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World Journal of Management and Economics

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 World Journal of Management and Economics
ISSN: 1819-8643

AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS

DURING THE PANDEMIC PERIOD
Dr.T.C.Thomas1, Dr.S.Suresh2 & Dr.G.Sankararaman3
____________________
1. Professor, Rajalakshmi School of Business, Chennai.
2. Assistant Professor (SG), Department of Management Studies, Rajalakshmi Engineering
College, Chennai.
3. Professor, Department of Management Studies, Rajalakshmi Engineering College,
Chennai.
____________________________________________________________________________
Abstract
Market performance of IPOs always create a growing stream of research interest for
academicians. Lock downs imposed due to Covid-19 pandemic have halted the new issues
markets in many countries. In this paper, an attempt has been made to study the listing
performance of Indian IPOs announced during covid-19 pandemic period. The analysis is
carried out on 34 IPOs listed in Indian capital market during August 2020 to April 2021. The
IPOs were grouped under seven sectors viz., finance, IT & Software, Consumer, Health, Real
Estate, Manufacturing and Others. Parameters such as listing day initial returns, intra day
returns on the listing day, Short-run market unadjusted returns, short-run market adjusted
returns, excess abnormal returns and wealth relative have been applied to assess the
performance of IPOs. The study found that the IPOs of financial sector have reported negative
returns from the day of listing to the 30th trading day. The results of the study show that IT &
Software IPOs have outperformed the market returns in the short-run.
Keyword
Initial Public Offer, Wealth Relative, Initial Returns, Pandemic, Indian Capital Market.
__________________________________________________________________________________
1. Introduction listing and post-initial performance.
The outbreak of COVID-19 has Existing studies find that coverage by
infected millions of people all over the various media about IPO and the reporting
world and several thousand deaths in many method may also shape investors’
parts of the world. The increasing number understanding and beliefs (Bajo &
of new cases and deaths related to COVID- Raimondo, 2017).Generally uncertainties
19 has created an uncertainty among all associated with the COVID-19 pandemic
market participants. Almost all stock creates a negative influence in the
exchanges witnessed downtrend between investors’ decision-making process. In
April 2020 and September 2020. Literature another study, conducted by Bali et al.
analysis pointed out under performance of (2017) it is reported that low uncertainty is
stock prices in various countries, global associated with 6% higher annualized
commodity meltdown and grim outlook of returns, as compared to the stocks of high
markets. Many studies were conducted on uncertainty. In this paper an attempt has
stock price movement during the pandemic been made to study the listing day initial
period. However, very few studies have returns, intra day returns on the listing day,
analyzed the impact of COVID 19 on IPO Short-run market unadjusted returns, short-

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 AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS DURING THE PANDEMIC PERIOD / WORLD JOURNAL OF MANAGEMENT AND
ECONOMICS
run market adjusted returns, excess
abnormal returns and wealth relative to
assess the performance of IPOs.
2. Literature Background
Performance of an IPO could be measured
through the returns of the IPO on the date
of listing. If the stock market pays more
price on the day of listing of IPO than its
offer price, then this phenomenon would be
termed as under-pricing. The under-pricing
was initially assessed in developed markets
such us USA and UK ( Ibbotson,1975,
Ritter,1986).It could be identified from the
different research papers that the IPOs of
Indian firms have fared higher under-
pricing rather than over-pricing on the
listing day (Shah, A. ,1995; Ranjan, N., &
Madhusoodanan, T. P. ,2004 ; Pande, A., &
Vaidyanathan, R. ,2007;Singh, A. K., &
Shrivastav, R. K. ,2017).
Performance of IPOs on the day of listing is
measured through initial returns formula (
difference between offer price and open
price on the day of listing) ( Ajay
Pandey,2005; Kumar,2007; Priyanka
Singh &Brajesh Kumar ,2008; Chorruk
and Worthington ,2009).
Few studies have applied Intra-day returns
( difference between open price of the IPO
on the day of listing and closing price on
the day of listing), Short- run market
unadjusted returns ( difference between
offer price and the closing day price of
selected days), short-run market adjusted
returns with selected market index returns,
excess abnormal returns of IPOs , and Buy
and Hold Abnormal Returns (BHAR)
(KanchanChhabra ,2011; Sadaqat Shama
et al ,2011; Nejat et al ,2012; Puri ,2012;
Clark,2012; Joshi et al ,2013;
Anuradha,2015;Abraham,2015).
Mazumder & Saha (2021) has made an
attempt to study the nexus between covid-
19 fear index and IPO performance in USA.
The researchers considered 81 IPOs made
by USA firms during January to July 2020.
It was identified from their research that
there existed a negative relationship
between covid-19 fear index and initial
returns of the IPOs.
268
There existed little evidences on the
performance of IPOs made by Indian Firms
during this Covid-19 pandemic period. This
has motivated the researchers to undergo an
analysis of post-listing performance of
IPOs made by the Indian firms during this
pandemic period
3. Research Methodology
This study has adopted analytical research
design. The main purpose of the study is to
assess the listing performance of IPOs
announced by Indian firms during
pandemic. The study has also studied the
short-run performance of IPOs since listing.
The researchers have considered 34 IPOs
which have listed and traded in Indian stock
exchanges during August 2020 to April
2021. The sample IPOs considered for this
study grouped under seven sectors viz.,
Finance, IT&Software, Consumer, Real
estate, Manufacturing, Health and Others.
National Stock Exchange’s Index NIFTY
Considered for calculating market returns.
Initial returns were calculated by applying
the below formula;
Initial Returns (IR) = Listing Day Opening
Price – Issue Price / Issue Price
Listing Day Gains were calculated through;
Listing Day Gain (LDR) = Listing Day
Closing Price – Issue Price / Issue Price
Intraday Return (IDR) on the listing Day
measured through
Intraday Return = Listing Day Closing
Price – Listing Day Opening Price/ Listing
Day Opening Price
Market Returns(MR) were found through
Market Returns = Index Value on the listing
Day – Index Value on the IPO Offer Day /
Index Value on the IPO offer Day
Abnormal Returns(AR) calculated through
Abnormal Returns = IPO Return – Index
Return
Market Adjusted Returns(MAR)
Market Adjusted Returns = (1+IPO
Return)/ (1+Index Return)
Short-run listing performance of IPOs have
studied from the listing day to 2nd,5th, 7th ,
10th, 15th, 20th and 30th day since listing.
 AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS DURING THE PANDEMIC PERIOD / WORLD JOURNAL OF MANAGEMENT AND
ECONOMICS

4. Analysis and Discussions

Table 1 Listing Performance of Sample IPOs
Panel A : Returns of Sample IPOs on Listing Day
Industry
Finance IT & Software Consumer Real Estate
Manufacturing Health Others
No of IPOs 7 4 6 4 4 3
6
Mean IR(%) 0.11 78.10 31.16 2.57
49.26 27.08 38.04
Cum IR(%) 0.78 312.40 186.93 10.30 197.02
81.25 228.2
Mean LDR(%) -3.17 70.82 44.80 28.32 33.30
39.19 33.3
Cum LDR(%) -22.16 283.27 268.79 113.27 133.25
117.57 200.31
Mean IDR(%) -2.89 -2.95 8.61 5.57 -5.18
1.70 -1.61
Cum IDR(%) -20.20 -11.81 51.64 22.28 -20.73
5.11 -9.69
Source: Authors’ own calculation Initial Returns of 0.11 % and Mean Listing
It could be ascertained from Table-1 that Day returns of -3.17%. It could be further
firms grouped under financial sector has observed that in terms of Mean Intraday
announced more number of IPOs than other Returns (IDR), all sectors have reported
sectors during the study period. On the day negative returns except consumer, real
of listing, IPOs of firms belong to IT& estate and health sectors. One could
Software sector have fared better Mean observe from the Mean Initial Returns of
Initial Returns(IR) and Mean Listing Day all the sectors that the under-pricing
Returns (LDR) as 78.10% and 70.82% phenomenon existed during the study
respectively. On the other hand, Finance period
sector IPOs have reported lower Mean
. Table 2
Average Short-run market unadjusted returns ( in %)
Days Since Listing
Industry 2 5 7 10 15 20 30
Finance -1.62 -3.2 -3.38 -5.54 -3.55 -0.34 -
0.65
IT&Software 75.63 100.45 92.02 87.43 79.73 76.06 97.36
Consumer 51.64 46.79 52.21 48.84 44.73 35.25 31.71
Real Estate 24.09 21.83 24.23 26.55 28.69 25.36 22.40
Manufacturing 30.70 25.81 26.71 24.23 19.80 17.69 24.08
Health 54.35 50.54 51.29 51.56 47.05 48.87 98.03
Other 30.59 28.30 28.09 29.61 27.58 27.20 39.02
Source: Author’s own calculation belong to consumer and health sector have
IPOs made by IT& Software firms have fared better mean returns ranged between
produced higher short-run returns in all the 40 to 50 percent in short-run. IPOs of Firms
trading days since listing. IPOs from firms belongs to real estate, manufacturing and

269
 AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS DURING THE PANDEMIC PERIOD / WORLD JOURNAL OF MANAGEMENT AND
ECONOMICS

other sectors have accounted average that IPOs from financial sector firms have
returns between 20 to 30 percent in short- reported negative returns in short-run.
run. It could be obtained from the table-2 Table 3 : Average Short-run Market
Adjusted Returns
Average Short-fun Market Adjusted Returns ( in %)
Days Since Listing
Industry 2 5 7 10 15 20 30
Finance -1.02 -5.01 -2.05 0.11 0.37 -1.49 -
4.77
IT&Software -225.09 -90.68 42.97 489.09 -5.04 14.79 32.05
Consumer 5.28 20.62 15.14 308.03 6.67 -1.93 12.98
Real Estate 9.59 2.82 -17.17 -10.90 61.85 6.91 4.29
Manufacturing 21.89 -99.46 71.29 -12.12 -33.68 -7.88 17.70
Health -5.28 59.13 -16.19 342.42 -4.12 -3.44 -10.82
Others 1.73 16.74 -8.03 24.78 -0.69 -8.93 42.1
Source: Authors Calculation 308.03. IT & Software sector has reported
It could be found from Table -3 that on the the highest negative average short-run
10th day of trading the following sectors market adjusted returns of 225.09 percent
have reported higher average short-run on second day of trading after listing
market adjusted returns among the different followed by 90.68 percent on the fifth day
sectors viz., IT & Software was 489.09 %, after listing.
Health was 342.42% and Consumer was
Table 4: Excess Abnormal Returns of Sample IPOs
Average Short-run Excess Abnormal Returns ( in %)
Days Since Listing
Industry 2 5 7 10 15 20 30
Finance -3.82 -7.09 -8.48 -9.96 -7.57 -5.38 -
9.42
IT&Software 76.53 101.89 93.14 88.00 78.69 75.04 97.16

Consumer 49.61 45.42 49.96 47.13 42.17 31.86 27.92

Real Estate 22.83 19.59 21.86 24.21 26.54 22.12 17.45
Manufacturing 28.79 24.46 25.45 23.44 20.56 16.57 21.12
Health 55.08 48.66 49.91 48.82 45.30 46.88 94.60
Others 29.92 25.94 25.58 26.60 24.49 25.16 32.57
It could be noticed from Table 4 that IPOs sectors have accounted average returns
made by IT& Software firms have reported between 20 to 30 percent in short-run. It
higher average short-run excess abnormal could be further observed from the table-4
returns in all the trading days since listing. that IPOs from financial sector firms have
IPOs from firms belong to consumer and reported negative average excess abnormal
health sector have fared average excess returns in short-run.
abnormal returns ranged between 30 to 50 Table 5: Wealth Relative Measure of
percent in short-run. IPOs of Firms belongs sample IPOs
to real estate, manufacturing and other
Mean Market Mean Market Wealth Relative
Unadjusted Returns(%)
Returns(%)
On Listing Day 30.79 0.69 1.299

270
 AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS DURING THE PANDEMIC PERIOD / WORLD JOURNAL OF MANAGEMENT AND
ECONOMICS
Days Since Listing
2nd 33.36
5th 33.63
7th 34.02
10th 32.74
15th 30.72
20th 28.58
30th 35.70
Source: Authors’ own calculation
If the wealth relative measure of an IPO
reported greater than one, then it could be
interpreted that the returns of IPOs
outperformed the market returns. On the
other hand, if the wealth relative measure
reported less than one for an IPO, then it
could evident that underperformance of an
IPO against the market returns. In this
study, the IPOs considered for this study
have fared better wealth relative of more
than 1 and it could be interpreted as the
IPOs have outperformed the NIFTY index
returns till 30th day of listing.
5. Conclusion and Scope for Further
Research
After market performance of IPOs will
always a growing stream of research
interest for academicians. Lock downs
imposed due to Covid-19 pandemic have
halted the new issues markets in many
countries. In this paper, the researchers
have made an attempt to study the listing
performance of Indian IPOs announced
during covid-19 pandemic period. The
researchers considered 34 IPOs listed in
Indian capital market during August 2020
to April 2021. The IPOs were grouped
under seven sectors viz., finance, IT &
Software, Consumer, Health, Real Estate,
Manufacturing and Others. Listing day
initial returns, intra day returns on the
listing day, Short-run market unadjusted
returns, short-run market adjusted returns,
excess abnormal returns and wealth relative
have applied to assess the performance of
IPOs. The study found that the IPOs of
financial sector have reported negative
returns from the day of listing to till the 30th
trading day since listing. IT&Software
IPOs have outperformed the market returns
271
1.17 1.318
1.90 1.311
2.34 1.310
2.24 1.298
2.28 1.278
2.84 1.250
4.91 1.293
in the short-run. Long-run performance of
IPOs announced during the pandemic could
be studied further.
6. References
• Balaji M K, Sankararaman G and
Suresh S, “A Study on Impact of Covid
19 in India”, Test Engineering and
Management, Volume 83,May – June
2020 ISSN: 0193-4120 Page No. 16056
– 16062
• Bajo, E., & Raimondo, C. (2017).
Media sentiment and IPO underpricing.
Journal of Corporate Finance, 46, 139-
153
• Bali, T. G., Brown, S. J., & Tang, Y.
(2017). Is economic uncertainty priced
in the cross-section of stock returns?
Journal of Financial Economics,
126(3), 471-489
• Ibbotson, R. G. (1975). Price
performance of common stock new
issues. Journal of financial
economics, 2(3), 235-272.
▪ ISSN- 2394-5125 Vol 7, Issue 13, 2020.
• Mazumder, S., & Saha, P. (2021).
COVID-19: Fear of pandemic and
short-term IPO performance. Finance
Research Letters, 101977.
• Pande, A., & Vaidyanathan, R. (2007).
Determinants of IPO underpricing in
the National Stock Exchange of
India. ICFAI Journal of Applied
Finance, Forthcoming.
• Ranjan, N., & Madhusoodanan, T. P.
(2004). IPO underpricing, issue
mechanisms and size. Social Science.
• Sankararaman, G., Suresh, S., &
Thomas, T. C. Impact of Economic
Decisions on Behaviour of Bombay
Stock Exchange in India. , International
 AN ANALYSIS OF LISTING PERFORMANCE OF INDIAN IPOS DURING THE PANDEMIC PERIOD / WORLD JOURNAL OF MANAGEMENT AND
ECONOMICS

Journal of Recent Technology and
Engineering (IJRTE) ISSN: 2277-
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market: empirical facts. Social Science
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(2017). An empirical study on
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ANNOUNCEMENTS ON NIFTY
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