Underpricing of infrastructure IPOs: An Indian perspective

IPO has been one of the most popular routes chosen for raising funds by any growing company and more often, they are underpriced. During 2003–2017 about 71 infrastructure IPOs were underpriced. This paper attempts to find out the factors which influence the underpricing decision of IPOs. Earlier researchers had found the influence of factors like ownership retention, size of the issue, age of the firm, Debt-equity ratio, NAV, EPS, Venture capital backing, IPO-grading and underwriters’ reputation. An attempt is made to find out if Net-worth to Total Assets, Return on Net-worth, also would influence the degree of underpricing of IPOs in the Indian context. Although Ritchie et al (2013) studied the Indian infrastructure sector IPOs and found that government ownership and issue size and oversubscription were significant variables in explaining the underpricing of Indian IPOs positively, the data pertained to 2004–2010. There are no studies relating to the underpricing of Indian infrastructure IPOs from 2003 to 2017 in the Indian Context. IPO, underpricing, Return on net worth, Net-worth to total assets.