Performance analysis of post-pandemic initial public offering's

Abstract

The process through which an unlisted company can become a listed one by selling its shares to the general public is known as an initial public offering (IPO). Companies are using an IPO to raise capital by issuing its new shares to the public. Primary market is where new securities are first offered for sale and after its listing, shares can be traded over secondary market. IPO’s can be a golden opportunity for the companies planning to expand and diversify their business, from the perspective of investors IPO’s can be a good source of earning higher dividends and long-term capital appreciation. Since COVID-19 pandemic, which created a devastated impact on the almost all the sectors of our economy, IPO’s during this period suffered a lot. Some companies struggled to get a right price for their IPO’s, while for some it was overpriced. Therefore, it can be assumed, COVID-19 pandemic has a significant impact on the performance of IPO’s especially from the context of Indian stock market. The study attempts to analyse the pricing of IPO’s and the value of share premium on listing day. Further the study evaluates the current and progressive performance of IPOs on the base of its listing status. The study analysis 27 newly listed IPOs in the post pandemic period of six months from the date of issue i.e., October 2021 to March 2022. The study found 19 companies have under-priced shares, while 8 companies have overpriced. Out of 27 IPO’s, 15 IPO’s have generated positive returns and performed well throughout the study period, 10 IPO’s have given negative returns and 2 IPO’s have shown volatility at each month but generated positive returns overall. Furthermore, the study observes that majority of the IPOs issued during post pandemic period has performed well. The study would help investors in increasing their understanding towards IPO’s and to take necessary precautions while selecting the IPOs into their portfolio.