Name: Rahul Nambiar

Roll No: 109

Project Topic: Initial Public Offer
Faculty: Prof. Akhil Shetty

Introduction

Initial public offering is when a company issues common stock or shares to the public for the
first time. They are often issued by smaller, younger companies seeking capital to expand,
but can also be done by large privately owned companies looking to become publicly traded.
In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps it
determine what type of security to issue, best offering price and time to bring it to market.
Initial Public Offering in India means the selling of the shares of the company, for the first
time, to the public in the country capital market. This is done by giving to the public, shares
that are either owned by the promoters of the company or by issuing new shares. During an
Initial Public Offer the shares are given to the public at a discount on the intrinsic value of the
shares and this is the reason that the investors buy shares during the Initial Public Offering in
order to make profits for themselves.

IPO in India is done through various methods like book building method, fixed price method
or a mixture of both. The method of book building has been introduced in the country in 1999
and it helps the company to find out the demand and price of its shares. A merchant banker is
nominated as a book runner by the Issuer of the IPO. The company that is issuing the Initial
Public Offering decides the number of shares that it will issue and also fixes the price band of
the shares. All these information are mentioned in the red herring prospectus. During the
Initial Public Offering in India, an electronic book is opened for at least five days. During this
period of time, bidding takes place which means that people who are interested in buying the
shares of the company makes an offer within the fixed price band. Once the book building is
closed then the issuer as well as the book runner of the Initial Public Offering evaluate the
offers and then determine a fixed price. The offers for shares that fall below the fixed price
are rejected. The successful bidders are then allotted the shares IPO can be a risky
investment. For the individual investor, it is tough to predict what the stock or shares will do
on its initial day of trading and in the near future since there is often little historical data with
which to analyse the company. Also, most IPO are of companies going through a transitory
growth period and they are therefore subject to additional uncertainty regarding their future
value.
Merits of IPO:

 Low cost financing

 No commitment of fixed returns
 No restrictions attached to financing
 No issues such as mortgaging, hypothecation etc
 Entire money received in one stroke without linking to any milestones
 No issues with returning of finance

Demerits of IPO:

 Success of an IPO has an element of risk

 IPO can only finance part of project
 IPO performance post listing has also bearing
 For new promoters and new company it is difficult to market their IPO
 Roles of Investment Bankers:
 Assist companies , organizations and other entities in raising public or private funds
through equity or debt offerings
 Build detailed financial models to analyse and support Merger and Acquisitions
transactions and Financial Planning and Analysis work
 Perform business valuation analyses by using transaction comps, discounted cash
flow and leveraged buyout methods
 Conduct company and industry research to prospect for clients and bring in new
business
 Participate in and manage all stages of a transaction, from the opening pitch to the
closing investment contract
 Identifying new business opportunities
 Liaising with the chief executive and chief financial officers of large organizations
 Coordinating teams of professionals, including accountants, lawyers and PR
consultants and working closely with them
Objects of Offering New IPO:

 Funds Requirement
 Funding Plan
 Schedule of Implementation
 Funds Deployed
 Sources of Financing of Funds already deployed
 Interim Use of Funds
 Basic Terms of Issue
 Basis for issue price
 Tax Benefits

Factors Deciding IPO Price:

 Promoters and their background

 Current National and Global economic scenario
 Sector specific issues in which company will be operating
 Tie up with financial institutions
 Investors outlook for the company
How does an IPO work?

In case a private company requires capital that is way beyond its individual ability to generate
through regular operations, there are a few alternatives that the management can take up to
work out that capital.

Popular methods to do so includes private investment, taking debt or through an IPO.

The process of IPO starts when the firm hires an investment bank or banks, to take care of the
IPO. The company may also choose to sell its shares on its own as well but, that can be
taxing.

Banks handover bids to companies that have decided to go public on the amount of money
the firm will make in the IPO and what the bank will earn. This process of an investment
bank taking care of the IPO is called underwriting.

When an investment bank is hired to do so, the company and investment bank talk about how
much money they think they aim to raise from the IPO, type of securities to be issued and all
other related-details are mentioned in the underwriting agreement.

After the company and investment bank comes to terms with underwriting deal, the bank
presents a registration statement that has to be filed with the Securities and Exchange
Commission.

This statement contains all the detailed information about the offering and the particular
company, including management background, any legal problems, financial statements, who
owned any stock before the company goes public and so on.

The SEC investigates the company and ensures that all the information submitted to it is
correct and all relevant financial data has been disclosed.

If everything is approved, the SEC works with the company to set a date to post the IPO.
After the SEC approval, the underwriter must put together a prospectus, including all
financial information on the company that’s doing the IPO.
Data Analysis on IPO:

1. Lyft: As most probably know, Lyft is a ride- sharing app that supports cars, scooters and
bikes. The IPO of Lyft took place on March 29. Lyft prices its IPO at $ 72 per share,
right at the top of the range. About a month later, the stock is now priced around $ 50.
Because of this sharp decline, many viewed the IPO as a failure. Most relevant to the
Lyft IPO is the continued losses, continuing to run in the green. Lyft lost about $ 911
million on $ 2.2 billion in revenue.

2. Tradeweb: Tradeweb operates in the OTC markets for fixed income and derivatives.
They serve banks, funds, insurance companies, and other high value clients. The
company was founded in the late 90 s and evolved into a formidable business with
revenues over $ 186 million and net income of $ 42.4 million as of Q2 2019.

With Tradeweb we are viewing a far more reasonable financial situation. Tradeweb is
a fin- tech company hopeful to leverage latest technologies to provide greater
efficiency and transparency for clients.

3. Pinterest : Pinterest is a social media company known for its ability to browse images
and videos. Pinterest is in the early days of its monetization efforts but currently
draws the majority of its revenue from “promoted pins”. This is just a space for paid
advertisement, and the majority of users paying for these pins are fashion and beauty
companies.

When Pinterest shared their earnings, we learned Pinterest had a fourth- quarter profit
of about $ 47 million, with full- year losses at about $ 63 million. The hope by
investors is that Pinterest can further monetize the platform and continue to grow
users. Their revenue growth continues to be very large, at about 60% each quarter. It
will be interesting to see how Pinterst monetizes further. Maybe promoted pins will be
a sufficient source of revenue?

4. Beyond Meat: Beyond Meat is a producer of plant- based meat substitutes. They
produced the first plant- based burger to be sold in the meat section of grocery stores,
going international. They had a massively successful IPO with the stock jumping
from 45 to 70 in the first day of trading. Continued gains have been fuelled by
rumours of partnerships with large restaurants.

Beyond Meat did revenue of about $ 56.4 million in 2018 and like many of the
companies discussed prior posted a net loss of about $ 22.4 million. The company
plans massive expansion, with recent launch in Europe and distributors in Hong
Kong. It is important to note Beyond Meat is not unique in its category. There are
many other plant- based food companies to compete with, such as Impossible Foods,
Boca Foods and others.
5. Zoom: Zoom Video provides conferencing services widely used by corporate clients.
The service is known for its video conferencing, meetings, chat, and other services.
The company was founded by an engineer from well -known Cisco owned competitor
WebEx. The Zoom IPO has been a big success thus far, starting at 62, making its way
to about 80 at time of writing for a market cap of about 20 billion

6. Uber: Uber is the well- known ride sharing service that offers a product very similar
to Lyft. Uber is the more used service with big plans to integrate food delivery and
self- driving into the platform. Uber experienced about $ 3 billion in operating loss.
Becoming profitable will be a huge mountain to climb, and it will be interesting to see
where the stock goes over the next few trading days.
List of IPOS in India:

 LIC
 Zomato
 Nykaa
 Fincare Small Finance Bank
 Nuvoco Vistas
 India Pesticides
 Bajaj Energy
 Aditya Birla Sun Life AMC
 GoFirst(Go Air)
 Devyani International
 Penna Cements
 Car Trade Tech

IPOS listed in 2021:

 IRFC
 Indigo Paints
 HFFC
 Stove Kraft
 Brookfield Reit
 Rail Tel
 Nureca
 Heranba
 MTAR
 Easy Trip Planners(Ease My Trip)
 Anupam Rasayan
 Laxmi Organic
 Craftsman Automation
 Kalyan Jewellers
 Nazara Tech
 Suryoday Small Finance Bank
 Barbeque Nation
 Lodha Developers
Reasons for listing IPOS:

 Increase in capital: An IPO allows a company to raise funds for utilizing in

various corporate operational purposes like acquisitions, mergers, working capital,
research and development, expanding plant and equipment and marketing.

 Liquidity: The shares once traded have an assigned market value and can be
resold. This is extremely helpful as the company provides the employees with
stock incentive packages and the investors are provided with the option of trading
their shares for a price.

 Valuation: The public trading of the shares determines a value for the company
and sets a standard. This works in favour of the company as it is helpful in case
the company is looking for acquisition or merger. It also provides the shareholders
of the company with the present value of the shares.

 Increased Wealth: The founders of the companies have an affinity towards IPO
as it can increase the wealth of the company, without dividing the authority as in
case of partnership.
 IPO Investment Strategies:

Investing in IPOS is much different than investing in seasoned stocks. This is because
there is limited information and research on IPOS. There are some of the strategies that
can be considered before investing in the IPO:

1. Understand The Working Of IPO: The first and foremost step is to understand
the working of an IPO and the basics of an investment process. Other investment
options could also be considered depending upon the objective of the investor.
2. Gather Knowledge: It would be beneficial to gather as much knowledge as
possible about the IPO market, the company offering it, the demand for it and any
offer being planned by a competitor.
3. Investigate before Investing: The prospectus of the company can serve as a
good option for finding all the details of the company. It gives out the objectives
and principles of the management and will also cover the risks.
4. Measure the Risk Involved: IPO investments have a high degree of risk
involved. It is therefore, essential to measure the risks and take the decision
accordingly.
5. Know your Broker: This is a crucial step as the broker would be the one who
would majorly handle your money. IPO allocations are controlled by the
underwriters. The first step to getting IPO allocations is getting a broker who
underwrites a lot of deals.
6. Invest at your own Risk: After the homework is done, and the big step needs to
be taken. All that can be suggested is to invest at your own risk. Do not take a
risk greater than your capacity.

Analysing an IPO Investment:

Initial Public Offering is a cheap way of raising capital, but all the same is not
considered as the best way of investing for the investor. Before investing, the investor
must do a proper analysis of the risks to be taken and returns expected. He must be
clear about the benefits he hope to derive from the investment. The investor must be
clear about the objective he has for investing, whether it is long- term capital growth
or short- term capital gains. The potential investors and their objectives could be
categorized as:

 Income Investor: An income investor is the one who is looking for steadily
rising profits that will be distributed to shareholders regularly. For this he needs
to examine the company potential for profits and its dividend policy.
 Growth Investor: A growth investor is the one who is looking for potential
steady increase in profits that are reinvested for further expansion. For this he
needs to evaluate the company growth plan, earnings and potential for retained
earnings.
Reasons to judge an IPO:

 Promoters: Is the company a family run business or is it professionally owned? Even

with a family run business what are the credibility and professional qualifications of
those managing the company? Do the top level managers have enough experience in
the specific type of business?
 Business Plan: Check the progress made in terms of land acquisition, clearance from
various departments, purchase of machinery, letter of credits, etc. A higher initial
investment from the promoters will lead to a higher faith in the organization.
 Financials: Why does the company require the money? Is the company floating more
equity than required? What is the debt component? Keep a track on the profits,
growth and margins of the previous years. A steady growth rate is the quality of a
fundamentally sound company. Check the assumptions the promoters are making and
whether these assumptions or expectations sound feasible.
 Risk Factors: The offer documents will list our specific risk factors such as the
company liabilities, court cases or other litigations. Examine how these factors will
affect the operations of the company.
 Key Notes: Every IPO will have lead managers and merchant bankers. You can
figure out the track record of the merchant banker through the SEBI website.
 Pricing: Compare the company PER with that of similar companies. With this you
can find out the P/E Growth ratio and examine whether its earning projections seem
viable.
 Listing: You should have access to the brokers of the stock exchanges where the
company will be listing itself.
Primary and Secondary Market of an IPO:

In the primary market securities are issued to the public and the proceeds go to the issuing
company. Secondary market is term used for stock exchanges, where stocks are bought and
sold after they are issued to the public.

Primary Market: The first time that a company shares are issued to the public, it is by a
process called initial public offering. In an IPO the company offloads a certain percentage of
its total shares to the public at a certain price.

Most IPOS these days do not have a fixed offer price. Instead they follow a method called
book building process, where the offer price is placed in a band or a range with the highest
and the lowest value. The public can bid for the shares at any price in the band specified.
Once the bid comes in, the company evaluates all the bids and decides on an offer price in
that range. After the offer price is fixed, the company allots its shares or returns them their
money.

Secondary Market: Once the offer price is fixed and the shares are issued to the public,
stock exchanges facilitate the trading of shares for the general public. Once a stock is listed
on an exchange, people can start trading in its shares. In a stock exchange the existing
shareholders sell their shares to anyone who is willing to buy them at a price agreeable to
both parties. Individuals cannot buy or sell shares in a stock exchange directly, they have to
execute their transaction through authorized members of the stock exchange who are also
called stock brokers.
Why may company need an IPO?

To meet the short- term requirements, the company may approach banks, lenders or may even
accept fixed deposits from the public/ shareholders. To meet its long- term requirements,
funds can be raised either through loan from lenders, Banks, Institutions, etc or through the
issue of capital. Capital can be raised through private placement of shares, public issue, rights
issue, etc. Public Issue means raising funds from the public. Promoters of the company may
have plans for the company that may require infusion of money. The main purpose of the
public issue, amongst others, is to raise money through the public and get its shares listed at
any of the recognized stock exchanges in India. The following may be some other reasons for
a company to go public:

 Raising funds to finance capital expenditure programs like expansion, diversification,

modernization, etc.
 Financing of increased working capital requirements.
 Financing acquisitions like a manufacturing unit, brand acquisitions, lender offers for
shares of another firm, etc.
 Debt financing.
 Exit route for existing investors.
Why go public?

Basically going public is the process in which a business owned by one or several individuals
is converted into a business owned by many. It involves the offering of part ownership of the
company to the public through the sale of debt or more commonly, equity securities.

Going public means raising cash. Being publicly traded also opens many financial doors:

 Because of the increased scrutiny, public companies can usually get better rates when
they issue debt.
 As long as there is market demand, a public company can always issue more stock.
Thus, mergers and acquisitions are easier to do because stock can be issued as part of
the deal.
 Trading in the open markets means liquidity. This makes it possible to implement
things like employee stock ownership plans, which help to attract top talent.

Being on a major stock exchange carries a considerable amount of prestige. In the past, only
private companies with strong fundamentals could qualify for an IPO and it was not easy to
get listed.

The internet boom has changed all of this. Firms no longer need strong financials and a solid
history to go public. Instead, IPOS were done by smaller start-ups seeking to expand their
businesses. There is nothing wrong with wanting to expand, but most of these firms had
never made a profit and did not plan on being profitable any time soon. Founded on venture
capital funding, they spent like Texans trying to generate enough excitement to make it to the
market before burning through all their cash. In cases like this, companies might be suspected
of doing an IPO just to make the founders rich. This is known as an exit strategy, implying
that there is no desire to stick around and create value for shareholders. The IPO then
becomes the end of the road rather than the beginning.

How can this happen?

An IPO is just selling stock. It is all about the sales job. If you can convince people to buy
stock in your company, you can raise a lot of money.
Process of IPO:

IPOS require a core group of highly skilled professionals who must literally work around the
clock for one year. Therefore, one of the first steps to a successful IPO is the formation of a
seasoned, experienced team of professionals who will make the IPO happen. You must
recruit the best possible people you can find.

 Month 12: Recruit new management to run the company. Start compiling the
financial information.
 Month 11: Start due diligence work- worthless assets are written off, inconsistencies
with GAAP are resolved, etc.
 Month 10: Start drafting the prospectus. Coordinate the collection of data to
minimize duplicate efforts.
 Month 9: Establish a board of directors for the newly formed public company.
 Month 8: Draft three year historical financial statements.
 Month 7: Circulate draft prospectus for comments.
 Month 6: Establish transition contracts for services and products that will now be
provided to the newly formed public company. Some new contracts will be needed
such as independent audits of financial statements.
 Month 5: Finalize historical financial statement. Start preparing interim financial
statement for the current period.
 Month 4: Finalize pro forma and interim financial statements. Make revisions to draft
prospectus.
 Month 3: Convene new board of directors. Audit of interim financials should be
complete.
 Month 2: Outside auditor opinion is issued. Membership with stock exchange is
completed.
 Month 1: File prospectus with Securities Exchange Commission. Issue press release
and sell the company to investors.

Before the IPO process is complete, it is essential to implement all of the necessary controls,
procedures and systems that will now be required within public life. Staff changes must be
made, new financial systems tested, functions like human resources should be managed, etc.
The entire IPO process is much more involved than most people realize. A great IPO team
and proper planning is the key to a smooth IPO process.
IPO Market in India:

The IPO market in India has been developing since the liberalization of the Indian economy.
It has become one of the foremost methods of raising funds for various developmental
projects of different companies.

The IPO market in India is on the boom as more companies are issuing equity shares in the
capital market. With the introduction of the open market economy in the 1990s, the IPO
market went through its share of policy changes, reforms and restructurings. One of the most
important developments was the disassembling of the Controller of Capital Issues and the
introduction of the free pricing mechanism. This step helped in developing the IPO market in
India, as the companies were permitted to price the issues. The Free pricing mechanism
permitted the companies to raise funds from the primary market at competitive price.

The Central Government felt the need for a governed environment pertaining to the capital
market, as few corporate houses were using the abolition of the Controller of Capital Issues in
a negative manner. The Securities Exchange Board of India was established in the year 1992
to regulate the capital market. SEBI was given the authority of monitoring and regulating the
activities of the bankers to an issue, portfolio managers, stockbrokers and other
intermediaries related to the stock markets. The effects of the changes are evident from the
trend of the resources of the primary capital market which includes right issues, public issues,
private placements and overseas issues. The IPO market in India experienced a boom in its
activities in the year 1994. In the year 1995 the growth of the Indian IPO market was 32%.
The growth was halted with the South East Asian crisis. The markets picked up speed again
with the introduction of the software stocks.
Need of the Study:

The main purpose of the study is to analyse the IPO market. It also involves in analysing the
risk in investing in the particular firm. This needs to understand the perception of the
investors and the due course of market and its prominent conditions.

This study will help to understand the market and its behavioural approach towards the need
of the investors. It will capture the systematic investing pattern based on the investors mode.

The need of this study is to analyse what investors are expecting from IPO, how they make
decision according to the situation, how they react for the changes that takes place in the
market.

This study will help to understand what the investor should watch out for investing in the
primary market.

 To analyse the returns of IPO which were issued in the year 2011
 To know the return of those IPO
 To know the market rate of return for the same period
 To find out the companies which like to adopt this technique and spread awareness
about this process
 To find out the factors which influence the IPO Listing Process
 What the companies are looking from Open New IPOs in India?
 Analysis between Shareholder and IPO Companies post/present/future Prospectus

Objectives of the Study:

 To analyse the investors perception on IPO

 To study the investors exposure to “fundamental analysis” and its impact to invest in
IPO issued by companies
 To analyse the investors preference in deciding the company
 To study the preference of different investment categories of IPO
 To analyse the benefits of the investors while investing in IPO
 To find out which source is more effective in creating the IPO awareness
 To get the feedback of investors on their preferences towards IPO investment
Limitations of the Study:

 The study is limited to Chennai city only. Hence, the analysis and findings are
relevant to that area only.
 The respondents are reluctant to express their views freely and openly.
 The results are of values for only a specific period of time since the market is always
dynamic.
 Since the analysis has been made from the information given by the respondents, the
accuracy of the findings depends on the quality of the respondents.
 The period of study was only for 3 months, which is very short period for detailed
study.
 The information recorded is based on the opinion and reaction of the respondents as
on the date of research.

Scope of the Study:

The study was conducted on INDIA BULLS SECURITIES LTD Chennai. It is useful to
both the investors and others to reduce risk. It is useful to analyse the thinking of people, their
ideas and interest level of IPO investment. It also creates awareness among people from
different classes. The company can suggest the preference of investors in IPO, which can
favour in fulfilling people requirements.

Interaction with investors will be useful in finding out the company that has goodwill among
public. This may lead to find out the most reputed investment organization and its position in
investors mind. This study gives a vivid picture about the investors perception level towards
IPO. It gives a chance to buy the shares of the company directly, the reason and why they
prefer IPO investment than others and what purpose they have invested in IPO.

Based on this survey was conducted among equity investors to analyse the IPO listing
pattern. It also helps to understand the benefits of investing in IPO. The study helps the
company to understand the effective way of distribution channel for IPO.
Research Methodology:

Research: “Defining and redefining problems, formulating hypothesis or suggested

solutions, collecting, organizing and evaluating data, making deductions and reaching
conclusions, and at last carefully testing the conclusions to determine whether they fit the
formulating hypothesis.”

Research means:

 Search for knowledge, Systematic and self-critical investigation

 It is an art of scientific investigation

According to Emory defines research as, any organized inquiry designed and carried out to
provide information for solving a problem.

Research Design:

Research design is specification of methods and procedures for acquiring the information
needed to structure or to solve problem.

Research design is defined as, “the arrangement of condition for collection of the data in a
manner that aims to combined relevant to the research purpose with economy in procedure”.
During the research, descriptive and analytical research has been used.

The success of formal research project depends on the sound research design. As the main
aim of the project is to identify the perception level of investors in an organization, the
project is purely descriptive in nature. Descriptive research studies are those studies, which
are concerned with describing the characteristic of particular individuals, or of a group.
Types of Research Design:

Descriptive Research:

Descriptive study is a fact- finding investigation with adequate interpretation. It is the

simplest type of research. It is more specific than an exploratory study, as it has focus on
particular aspects or dimensions of the problem studied. It is designed to gather descriptive
information for formulating more sophisticated studies. Describing the performance of the
company and fact finding of different kinds.

Analytical Research:

Analytical Research is primarily concerned with testing hypothesis and specifying and
interpreting relationships, by analysing the facts or information already available. This type
of research design focuses on theoretical lines, to solve the problem. An analytical research
answers questions why, how, when and by whom the incident happened. It provides suitable
reason. It is an in depth study.

A mode of enquiry in which events, ideas, concepts, or artifacts are investigated by analysing
documents, records, recordings, and other media.

Sources of Data Collection:

Data collection method is an important task in every research process. There are two types of
data being used.

Primary Data:

The data are collected directly from the respondents as the information is not already been
provided. The researcher collected information from respondents directly through disguised
questionnaire and informal talks with employees. Under the questionnaire the following type
of questions were asked to collect the data: open ended, close ended and multiple choice
questions.

Secondary Data:

The data are collected from the investors, company staff, etc. The secondary data such as
history and various profile of the company where collected from company manuals, company
website and verbal contact with various executives of the company. The data collection
method should be used in this research way of analysing the questionnaires from the
investors.
Sample Size:

A part of the population selected for study is called as sample. The selection of a group of
individuals or items from a population in such a way that this group represents the population
is known as sample. Sample size is 120. The sample consists of 120 investors/ employees
who had invested in IPO.

Sample Unit:

The sample unit is based on the investors/employees who had invested in IPOS.

Sampling Design:

A sampling design is a definite plan for obtaining a sample frame. It refers to the technique or
the procedure the researcher would adopt in selecting units from which inferences about the
population is drawn. Sampling design is determined before any data are collected.

Sampling Technique:

Non- probability convenience sampling was used in the study and sampling units are chosen
primarily in accordance to the convenience. In this sampling does not afford any basis for
estimating the probability that each in the population has been included in the sample. In this
type of sampling, items for the sample are selected deliberately by the researcher.

In this study convenience sampling type is used. This is non- probability sampling. It means
selecting sample units in a just “hit and miss” fashion.

E.g. interviewing people whom we happen to meet. This sampling also means selecting
whatever sampling units are conveniently available.
Research Instrument Used:

Questionnaire:

Generally, in questionnaire, the respondent can apply his own judgement and answer the
question as he thinks right. While constructing a questionnaire the following vital points have
to be considered: the type of questions to be asked, wording of questions and sequencing of
questions. Every question should be checked to evaluate its necessity in terms of fulfilling the
research objectives. The questionnaire use different forms such as:

 Open- ended questions in which acceptable responses are not provided to employees.
 Close- ended questions
 Multiple choice questions
 Dichotomous questions

Questionnaire is relatively simple, quick and inexpensive method of obtaining data.

Researcher is able to gather data from a widely scattered sample as the instrument can be
mailed to far off places. Respondent has time to contemplate his/her response to each
question.

Description of Statistical Tools:

In order to come out with the findings of the study, the following statistical tools are used in
the study. The various analytical tools used in the study are:

 Percentage Analysis: The percentage refers to a special kind of ratio. Percentage is

used in making comparison between two or more series of data. Percentage is used to
describe relationship.
 Chi- Square Test: The chi- square test is useful for measure of comparing
experimentally obtained results with those expected theoretically and based on the
hypothesis. It is used as a test statistics in testing hypothesis that provides a set of
theoretical frequencies with which observed frequencies are compared. The chi-
square test was first used in testing statistical hypothesis by Kari Pearson in the year
1990.
 Student T- Test: The t- statistic was introduced in 1908 by William Sealy Gosset, a
chemist working for the Guinness brewery in Dublin, Ireland. A t- test is any
statistical hypothesis test in which the test statistic follows a Student t- distribution, if
the null hypothesis is supported. It is most commonly applied when the test statistic
would follow a normal distribution if the value of a scaling term in the test statistic
were known. When the scaling term is unknown and is replaced by an estimate based
on the data, the test statistic follows a student t- distribution. If using student original
definition of the t- test, the two populations being compared should have the same
variance.
 Analysis Of Variance: It is a technique used to test equality of means when more
than one population are considered. This technique introduced by R.A. Fisher was
originally used in different fields. It is a statistical technique specially designed to test
whether the means of more than two quantitative populations are equal. There are two
major types of ANOVA ONE- way and Two- way.

 Karl Pearson Coefficient Of Correlation: In statistics, the Pearson product-

Moment Correlation Coefficient is a measure of the correlation between two variables
X and Y, given a value between + 1 and – 1inclusive. It is widely used in the sciences
as a measure of the strength of linear dependence between two variables. It was
developed by Karl Pearson from a similar but slightly different idea introduced by
Francis Galton in the 1880s. The correlation coefficient is sometimes called “Pearsons
r”. If the two variables deviate in the same direction i.e. if the increase or decrease in
one results in a corresponding increase or decrease in the other, correlation is said to
be direct or positive. But if they deviate in opposite direction i.e. if the increase or
decrease in one results in a corresponding increase or decrease in the other,
correlation is said to be negative.
 Kruskal- Wallis Test: It is used to test the null hypothesis H0 that k independent
samples are drawn from the identical population. This test is an alternative
nonparametric test for testing the equality means in the one factor analysis of variance
when experimenter wish to avoid the assumption that the samples were selected from
the normal populations. The Kruskal- Wallis test is a nonparametric test to compare
three or more samples. It tests the null hypothesis that all populations have identical
distribution functions against the alternative hypothesis that at least two of the
samples differ only with respect to location, if at all. It is the analogue to the F- test
used in analysis of variance. While analysis of variance tests depends on the
assumption that all populations under comparison are normally distributed, the
Kruskal- Wallis test places no such restriction on the comparison. The approximate
sampling distribution for k is chi- square with K-I degrees of freedom when Ho is true
and if each sample consists of at least five observations.
Review of Literature

Investors Perception on IPO: The literature sets out four key stages during which private
equity firm involvement could add value to an investee company excited through an IPO.
These are:(1) screening and evaluation processes which identify better prospects,(2)
governance and mentoring activities which nature investee companies and prepare them for
life as a public company,(3) private equity firms knowledge and networks which add value
around the IPO event, and(4) continued involvement which contributes to superior post IPO
performance.

First, Fried and Hirsch, 1994: Hall and Hofer, 1993: Hisrich and Jankowicz, 1990;
MacMillian, Siegel, and Subbanarasimha, 1985; Tybee and Bruno, 1984, it has been
argued that private equity firms begin to add value to their investee companies even before
the initial investment takes place through considered evaluation and selection procedures.
These procedures identify only the best prospects for investment and together with the
imposition of governance and monitoring control in investment contracts ( Gompers, 1945;
Sahlman, 1990) lead to enhanced prospects of survival and prosperity.

Second, ( Gompers and Lerner, 1998), Private equity firms have been described as active
investors, monitoring the progress of firms, sitting on boards of directors, and meting out
financing based on the attainment of milestones. This active investor role is demonstrated by
buyout focused firms as well as earlier stage “venture capital” firms ( Cao and Lerner,
2009; Cornelli and peck, 2001). The ways and means through which private equity firms are
posited as potentially adding value to investee companies are myriad.

Frequently cited ways include:1) assistance in finding and selecting key management team
personnel, 2) solicitation of essential suppliers and customers, 3) strategic planning, 4)
assistance in obtaining additional financing, 5) operational planning and 6) replacement of
management personnel when appropriate ( MacMillian, Kulow and Khoylian, 1988, p, 28;
Private equity firm involvement has also been shown to be associated with efficiency and
productivity improvements, both in respect of buyout specialists and venture capital firms
( Chemmanur, Krishnan and Nandy, 2009; Cotter and Peck, 2001; Cressy, Munari, and
Malipiero, 2007; Munari, Cressi and Malipiero, 2006).

One of the key areas of interaction between private equity firms and investees is through
participation on investee company boards. Private equity firms ordinarily require board
representation as part of their funding agreement ( Beecroft, 1994; Cotter and Peck, 2001;
Kaplan, 1989; Sahlman, 1990). Private equity firm representation on boards has been found
to increase as the investee company moves through its developmental phases and staged
investment increases the ownership level of the private equity firm ( Smith, 2005).

Third, private equity firms are believed to add value around the IPO event. Their familiarity
with the process enables them to prepare the investee company beforehand, for example by
influencing marketing and R and D expenditure to portray an appropriate balance of
investment for the future and current profit. They may also impose appropriate governance
and management structures to make the offer attractive to future shareholders ( Campbell
and Frye, 2006; Krishnan, Masulis, Ivanov, and Singh, 2009). Through these preparatory
actions, a more attractive proposition is presented to the market, thereby achieving a higher
price and/or hastening the time to IPO ( Barry, Muscarella, Peavy, and Vetsuypens, 1990;
Dovin and Pyles, 2006; Ducharme, Malatesta and Sefcik, 2001; Lin and Smith, 1998;
Sandstrom and Westerholm, 2003; Timmons and Bygrave, 1986; Wang, Wang and Lu,
2002).

Lerner, 1994, private equity firm experience with the IPO process and markets can deliver a
timing benefit. Timing of an IPO to coincide with positive market conditions is a key
consideration in going public and is associated with higher returns ( Cumming, 2008;
Lerner, 1994, Ritter and Welch, 2002). Experienced private equity firms have been shown
to be better at timing IPO exists ( Lerner, 1994) and less incentivized to take investee
companies public for ulterior motives as can be with the case with younger venture capital
firms who may wish to generate reputational benefits ( Gompers, 1996).

Finally, private equity firms contacts within the industry can not only lead to the selection of
superior service providers of associated functions, e.g. auditors, lawyers and underwriters, but
can also reduce the costs of evaluating, selecting and commissioning these service providers (
Bygrave and Timmons, 1992; Dolvin, 2005; Dolvin and Pyles, 2006; Stein and Bygrave,
1990).

Fourthly private equity firms can continue to add value beyond the IPO. They commonly
retain high degrees of ownership ( Barry et al, 1990; Bradley, Jordan, Yi, and Roten,
2001; Brav and Gompers, 1997; Cao and Lerner, 2009; DeGeorge and Zeckhauser,
1993; Holthausen and Larcker, 1996; Lin and Smith, 1998; Mian and Rosenfield,
1993 ). Consequently, their board representation and influence continues after the IPO event (
Campball and Frye, 2006; Jain and Kin, 1995; Krishnan et al, 2009), which is not
ordinarily the case under other the case under other exit routes ( Wright et al, 1990).

Collectively, these value adding activities of private equity firms are considered to have
lasting benefit for investee companies. An extensive study of post IPO performance by Brave
and Gompers (1997) suggests that the knowledge, resource and network benefits private
equity firms bring extends beyond the event of going public. In comparing post IPO share
price performance, their sample of private equity backed firms significantly outperformed
non- private equity backed firms despite being smaller, as measured by market capitalization

Conversely, buy-side analysts need to be concerned that leaner operations together with
reduced capital expenditures ( Fox and Marcus, 1989) will lead to a lack of sustainability
following the IPO. Window dressing is therefore an important aspect of private equity firm
certification of investee firms, there is- by comparison- relatively little, directly related work
on window dressing.
In the case of reverse LBOs, accounting measures of operating performance have been found
to peak around the time of the IPO (DeGeorge and Zeckhauser, 1993). Existing evidence is
mixed as to whether this extends to manipulating reported performance to window dress
public offerings. On one hand, the presence of private equity firms, other than young,
inexperienced firms, has been found to mitigate the management of accruals ( Jain and
Kinny, 1995; Morsfield and Tan, 2006). In contrast, Chou, Gombola and Liu, 2006)
found evidence of significant discretionary accruals around the IPOs of reverse LBOs.

Shah (1995) documents an under- pricing of 3.8% weekly excess returns from a study of
2056 IPOs that commenced trading between January 1991 and April 1995 and finds that past
Sensed returns have an impact on the under- pricing.

In a comprehensive analysis of 1922 IPOs listed from 1992 to 1995 Madhusoodhanan and
Thiripalraju (1997) shows that the annualized excess returns from IPOs at 294.8% was
higher than the experiences of the other countries. They also suggest book building as an
alternative “proposition to avoid mispricing”.

Kakati (1999) examined the performance of a sample of 500 IPOs that tapped the market
during January 1993 to March 1996 and documents that the short run under- pricing is to the
tune of 36.6% and in the long-run the overpricing is 40.8%.

Krishnamurthi and Kumar (2002) working on the IPOs that listed between July 1992 to
December 1994 conclude a mean excess return of 72.34% and indicate that the time delay
between offer approval and the issue opening as an important factor behind the under-pricing.

Majumdar (2003) also documents short run under-pricing in India and observes aftermarket
total returns of 22. % of six months after listing. All the above mentioned studies examined
IPO performance during the fixed price regime as book building was not in vogue at those
times.

Ranjan and Madhusoodanan (2004) from a study of 92IPOs offered during 1999-2003
document that fixed price offers were under-priced to a larger extent than the book built
issues though the book built issues were only figuring 24 in the sample this was the first
study comparing the fixed price issues performance vis-à-vis book built issues.
Review of Some of the Most Closely- Related Literature:

This paper builds on previous models of the book building process by Benveniste and pint
(1989), Benveniste and Wilhelm (1990) and Maksimovic and Pichler (2001), which argue
that under- pricing is needed to induce investors to report information once they have it, and
Sherman and Titman (2002), which argue that under- pricing is needed to compensate
investors for the cost of acquiring information. It extends past book building models by
allowing the information accuracy to be a continuous decision variable. In a similar
environment, Sherman and Titman explore the effects of the one price rule and of various
participation restrictions, characterizing when such restrictions lead to informed investors
receiving economic rents. Yung (2004) models both investor evaluation and banker screening
of IPOs, explaining why the size of an IPO investor pool may be restricted.

In the auction literature, relatively little work has been done on endogenous entry and
information production in a common value setting. Notable expectations include Hausch and
Li (1993) and Harshad (1990), both of which consider only the single unit case. Levin and
Smith (1994) and Bajari and Hortacsu (2003) model endogenous entry in a single- unit,
endowed information setting. Mathews (1987) considers information production in single-
unit auctions with risk adverse buyers. Habib and Ziegler (2003) show that posted- price
selling of corporate debt may be superior to an auction, if there is a cost to evaluation.

Chemmanur and Liu (2003) analyse information acquisition in uniform price auctions and
fixed price public offers. Public offers allow issuers to control price but not allocations, book
building allows issuers to control both, and standard auctions do not allow issuers to control
either. Chemmanur and Liu demonstrate how fixed price offers allow the issuer to induce a
higher level of information acquisition but do not allow the offering price to reflect the
information acquired.

Ausubel (2002) suggests that IPOs should be sold through an ascending clock auction, which
he shows to be efficient in an independent private values model with an exogenous number of
bidders. Klemperer (2002) points out that a multi- unit uniform price auction “is analogue to
an ascending auction, since the lowest winning bid “is typically not importantly different
from the highest losing bid”. With IPO auctions, there tend to be hundreds of bids at the
market- clearing price. Ausubel recommend ascending auctions to reduce the winner curse,
although reducing the winner curse increases the free rider problem if information must be
produced.

Biais and Faugeron- Crouzet (2002) model IPO auctions that a “dirty Dutch” auction can
prevent tacit collision among bidders and can truthfully elicit pre-existing information from
investors in much the same way as book building. Parlour and Rajan (2002) also identify
similarities between dirty auctions and book building, showing that “leaving something on
the table” can reduce the winner curse, thus eliciting more aggressive bids, under a variety of
allocation rules, including some that allow the underwriter to discriminate between bidders.
Loughran, Ritter and Rydqvist (1994) were the first to examine global patterns for IPOs,
showing that under- pricing of IPOs exists to some extent in virtually all countries and for all
issue methods. They were also among the first to point out the importance of considering the
offering method when evaluating IPOs. For survey of U.S. IPO papers, see Ritter and Welch
(2002). For a more extensive list of empirical papers on non- U.S. IPOs, see Jagannathan and
Sherman (2004).

Cornelli and Goldreich (CG,2001) and Jenkins and Jones 2003 use unique data sets to
examine the orders and allocations for investors in book building IPOs. Both find that large
orders are favoured over small orders. JJ finds that early bids receive favourable allocations.
This is consistent with underwriters trying to discourage free riders, since those that place
firm, early bids are clearly acting on their own opinions about the issuer. However, CG do
not find that early orders are favoured in terms of allocation size. CG find that rationing
varies between bidders and that about 30% of bidders does not get shares at all, showing that
underwriters are actively managing allocations, rather than passively rationing everyone one
demand is high. Both papers also find a core of frequent investors that tend to be favoured in
terms of allocations.

Ljungqvist, Jenkinson and Whilhelm (2003) compare book building and public offer IPOs
for many countries. They find that book building leads to low under- pricing when conducted
by U.S. banks and/or targeted at U.S. investors. Pichler and Stomper (2003) explore the
roles of book building and when issued forgery market trading, showing that acquiring
private information may be necessary to reduce the Glosten and Milgrom (1985) problem.
Glosten and Milgrom showed that a market may fail to open if there are extreme
information asymmetries. Pichlerand Stomper demonstrates that book building may reduce
the information asymmetry regarding the value of an IPO, thus allowing the when issued
market to open.

Barrien (2004) models IPO under- pricing as being driven by suboptimal regulation-
requiring aftermarket price support for all IPOs, in an environment in which price support
would not occur voluntarily. The paper does not give information on which countries, if any,
mandate aftermarket price support.

Several researchers have focused on the particular role of market sentiment in IPO
performance. The evidence shows that initial returns are higher when investors overreact to
initial IPOs news. For example, Gervais and Odean (2001) find that if investors have more
overconfidence after market gains then this is followed by increased trading volumes and
market depth.

Brown and Cliff (2004) use a large group of sentiment indicators to investigate the
relationship between sentiment and near-term market returns, and find that sentiment is
caused by equity returns. These findings are consistent with Solt and Statman (1988) that
greater initial returns cause excessive optimism in investors and following overreaction in
post-IPO market. The issuer can also choose when to go public.
Odean (1998) provides evidence that the pattern of serially auto- correlated returns around
IPOs is particularly strong during hot market periods.

Lowry (2003) posits that market cycles and optimism are the reasons for the fluctuations in
IPO numbers. Similar research is presented by Cornelli, Goldreich and Ljungqvist (2006),
who use the trading behaviour of retail investors of the IPO grey market and argue that the
sentiments on this market can predict the first-day aftermarket returns.

Purnanandam and Swaminathan (2004) compare IPO stocks with those of matching firms
and find that stock with high growth potential increase in value on the first day. Therefore,
we extend these findings by examining the daily buying and selling information of institution
investors and we highlight how the IPO under- pricing associated with each IPO method
influences investment sentiment, the subsequent trading behaviour of investors and long- run
performance.

Rock (1986), Beatty and Ritter (1986) document that IPO offer prices should be
undervalued relative to fair value to avoid winner curse. However, the valuation processes of
these three IPO methods are different, first, the value of a fixed- price offering is determined
by underwriters, and they gauge the offering prices by their own pricing formulas. Second,
auction offerings are open to all bidders and therefore the value of offering is determined by
market demand. In contrast with the fixed- price method, an auction allows potential
investors to raise their bid prices which may lead to overpricing, and thus dramatic reverse
trading would likely follow post-IPO. Finally, book building underwriters solicit private
information from regular traders by road show to and then set the IPO price.

Ritter (1998) investigates IPO mechanisms in several countries and finds that the Magnitude
of under- pricing is greater for countries with fixed- price offering than those using book
building procedures. However, Ljungqvist and Wilhelm (2002) use worldwide IPO markets
and document that initial returns are positively related with information production.
Controlling for the country factor, Derrien and Womack (2002) use IPO data in French
stock market, which have experienced these three IPO methods, and find that book building
had greater under- pricing and pricing variance than other two methods. These findings of a
direct correlation between initial returns and information compensation are consistent with
the theoretical models of Benveniste and Spindt (1989), Benveniste and Wilhelm (1990).

Daniel, Hirsh and Subrahmanyam (1998) study the effect of biased self- attribution on new
announcements and find that short- term momentum and long- term reversal are apparent in
equity markets. Moreover, the trading activities of institutional investors play important roles
in IPO markets, and the risk preference and investment sentiment towards an initial great
allocation of shares would dominate the post- IPO performance.

Aggarwal (2003) documents the flipping of institutional investors is more frequently in hot
IPOs. Investors endowed with offering shares are more likely enjoy higher initial abnormal
returns and thus realize their gain.
Ellis (2006) finds a significant relationship between initial IPO returns and trading volume
and document that cold IPOs have early sell trades by insiders. However, the extent of
ownership changes among the IPO methods remains unknown.

In this research, we aim to study whether the trading behaviour associated with different IPO
methods affects the short and long- run returns of the post- IPO market. We evaluate the
buying and selling trade activities of institutional investors to examine how investors react to
the abnormal returns of the initial offering. Since higher sentiment causes subsequent trading
bias, we further test whether the trading bias of institutional investors affects long- run IPO
performance.

From the above studies it is evident that an IPO referred to simply as offering or flotation is
when a company issues common stock or shares to the public for the first time. They are
often issued by smaller, younger companies seeking capital to expand, but can also be done
by large privately owned companies looking to become publicly traded.

In an IPO the issuer obtains the assistance of an underwriting firm, which helps determine
what type of security to issue, best offering price and time to bring it to market. When a
company lists its securities on a public exchange, the money paid by investors for the newly-
issued shares goes directly to the company. An IPO, therefore, allows a company to tap a
wide pool of investors to provide it with capital for future growth, repayment of debt or
working capital. A company selling common shares is never required to repay the capital to
investors.

Once a company is listed, it is able to issue additional common shares via a secondary
offering, thereby again providing itself with capital for expansion without incurring any debt.
This ability to quickly raise large amounts of capital from the market is a key reason many
companies seek to go public. IPOs generally involve one or more investment banks known as
underwriters. The company offering its shares, called the issuer, enters a contract with a lead
underwriter to sell its shares to the public. The underwriter then approaches investors with
offers to sell these shares.
Key Internal Approval from Shareholders:

 Board Meeting for the IPO including taking on record a potential offer for sale
through the IPO process and setting up an IPO Committee.
 Approval/ authorization for Offer for Sale by Selling Shareholders.
 Appointment of intermediaries by the Board/ IPO Committee.
 Declarations/ Undertakings enclosed with the filing of the DRHP with SEBI.
 Finalize the price band at least two working days prior to issue opening.
 Post issue Decisions and Actions along with the Company.

IPO Grading Process:

 Aimed at providing an independent assessment of fundamentals to aid comparative

assessment.
 Intend to serve as an Information and Investment tool for the investors.
 IPO grading does not take cognizance of the price of the security. It is not an
investment recommendation.
 Present the analysis to a committee comprising senior executives of the concerned
grading agency. This committee would discuss all relevant issues and assign a grade.
 Review SEBI observations and update their report if required.
 Communicate the grade to the company along with an assessment report outlining the
rationale for the grade assigned.
 Though this process will ideally require 2-3 weeks for completion, our initial reaction
with Credit Rating Agencies indicates that it may be a good idea for Issuers to initiate
the grading process about 6-8 weeks before the targeted IPO date to provide sufficient
time for any contingencies.
 IPO Grading is required prior to marketing of the IPO and needs to be disclosed in the
RHP and Prospectus.
 The Credit Rating Agencies have to forward the names and details of IPOs graded by
them on a monthly basis to SEBI/ Stock Exchanges for uploading on their website for
public information.
Book Building Issues:

 Offer Price: A 20% price band is offered by the issuer within which investors are
allowed to bid and the final price is determined by the issuer only after closure of the
bidding.
 Demand: Demand for the securities offered, and at various prices, is available on a
real time basis on the BSE website during the bidding period.
 Payment: 10% advance payment is required to be made by the QIBs along with the
application, while other categories of investors have to pay 100% advance along with
the application.
 Reservations: 50% of shares offered are reserved for QIBs, 35% for small investors
and the balance for all other investors.

Fixed Price Issues:

 Offer Price: Price at which the securities are offered and would be allotted is made
known in advance to the investors.
 Demand: Demand for the securities offered is known only after the closure of the
issue.
 Payment: 100% advance payment is required to be made by the investors at the time
of the application.
 Reservation: 50% of the shares offered are reserved for applications below Rs 1lakh
and the balance for higher amount applications.
Book Building Process:

 The Issuer who is planning an offer nominates lead merchant bankers as “book
runners”.
 The Issuer specifies the number of securities to be issued and the price band for the
bids.
 The Issuer also appoints syndicate members with whom orders are to be placed by the
investors.
 The syndicate members input the orders into an “electronic book”. This process is
called “bidding” and is similar to open auction.
 The book normally remains open for a period of 5 days.
 Bids have to be entered within the specific price band.
 Bids can be revised by the bidders before the book closes.
 On the close of the book building period, the book runners evaluate the bids on the
basis of the demand at various price levels.
 The book runners and the Issuer decide the final price at which the securities shall be
issued.
 Generally, the number of shares is fixed; the issue size gets frozen based on the final
price per share.
 Allocation of securities is made to the successful bidders. The rest get refund orders.
Fast Track Issue:

 The equity shares of the issuer have been listed on any recognized stock exchange
having nationwide trading terminals for a period of at least three years immediately
preceding the reference date.
 The average market capitalization of public shareholding of the issuer is at least 5000
crore rupees.
 The annualised trading turnover of the equity shares of the issuer during 6 calendar
months immediately preceding the month of the reference date has been at least 2% of
the weighted average number of equity shares listed during such 6 months period.
 The issuer has redressed at least 95% of the complaints received from the investors till
the end of the quarter immediately preceding the month of the reference date.
 The issuer has been in compliance with the equity listing agreement for a period of at
least 3 years immediately preceding the reference date.
 The impact of auditors qualifications, if any, on the audited accounts of the issuer in
respect of those financial years for which such accounts are disclosed in the offer
document does not exceed 5% of the net profit or loss after tax of the issuer for the
respective years.
 No show- cause notices have been issued or prosecution proceedings initiated or
pending against the issuer or its promoters or whole time directors as on the reference
date.
 The entire shareholding of the promoter group of the issuer is held in dematerialized
form on the reference date.
Findings:

 The maximum investments are invested by male who belongs to the age group of 25-
35.
 Out of 120 respondents 54% of investors have below 2 yrs experience in IPO
investment based on company performance.
 The statistics shows that out of 120 respondents 43% of them are highly satisfied with
the IPO investment.
 It is found that 46% of investors have knowledge about IPOs because new investors
are trying to learn about stock markets will make them familiar with the stock market
terminology along with the safe investing techniques.
 It is found that 34% of the investors agree that IPO is a risky investment. For the
individual investor, it is tough to predict what the stock will do on its initial day of
trading and in the near future because there is often little historical data with which to
analyse the company.
 The statistics shows that 60% of the investors prefer online mode of investment, the
most important benefit of investing in IPO online is paper less work and any time
anywhere investment.
 The statistics shows that 49% of the investors prefer media as a primary source for
collecting information regarding IPO. Therefore these medias invite experts who
gives tips to the investors about IPO offers and stock trading lively.
 It is found that 42% of the investors prefer to spend half of their income for
investment in IPO, a good IPO investor is the one who knows about the future
developments in IPO markets before they are actually in news. The next point is to
read the prospectus of the company in detail.
 The statistics shows that 41% of the investors gained high return of profit by investing
in IPO while compared to other investment.
 The statistics shows that 58% of the investors inferred that risk factor for prevailing in
IPO is medium while compared to other investment.
 It is found that 36% of the investors neither agree nor disagree in investing in IPO.
IPOs and public issues are the flavour of the season in the market and scores of small
investors have made phenomenal overnight gains by subscribing to them.
 It is found that 41% of the respondents prefer the profitability of the particular
company for investment, is not easy but you can learn the steps for successful
investing if you learn the basics of stock market investing by reading up on the ideas
and guidance given by stock market investing experts.
 Out of 120 respondents 71% of the investors have knowledge about the fundamentals
of an IPO. Indian investors do not really bother about grades for IPOs before
investing when the market is hot and then they invariably regret.
 It is found that 55% of the respondents have given YES to have awareness of the
procedures before applying for the IPO. An informed and intelligent IPO investment
decision can help you to make huge profits.
  It is found that 33% of the investors expect more companies coming out with their
IPOs in FY 2011, based on recently listed IPOs.
 It is found that 38% of the investors advice, new investors in IPO to go by only
premium while compared to others it is best for them.
 The statistics shows that 70% of the respondents suggested their friends, colleagues
and relatives to invest in IPO, for the investor, IPOs are attractive mainly because they
may be undervalued. Initially, to make IPOs more attractive, many companies will
offer their IPO at a lower rate.
 From Chi- square test it was found that there is a relationship between fundamental
analysis of an IPO and the awareness of the procedures before applying for IPO.
 From T- test of comparing two groups, it is found that there is a significant difference
between male and female with respect to their opinion about that IPO is a risky
investment.
 From ANOVA it is inferred that there is a significant difference between occupations
with respect to the above statement.
 From the H- test, it is evident that that there is a significant difference between age
group with respect to the statement investing in IPO is safe for small investors.

Suggestions:

 Identify the company to in which the IPO investment is to be made.

 Investors should have the awareness of the procedures before applying for IPO.
 Identify the risk factor prevailing in IPO before investment.
 Identify the source for collecting information regarding IPO.
 The policies of the company should be clear such that even ordinary people should be
able to know about IPOs.
 Organize program for investors and educate them the opportunities and new opinion
available in the IPO market.
 Investors must understand clearly the objectives, schemes and services by IPO.
 Read the section about underwriters, and note which brokerage firms are participating
in the IPO.
 Be prepared for rejection. Most brokers let only their top clients buy into an IPO.
 Find out whether online discount brokers are playing a distributor role in the IPO. If
so, they may be willing to let you buy shares if you will establish an account.
 Tell the broker how much you plan to invest in the IPO.
 Keep an eye on Web Sites as the expected offering date nears. You will learn the
price range in which the company plans to sell shares and the date the offering is
expected to take place.
 Company should take in account the world market scenario before making any
offering to public.
 The customer should also be rational while investing in IPOs.
 Proper allocation of fund should be done by the investor to ascertain what quantum of
fund is sufficient for investment.
Conclusion:

“Tomorrow is another day”, this applies to the corporate as well as the individual almost
equally. As the need of the people is changing so is changing the investment habits of the
people and this has brought in a spate of new products and schemes where people can invest.
IPO is a first sale of shares to the public by any company. The objective of IPO is to ensure
that raising the capital of the company and creating awareness of the company.

If investor invests only in IPO then his purpose is to cut the profits on the listing of the
shares. Investors not interested in company should sell their shares on the day of the listing.
So Brand image of the company specially the image of the company wants to increase. Indian
investors have full faith in the name of the company because the situation of world market
were hostile and due.

IPO is basically would be made by a company primarily in case it requires funds. So for
companies in growth stage it is looking at expansion and diversification. In my study I
verified that IPO is suitable for institutional investors and business people to begin making
contact with investment banks, attorneys, and accountants in advance of planning an IPO. He
or she must be well informed on the risk and return attributes of these options. Initially, to
make IPOs more attractive, companies must offer their IPOs at low rate, this will help to
encourage the investors.

To be a successful investor they need two main things the knowledge and right trading
platform, however in view of the fact that the risks are the part of any investment, this project
also gave me a good exposure on IPO market and clear details about the recently listed IPOs
and how they attract their customers in the market.
 Acknowledgement:

I wish to express my sincere gratitude to Prof. Akhil for giving me the opportunity to work on
this wonderful project on IPO. Prof.Akhil is my mentor who has helped me a lot throughout
this project with his valuable advice which has truly motivated me. The process of preparing
this project in collaboration with my professor is a refreshing experience. I have learned
many useful things from this project. Prof.Akhils guidance and constant support has pushed
me to successfully complete this project. Finally, I would like to thank my mother who has
helped me a lot in gathering different information and guiding me from time to time, despite
of her busy schedule. I am making this project not only for marks but also to increase my
knowledge.

Bibliography:

www.scribd.com

www.moneycontrol.com

www.ssrn.com

www.icsi.edu