Factors influencing underpricing of manufacturing sector IPOS: An indian perspective

IPO has been one of the most popular routes chosen for raising funds by any growing company. It is a common experience that many IPOs are underpriced. This paper attempts to find out the factors which influence the under pricing decision. Earlier researchers had found that the influence of factors like ownership retention, size of the issue, age of the firm, Debt-equity ratio, NAV, EPS. An attempt is made to find out if Net-worth to Total Assets, Return on Net-worth, also would influence the degree of under pricing of IPOs in the Indian context. Further there are no studies relating to the under pricing of Manufacturing sector IPOs. Data relating to Indian IPOs from 2003 to 2017 have been studied with reference to the Manufacturing Sector. A general opinion is that older firms have established their reputation which has spread in to the market and the investors know about the risk levels of the firm much better than those of the newer firms. Further due to higher allotment, the shares in the public will come down and create a possible liquidity crunch. The positive influence is in sync with the conceptual interpretation proposed. Hence it is proposed to use the median values of the independent variables to conduct the “t” test.