is
lower when using the auctions or the fixed-price offering instead of the book building
method). Empirical studies on particular sectors of the economy report that most of the
studies focus on high-tech IPOs. Their findings indicate that most new technology
companies are underpriced. Empirical evidence on underpricing in other sectors of the
economy is less clear, as there are very few empirical studies in worldwide literature, fact
that reveals the need for future IPO empirical research in specific sectors of the economy.

2.5 REFERENCES

 Arwah Arjun Madan (2003), „Investments in IPOs in the Indian Capital

Market‟,Bimaquest-Vol. 3, No. 1, Page 24-34

 Anand Adhikar (2010) “New Listings” Business Today, Vol.19, No.23, Page 94-95.

 Jignesh B. Shah and Smita Varodkar , November (2013) “Capital Market: Trends in
India and abroad – impact of IPO Scam an Indian Capital Market”, published in the
Souvenir, All India Accounting Conference, November (2013)

 Jagannadham Thunuguntla (2011) “IPOs: More Misses Than Hits”, Dalal Street
Investment Journal, Vol.26. No. 9, Page. 69.

 Madhumita Gosh (2011) “IPOs: More Misses Than Hits”, Dalal Street Investment
Journal, Vol. 26. No. 9, Page 70.

 Mahesh Nayak (2010) „Of Primary Concerns‟ Businessworld, Vol. 30, No. 25, 2-8,
Page 30-36.

35
 Prithvi Haldea, (2011) “IPOs: More Misses Than Hits”, Dalal Street Investment
Journal, Vol. 26. No. 9, Page 67.

 Sunil Damania (2011) “Primary Issues” Dalal Street Investment Journal, Vol. 2 No.
9, Page No. 3.

36
 3

RESEARCH METHODOLOGY

3.1 SCOPE OF THE STUDY

3.2 DATA TYPES & SOURCES

3.3 POPULATION, SAMPLING FRAME & SAMPLE SIZE

3.4 STUDY AREA, SAMPLE TYPE – SAMPLING PROCEDURE

3.5 DATA COLLECTION TECHNIQUES

3.6 OBJECTIVES OF THE STUDY

3.7 HYPOTHESIS OF THE STUDY

37
 3

RESEARCH METHODOLOGY

3.1 SCOPE OF THE STUDY

This study covers a time period of ten years from 2008-2018, for the purpose of
Secondary data. The research study involves exploration of which attribute of Emerging
Trend of IPO in India has more intense effect on the investor decision and which
attributes of IPOs are relatively significant or insignificant for investors, and also to
determine how much level of each attributes is most or least preferred. Similarly, the
primary data pertaining to the opinions, views & perceptions of the Investors were
collected through a Questionnaire during July, 2018 & August, 2018 from the study area.
Mumbai City of the Maharashtra State was purposively selected for the study as the
researcher is from the same City.

3.1.1 STATISTICAL TOOLS ADOPTED:

The data was interpreted & analyzed with the help of tables, percentages, graphs
& chart presentation.

3.1.2 SAMPLING TECHNIQUE:

The technique used for this Project is based on a QUESTIONNAIRE which consists
of about 15 general questions. This questionnaire aims to provide the data which is of
most important in nature to enable a comprehensive analysis of impact attributes of
Investor Towards IPO in India. The questions consist of statements, the intensities of
which are from the respondents to extract the opinion of respondents. These questions

38
evaluate the intensity of respondent on various parameters with high and low extremes on
the scale.

3.1.3 LIMITATIONS:
The study is limited only within Mumbai City [mainly Central Mumbai] of
Maharashtra State, because of the time & financial constraints the study is restricted to
the sample size up to 50 respondents / investors of different age groups. However, it is
reasonably sufficient number to generalize the information collected. The study could not
cover the legal – investment strategies & aspects on the whole.

3.2 DATA TYPES & SOURCES

Both quantitative & qualitative data will be used. Primary data will be collected
through observation, structured questionnaires & semi-structured interviews using
checklist & the responses of the leading questions. Secondary data will be obtained from
external sources like Newspapers, journal, magazines, Internet, Website etc. which will
be included to gather more information for International comparisons.

3.2.1 MEANING OF PRIMARY DATA & ITS IMPORTANCE

Primary data is information that you collect specifically for the purpose of your
research project. An advantage of primary data is that it is specifically tailored to your
research needs. A disadvantage is that it is expensive to obtain.

Primary data are information collected by a researcher specifically for a research

assignment. In other words, primary data are information that a company must gather
because no one has compiled and published the information in a forum accessible to the
public. Companies generally take the time and allocate the resources required to gather
primary data only when a question, issue or problem presents itself that is sufficiently

39
important or unique that it warrants the expenditure necessary to gather the primary data.
Primary data are original in nature and directly related to the issue or problem and current
data. Primary data are the data which the researcher collects through various methods like
interviews, surveys, questionnaires etc.

Advantages of primary data are as follows:

1. The primary data are original and relevant to the topic of the research study so
the degree of accuracy is very high.
2. Primary data is that it can be collected from a number of ways like interviews,
telephone surveys, focus groups etc. It can be also collected across the national
borders through emails and posts. It can include a large population and wide
geographical coverage.
3. Moreover, primary data is current and it can better give a realistic view to the
researcher about the topic under consideration.
4. Reliability of primary data is very high because these are collected by the
concerned and reliable party.

3.2.1 MEANING OF SECONDARY DATA & ITS IMPORTANCE

Secondary data are the data collected by a party not related to the research study
but collected these data for some other purpose and at different time in the past. If the
researcher uses these data then these become secondary data for the current users. These
may be available in written, typed or in electronic forms. A variety of secondary
information sources is available to the researcher gathering data on an industry, potential
product applications and the market place. Secondary data is also used to gain initial
insight into the research problem. Secondary data is classified in terms of its source –
either internal or external. Internal, or in-house data, is secondary information acquired
within the organization where research is being carried out. External secondary data is
obtained from outside sources. There are various advantages and disadvantages of using
secondary data.

40
Advantages of secondary data are following:

1. The primary advantage of secondary data is that it is cheaper and faster to access.
2. Secondly, it provides a way to access the work of the best scholars all over the
world.
3. Thirdly, secondary data gives a frame of mind to the researcher that in which
direction he/she should go for the specific research.
4. Fourthly secondary data save time, efforts and money and add to the value of the
research study.

3.3 POPULATION, SAMPLING FRAME & SAMPLE SIZE

3.3.1 POPULATION:
This is the set of maximum Investors [Male & female] to which the findings are
to be generalized.

3.3.2 SAMPLING FRAME:

In order, to perform non probability sampling, a sampling frame is constructed
based on the study area. The list of Corporates, households, etc. is generated from the
selected areas & randomly.

3.3.3 SAMPLE SIZE:

Sample size of 50 respondents is selected for the study to make the study
meaningful and relevant.

41
3.4 STUDY AREA, SAMPLE TYPE – SAMPLING PROCEDURE:

3.4.1 STUDY AREA:

The topic of ‘Emerging Trend of IPO in India’ is generally known by all masses, but

due to time constraints, the study is bounded throughout the city of Mumbai only. The
reason for selecting this City is because there are a large number of people residing &
who are familiar about it as they may invest on regular basis too.

3.4.2 SAMPLE TYPE & SAMPLING PROCEDURE:

The sample type & procedure opted for this study is by prepared by circulating
Questionnaire via social media WhatsApp within the Mumbai city. The data collected is
mainly based age wise, gender wise, educational background, minimal knowledge about
Emerging Trend of IPO in India.

3.5 DATA COLLECTION TECHNIQUES:

For the collection of data regarding the conceptual framework, performance of the
Emerging Trend of IPO in India and the preference of Emerging Trend of IPO in India
The data has been collected through Primary and Secondary Sources as follows:

1.) Documentation – This involves collecting information & data from existing
surveys, reports & documents.

2.) Structured Questionnaires – This will be used to collect information from

Investors & households. Questionnaires will be developed to obtain survey &
statistical data that allows an understanding with respect to the review of people
investing in IPO in India & their decisions.

42
 3.) Observation & Analysis – The observation during the fieldwork will be used
mainly to review the issues beyond those covered in the structured & semi-
structured questionnaires. The data will be analyzed in the form of graphs, charts
table format, etc. according to the age-groups, gender wise.

3.6 OBJECTIVES OF THE STUDY

There are several parties of IPO such as sponsor, the trustees, the custodians and
investors as beneficiaries. To gain an overview of the current performance trends of the
Indian Capital Markets industry and investors’ preference, the present thesis is intended
to evaluate the performance of IPO and its impact of diversification of portfolio on risk
and risk potential of IPO, in particular. It is felt necessary to understand the preferences
of IPOs with respect to the risk tolerance, return expectation, tenure of investment and
investment influencing factors etc. in relation to age, qualification, gender, marital status
and income levels. The objectives of the study are:

1. To present the trends in the growth of Indian IPOs.

2. To appraise the performance of selected schemes on the basis of performance

measures.

3. To evaluate the performance of the select equity growth schemes and compare
it with the benchmark to find out whether there is equality of means (returns).

4. To compare the risk and return of equity and debt funds for a period of 10
years to study the long run performance.

5. To find the relationship of age, qualification, gender, marital status and

income with the preferences of IPOs.

43
 6. To know whether there is any association between the selected variables and
investors perception of IPOs.

7. To suggest suitable measures for strengthening of the IPOs in India.

3.7 HYPOTHESIS OF THE STUDY

The main purpose of this study is to find out how these IPO provide opportunities
to Investors as well as Companies. To be able to fulfill the purpose of this research we
find it appropriate to test the perception of investors towards IPO. This led into
generating the following hypotheses to test accordingly:

Hypothesis 1: IPO‟s is a risky investment.

Hypothesis 2: The retail investors‟ greatest worry is too much price volatility, price
manipulation and corporate fraud which shaken confidence of the investors.

44
 4

DATA ANALYSIS, INTERPRETATION

AND PRESENTATION

4.1 METHOD OF DATA PRESENTATION AND ANALYSIS

4.2 PROFILE OF RESPONDANTS

4.3 ANALYSIS OF QUESTIONNAIRE

45
4.1 METHOD OF DATA PRESENTATION AND ANALYSIS

Here, I m using table and chart to understand very clearly. which help me to analyse the
profile of respondents. The table and chart are as follows:

Table No. 4.1 Age Group of Respondent

Category Response %
21-30 39 81.6
31-40 4 8.2
Above 40 7 10.2
50 100

Source: Field Work

Chart No. 4.1 Age Group of Respondent

46
 From the above table 4.1 provides the profile of sample like age of the
respondents. The sample was selected of them who are the traders, brokers and individual
investors. The sample size of our project is limited to 50 people only. Most of the
respondents belong to the age group of 21-30, followed by 31-40, and 40 - Above. This
shows that Age group of 21 to 30 are highly invest in IPO

Table No. 4.2 Gender Group of Respondent

Category Response %
Female 15 30.6
Male 35 69.4
50 100

Source: Field Work

Chart No. 4.2 Gender Group of Respondent

47
 Above table 4.2 shows that from the total respondents 62% were males and 38%
were females. We can see that the number of males is more compared to that of the
number of females. This clearly talks about the interests of the male population in
investments.

Table No. 4.3 Education Group of Respondent

Category Response %
Secondary School or less 1 2.0
Diploma/Certificate 3 6.1
Bachelor’s Degree/PG Diploma 39 77.6
Master’s Degree/ACCA/APA 7 14.3

50 100

Source: Field Work

Chart No. 4.3 Education Group of Respondent

48
 From the table 4.3 shows that the invest education, they were 44% of respondents
are in Bachelor’s degree, followed by 24% diploma/Certificate, and then 20% are in
Master’s degree.

Table No. 4.4 Occupation Group of Respondent

Category Response %
Student 24 49
Employed 22 44.9
Part Time Work 2 4.10
Retired 2 2

50 100

Source: Field Work

Chart No. 4.4 Occupation Group of Respondent

49
 From the above table 4.4 we can see that the maximum numbers of respondents
were employed followed by student, retired and Part time workers. This clearly shows us
that the maximum numbers of people who are interested in investment activities are
employed persons; they have the panache for investment activities. They are nearly 48%
of the sample. The interesting factor is that the employed persons are very much
interested in investment activities which are a very good sign.

Table No. 4.5 Investor group In IPO

Category Response %
Yes 26 51
No 24 49
50 100

Source: Field Work

Chart No. 4.5 Investor group In IPO

50
 Table 4.5 mainly talks about the respondents‟ interest in investing in Initial Public
Offers. Out of 50 people surveyed it is seen that 48% of the people are investing in IPOs
whereas 52% of the people are not investing in IPO. This shows that IPO does not considered
as a good option for investment by most of the respondents.

Table No. 4.6 Reason for not invest In IPO

Category Response %
Lace of Awareness & knowledge 13 58.6
Due to Risk Factor & Scam 7 27.6
Take more time in getting returns 4 13.8
24 100

Source: Field Work

Chart No. 4.6 Reason for not invest In IPO

Table 4.6 is clearly shows that 54% of people who don’t invest in IPOs due to
lack of awareness and knowledge. And second most important reason is risk factor and
51
 scam which are associated with IPO. Also delay in getting returns is also one of the
factors.

Table No. 4.7 New IPO Liisting

Category Response %
Through Newspaper 5 15.4
Through Broker 17 65.4
Through Friend 4 19.2
26 100

Source: Field Work

Chart No. 4.7 NEW IPO LIISTING

From the above table 4.7shows that, when the investors were asked to, How do you
come to know about the new IPO listing we found that maximum number of the people invest
through broker in an IPO that is 65.4% and followed by people who invest through news
52
paper in an IPO that is 19.2%. There were very few people who invest in IPO through friend
15.4%.

Table No. 4.8 Investors in IPO

Category Response %
Below 10,000 0 0
Above 10,000 - 50,000 15 57.7
Above 50,000 - 1,00,000 11 42.3
26 100

Source: Field Work

Chart No 4.8 How much do you invest in IPO

From the above table 4.8 shows that, when the investors were asked to how much they
invest in an IPO, we found that the people are not invest in below 10,000 in an IPO and
followed by maximum people who invest more than Rs 10,000 in an IPO that is 57.7%.
42.3% people who invest in IPO for an amount more than Rs 50,000 and Rs 1, 00,000.

53
 Table No. 4.9 Percentage gained on IPO listing

Category Response %
Below 10% 4 21.1
Up to 10% 5 21.1
10% - 15% 12 31.6
15% and Above 5 26.3
26 100

Source: Field Work

Chart No. 4.9 Percentage gained on IPO listing

From the above table 4.10 mainly talks about the returns that the investors have received by

investing in an IPO. We can see that most of the investors have received Up to 10% of returns that is

21.1% of sample size. And there are also people who received 10% to 15% returns that are 31.6% of

sample size and very few people received above 15% returns and that are 26.3% of sample as well. As
54
figure shows there few people haven’t got the returns on their investment that is 24% of sample size.

Hence we can say that IPO would be the good option for investment which gives you around 10% to 15%

returns on your investment.

Table No. 4.10 Investors perception towards Procedure of IPO

Category Response %
Easy 13 50
Complicated 13 50
26 100

Source: Field Work

Chart No. 4.10 Investors perception towards Procedure of IPO

A respondent feeling about the IPO procedure is discussed in the above table 4.13
it has been observed that 50% of the respondents are of the opinion that the IPO listing
procedure is complicated. Where 50% of the people feel that it is easy. The overall
opinion of the respondents is that the IPO procedure is complicated and easy.

55
 Table No. 4.11 Difficulties faced by Investors

Category Response %

Refund Problem 4 30.8

Delay in crating allotted shares to your DEMAT Account 13 46.2
No Clarity in allotment 3 23.1
24 100

Source: Field Work

Chart No. 4.11 Difficulties faced by Investors

From the above table 4.14 mainly talks about the problems faced by the investors
after applying for IPOs. We can see that 46.2% of the respondents have faced problem
Delay in crediting allotted of shares where as 30.8% of the people have the problem with
Refund and 23.1% faced problem of No clarity in allotment after applying for IPOs.

56
 Table No. 4.12 Group of Respondent for IPO
Category Response %
Satisfied 15 57.9
Highly satisfied 11 42.1
26 100

Source: Field Work

Chart No. 4.12 Group of Respondent for IPO

From the above table 4.11 as we asked question to respondents that is it better
invest in IPO? The maximum number of respondent’s are satisfied 57.9% of sample size,
some respondents are highly satsfied 42.1% of sample size.

57
 Table No. 4.13 Purpose of Investment

Category Response %
Listing Gain 15 52.6
Long Term Gain 11 47.4
26 100

Source: Field Work

Chart No. 4.13 Purpose of Investment

Table 4.9 talks that the respondents invest in an IPO for the purpose of obtaining
the listing gains that is 52.6% and the long term gains that is 47.4%. This clearly shows
us that more number of people invests in IPO to earn profit at the time of listing and they
are not the long term investors.

58
 Table No. 4.14 Advice to new investor

Category Response %
Go by only Promoters 9 34.6
Go by only Premium 6 23.1
Go by only Sector Performance 16 42.3
26 100

Source: Field Work

Chart No. 4.14Advice to new investor

Table 4.14 mainly talks about the advice to new investors the respondent’s data
shows that 38% respondents are prefer to go by only premium, 32% respondents showed
interest in go by only sector performance and 30% respondents go by only promoters.

59
 5

FINDING, SUGGESTION AND CONCLUSION

5.1 FINDING OF THE STUDY

5.2 SUGGESTION OF THE STUDY

5.3 CONCLUSION OF THE STUDY

60
 5

FINDING, SUGGESTION AND CONCLUSION

5.1 FINDING OF THE STUDY

1. Age Group of Respondent shows that Age group of 21 to 30 are highly invest in
capital market and IPO

2. Gender Group of Respondent this clearly talks about the interests of the male
population in investments.

3. Education Group of Respondent shows that the invest education, they were 44%
of respondents are in Bachelor’s degree

4. Occupation Group of Respondent we can see that the maximum numbers of

respondents were employed followed by student, retired and Part time workers.

5. Table 4.5 mainly talks about the respondents‟ interest in investing in Initial Public
Offers. Out of 50 people surveyed it is seen that 48% of the people are investing
in IPOs whereas 52% of the people are not investing in IPO.

61
6. Table 4.6 is clearly shows that 54% of people who don’t invest in IPOs are due to
lack of awareness and knowledge.

7. Table 4.7 mainly talks about the advice to new investors the respondent’s data
shows that 38% respondents are prefer to go by only premium.

8. We found that maximum number of the people invest somewhere below 10,000 in
an IPO that is 54% and followed by people who invest more than Rs 10,000 in an
IPO that is 40%.

9. Purpose of Investment that more number of people invests in IPO to earn profit at
the time of listing and they are not the long term investors.

10. We can say that IPO would be the good option for investment which gives you
around 10% to 15% returns on your investment.

11. The maximum number of respondent’s are says yes 52% of sample size, there are
few respondent’s said no 16% of sample size.

12. IPO would be the good option for investment which gives you around 10% to
20% returns on your investment.

13. The overall opinion of the respondents is that the IPO procedure is complicated
and easy.

62
14. Delay in crediting allotted of shares where as 34% of the people have the problem
with Refund and 32% faced problem of No clarity in allotment after applying for
IPOs.

5.2 SUGGESTION OF THE STUDY

1. There is below age 20 having 12% of sample size; the investor should educate the
students in IPO.

2. Needs to be educating more female respondents to invest in IPO.

3. Secondary school or less having 12% of respondents therefore we must educate

the students in investing in IPO.

4. Retired people having respond only 6%, needs to be educate more to them to
invest in IPO.

5. There are 48% of respondents those not invest in IPO; it needs to be educating
them to invest in IPO.

6. Due to risk factor and scam people are not invest in IPO, therefore the knowledge
needs to be provide to the people who wants to invest in IPO.

7. As per sample size of respondents we can suggest to go by only premium.

8. We found that only 6% of sample size not invest in more than 50,000 to 1,00,000,
hence we needs to suggest to invest more in IPO.

9. There are 46% of sample size are invest in IPO for Long term gain.

63
 10. Above 15% and more are gained from IPO listing 12% of our sample size,
however, needs to be educating them how to gain more from IPO.

11. 16% sample size are saying no to invest in IPO. We can suggest investing in IPO.

12. Needs to be educating people that how to gained more from IPO.

13. Needs to be easy set Procedure of IPO.

14. There are 34% of sample size of respondents are facing refund problem, therefore
needs to create simple procedure of IPO.

5.3 CONCLUSION OF THE STUDY

 After making the project, we would like to conclude that IPO is no more risky
investment as SEBI is playing very important role in regulating the risk and
financial aspects of the investors. As per our finding IPOs gives returns up to 10%
to 20% to 88 of total investors hence IPO can be consider good option for
investment.

 Therefore, we reject the null hypothesis 1 and conclude that IPO is not a risky
investment with the help of careful research and study and with the help of broker
advice the individual investor can predict what the stock or shares will do on its
initial day of trading up to some extent.

64
 Also this project report has proven that large no of investors have shown
confidence in IPO and prefer to invest in IPO and according to them IPO is one of
the good option for Investment.

65
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 APPENDIX

Questionnaire
Primary Data

Name-

Age- Gender-

Email-

Q.1 Age
o Below 20
o 21-30

o 31-40
o Above 40

Q.2 Education Background

o Secondary School or less

o Diploma/Certificate
o Bachelor’s Degree/PG Diploma
o Master’s Degree/ACCA/APA

70
Q.3 Occupation

o Student
o Employed
o Part Time Work
o Retired

Q.4 Do you invest in IPO?

o Yes
o No

Q.5 Reason for not investing in IPO

o Lace of Awareness & knowledge

o Due to Risk Factor & Scam
o Take more time in getting returns

Q.6 How do you come to know about the new IPO LISTING?

o Through Broker

o Through Television

o Through Friend

o Through Newspaper

Q.7 What is your advice to new investor in IPO?

o Go by only Promoters
o Go by only Premium
o Go by only Sector Performance

Q.8 How much do you invest in IPO per year?

o Below 10,000

IX
 o Above 10,000 - 50,000
o Above 50,000 - 1,00,000

Q.9 What is the purpose of IPO investment from Investor’s perceptive?

Listing Gain
Long Term Gain

Q.10 How much percentage have you gained on IPO listing?

o Below 10%
o Up to 10%
o 10% - 15%
o 15% and Above

Q.11 Is it better to invest in IPO?

o Yes
o No
o May
be

Q.12 How do you feel about the procedure of IPO’s?

o Easy
o Complicated
o Difficult
o Lightly

Q.13 What difficulties do you face after applying IPO’s?

o Refund Problem
o Delay in crating allotted shares to your DEMAT Account

IX
 o No Clarity in allotment

Q.14 Are you satisfied with the present system of Book Building wherein a
price band is fixed for an IPO in which free pricing is allowed?

Highly Satisfied

Satisfied

Can’t say

IX