A project on

“A STUDY ON INVESTOR PREFERENCE TOWARDS IPOs IN THANE DISTRICT”

A project submitted to

University of Mumbai for partial completion of the degree of

Bachelor’s in Management Studies

Under the faculty of commerce

By

DARSHAN PATIL

Under the guidance of

PROF. KIRAN PUNJABI

VEDANTA COLLEGE

(Vithalwadi Station Road,

Vithalwadi West, 421003)

March 2024

1
 A project on
“A STUDY ON INVESTOR PREFERENCE TOWARDS IPOs IN THANE DISTRICT”

A project submitted to

University of Mumbai for partial completion of the degree of

Bachelor’s in Management Studies

Under the faculty of commerce

By

DARSHAN PATIL

Under the guidance of

PROF. KIRAN PUNJABI

VEDANTA COLLEGE

(Vithalwadi Station Road,

Vithalwadi West, 421003)

March 2024

2
 Certificate

This is to certify that Mr. DARSHAN SUNIL PATIL has worked and duly completed his
Project Work for the degree of Bachelor’s in Management Studies under the Faculty of
Commerce in the subject of and her/his project is entitled, “A STUDY ON INVESTOR
PREFERENCE TOWARDS IPOs IN THANE DISTRICT” under My Supervision.

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University.

It is his own work and facts reported by his personal findings and investigations.

KIRAN PUNJABI

Seal of the
College

Date of submission:

3
 Declaration by learner

I the undersigned Mr. DARSHAN PATIL here by, declare that the work embodied
in this project work titled “A STUDY ON INVESTOR PREFERENCE TOWARDS IPOs
IN THANE DISTRICT”, forms my own contribution to the research work carried out

under the guidance of PROF. KIRAN PUNJABI is a result of my own research work
and has not been previously submitted to any other University for any other Degree to
this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

DARSHAN PATIL

CERTIFIED BY
PROF. KIRAN PUNJABI

4
 Acknowledgment

To list who all have helped me is difficult because they are so numerous, and
the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Dr Sangeeta Kohli for providing the

necessary facilities required for completion of this project.

I take this opportunity to thank our Vice Principal, Dr Kiran Menghani, for
her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide PROF.
KIRAN PUNJABI whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially My Parents and Peers
who supported me throughout my project.

5
 Index

Sr. no Particular Page no.

1 Introduction
1.1 What is IPO (Initial Public Offering)
1.2 There are 3 main reasons why a company should go
public:
1.3 IPO Benefits to the Investors
1.4 IPO Disadvantages for Investors.
1.5 IPO Types and Methods.
1.6 IPO Process
1.7 IPO Intermediaries
1.8 IPO Prospectus.
1.9 IPO Valuation: 7-45
1.10 IPO Application Process.
1.11 ASBA
1.12 UPI IPO APPLICATION
1.13 IPO Application Modification.
1.14 IPO SUBSCRIPTION
1.15 IPO Allotment
1.16 Unblocking Funds of IPO.
1.17 IPO LISTING.
1.18 IPO Grey Market Premium.
1.19 MARKETING OF IPO.
2 Review of literature. 46-50
3 Research methodology 51-55
4 Data analysis 56-59
5 5.0Conclusion 60-72
5.1 Annexure 73-75
Bibliography 76

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1. INTRODUCTION

1.1 What is IPO (Initial Public Offering)?

IPO stands for Initial Public Offering. In an IPO, a company offers its shares to the public for
the first time via the primary market. A primary market, also known as a new issue market, is
a place where securities are created or issued directly by issuers and made available for trading
in the secondary market.

Initial Public Offering (IPO) also refers to the process where private companies sell their shares
to the public to raise equity capital from the public investors. The process of IPO transforms a
privately company into a public company. This process also creates an opportunity for smart
investors to earn a handsome return on their investments.

The Dutch East India Company is said to have been the first company to publicly offer its
shares to raise capital in March 1602, thus completing its first IPO.

Going public is a vote of confidence in a company's future. The rigorous process of preparing
for an IPO involves financial audits, legal disclosures, and intense scrutiny by regulatory
bodies. Successfully navigating this gauntlet signifies the company's financial health, strong
governance, and long-term growth prospects. This newfound public image attracts further
investment: venture capitalists become more interested in providing additional funding, and
established companies view them as potential partners. Additionally, a higher profile can attract
top talent seeking to be part of a successful and growing organization.

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1.2 There are 3 main reasons why a company should go public:

 The owners or investors of the company want to sell a significant stake and make
money.
 The company wants to raise fresh money to expand the business and build new
production facilities.
 The company wants to pay off accumulated debt and clean up its books.

A company issues an IPO for a number of reasons. Let us look at each of these reasons in
detail:

1) Raising Capital.

One of the main reasons for IPO is to raise capital for expansion, growth, debt repayment, and
for the future. A company needs capital at every stage of its life cycle. It cannot go public
immediately after it is established. A company goes through various financing phases to meet
its capital needs before going public.

2) Exit for early investors.

An IPO can be a Fresh Issue, an Offer for Sale (OFS), or a combination of both. The existing
investors or promoters can reduce their stake in the company by selling their shares to the
general public through an OFS. This makes it easier for the early investors/promoters to exit
the company and seek other opportunities.

3) Business Expansion.

A company needs capital to expand its business and fund other projects. An IPO helps a
company raise a lot of money to grow the business. Selling shares to the public raises a large
sum of money. This can fund new product development, marketing campaigns, or even
acquisitions. Imagine a local bakery wanting to open nationwide - an IPO could fuel that dream.
4) Repayment of loans.

Some companies may have large loans. Taking on more debt to pay off the existing ones would
mean an additional interest and repayment burden. The proceeds from the IPO can help a
company reduce its debt without having to worry about repaying the principal.

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1.3 IPO Benefits to the Investors.

1) Zero cost investment, as there are no fees for applying for an IPO, unlike buying shares on
the secondary market, where you have to pay brokerage and regulatory fees.

2) Applying for an IPO is simple, easy and hassle-free.

3) By applying for an IPO, investors get the opportunity to participate in profitable and high-
growth companies.

4) IPO offers the chance to earn high profits quickly in the case of a premium listing or allows
wealth creation in case of long-term investment.

5) Strict IPO norms make IPO markets more professional and secure.

6) Greater access to information and company news through public filings.

7) Investment in innovation by supporting companies developing new technologies.

8) Psychological satisfaction of owning a piece of a successful and impactful company.

9) By investing early in a promising company (while company brings IPO), investors can
potentially benefit from its growth over a significant period.

10) The Red Herring Prospectus (RHP) issued for the IPO contains all the necessary
information about the company to help investors make informed decisions.

11) In case of a successful allotment, investors will become shareholders of the company.
Shareholders can participate in certain corporate actions and elect members of the Board of
Directors through voting rights.

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1.4 IPO Disadvantages for Investors.

1) Investors do not have any background information about the company doing the IPO
as it is a new company going public for the first time. An investor has to go through the
entire RHP to know all the details of the company.
2) An investor may suffer losses in a discount listing if it is done with the goal of a quick
return (listing profit).
3) Stock prices can swing wildly after the IPO, leading to potential losses if you sell at the
wrong time.
4) Public companies face constant pressure to meet short-term financial goals, which
might not always align with long-term strategic plans.
5) Public companies face increased scrutiny and potential legal liabilities that can impact
stock price.
6) Short-term investors might buy IPO shares just to sell them quickly for a profit, leading
to increased volatility in the stock price. This can harm long-term investors who are
looking to hold onto their shares for a longer period.
7) After an IPO, a company's management might shift its focus from long-term strategic
planning to meeting short-term investor expectations. This can negatively impact the
company's future growth prospectus.
8) There is no guaranteed allotment in an IPO in case of oversubscription.

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1.5 IPO Types and Methods.

What are the types of IPO?

An IPO is classified as either a Mainline IPO or an SME IPO based on the platform used by
the issuer company for their IPO.

1) Mainline IPO (Mainboard IPO)

A Mainline IPO, also known as Mainboard IPO, is a regular IPO issued by large companies
that have an extensive track record and meet the IPO eligibility criteria set by SEBI.The
minimum paid-up capital of a Mainboard IPO after the issue should be Rs 10 crores.

2) SME IPO

A SME IPO is an initial public offering of small and medium enterprises (SME) or start-
ups. The post-issue paid-up capital of SME IPO should not exceed Rs 25 crores.

What are method of IPO?

IPO pricing is one of the critical steps of the IPO process, which must occur before the IPO
launch date. If the IPO price is too high, investors may be reluctant to invest in the company
as it may result in losses. If the IPO is priced too low, it may cause investors to doubt the
performance of the IPO because good things do not come at a low price. Therefore, the right
pricing for an IPO is very important for a fair listing.

The IPO price is determined by one of the two IPO methods - Book building or Fixed price .
The issuing company may use either method, depending on its preference. (Unless the
mainboard-eligible company is unable to meet the profitability norms prescribed by SEBI. In
such a case, a company will have to go the QIB route, where it is mandatory for the issue to
follow the book-building route.

1) Book Building Method:

In the book-building method of issuance, the IPO price is not fixed in advance. The issuing
company announces an IPO price range (e.g., Rs 75 to Rs 80 per share) within which bids for
the IPO are accepted. The IPO price is determined at the end of the bidding period based on
the demand for the shares at various price levels.

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Book Building Features:

 The IPO is launched without setting the final price of the issue.
 The issuer announces a price range for the issue. According to the regulations, the price
range should be announced at least two business days before the opening of the issue
for the subscription.
 The issuer can revise the price range for the offering during the life of the offering.
 A book-building issue must be kept open for 3-7 business days , although the period
may be extended by three days if the price range is revised.

Book Building Advantages:

The book-building method offers the following advantages to the company:

i. An efficient mechanism for price discovery.

ii. The company can assess its credibility based on the demand for the issue.
iii. A realistic approach to pricing that is based on demand for the shares and not set by
management

Book Building Disadvantages:

Book building has certain limitations, which are listed below:

i. Costly compared to a fixed issue IPO.

ii. Lengthy process for issuing shares as the price has to be calculated at the end of the
bidding process.
iii. Suitable for large issuance volumes.

Book Building Types:

An issuing company may conduct the IPO in one of the following ways:

1) 100% Book Built Offer, in this type of offering, the entire 100% of the issue may be
offered through the book-building process. 75% Book Building. In this type of offering,
75% of the net offering can be offer through the book-building process and 25% can be
offered at the threshold determined through the book-building process.

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2) Fixed Price Issue Method:
In a fixed price issue, the offer price is fixed (e.g. Rs 75 per share) that is decided in
advance before the IPO opens for the subscription. The SME companies prefer a fixed
price issue over the book-building method due to the smaller issue size.
Fixed Price Issue Features:
Unlike a book-built issue, a fixed-price issue must be applied at the price set by the
issuing company. Following features of a fixed-price IPO:
 The fixed-price IPO prospectus contains all the details about the IPO price and
the basis for setting it.
 The issuer must register the fixed-price IPO prospectus with the Registrar of
Companies before the issue is opened for subscription.
 At least 50% of the net offering of securities should be made available to retail
investors. A fixed-price offering should be held open for 3-10 business days.

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1.6 IPO Process.

A company must follow the IPO procedures set by the exchange(s) ( NSE and BSE) on
which the company wishes to list its shares after the IPO. The IPO procedure in India
is as follows:

1. Merchant Banker (Lead Manager) Appointment.

The company appoints a Merchant Banker (Lead Manager) to assist the issuer
throughout the IPO process, starting from due diligence to post-listing support. They
orchestrate the entire IPO process and coordinate with all parties involved in the IPO
from start to end.
The Issuer Company and the merchant banker conduct due diligence and prepare the
draft prospectus (DRHP).
A merchant banker is a SEBI-registered financial institution that assists companies with
financial solutions, such as raising funds, providing advisory services, acting as an
underwriter, and more.
2. DRHP Approval from SEBI.
The DRHP document is submitted to SEBI for review. This process takes between 2 to
4 months. SEBI reviews the information in the DRHP and issues the necessary
approvals.
Note: SME IPOs don't require approval from SEBI. They must be approved by the stock
exchange.
3. IPO Application to Exchanges.

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Merchant bankers then submit the IPO application and DRHP document to the stock
exchanges for approval. The exchange gives the company in principle approval after
verifying the IPO application.
4. Price determination.
The issuer and the merchant bank determine the IPO pricing method: fixed-price issue
or book-building issue.
In a fixed-price offering, the price at which shares are sold and allotted in the fixed-
price offering is announced to investors prior to the IPO.
5. RHP Submission.
A Red Herring Prospectus (RHP) is prepared and filed with the Exchange(s).The RHP
is an updated version of the DRHP document. It contains current information about the
company, i.e., the most recent financial data. It also contains additional information
such as the IPO timeline and pricing details to help investors make an informed
decision.
6. IPO Open for Anchor Investor.
The IPO will be open to anchor investors (if any). An anchor investor is a qualified
institutional buyer (QIB) who applies for an IPO under the anchor investor section and
submits a bid for an amount of at least Rs 10 crore.
The company allots the shares to the anchor investor one day before the issue opens to
the public.
7. IPO Open for Public.
The IPO is opened to the public to place bids for the shares offered in the IPO. An
offering may be open to the public for a minimum of three days and up to ten days.
While the offering is open, investors place bids for the available shares. Submitting bids
does not guarantee shares, as in most cases shares are allotted through a lottery.
IPO applications are submitted to the stock exchange's IPO platform by investors
through a broker or bank. Investors receive a unique IPO application number.
8. IPO Shares Allotment.
Once the public offering is closed, the application data is forwarded by the exchanges
to the IPO registrar, which handles the allotment.
1) The exchange sends the IPO application file to the banks to confirm that the bank
account and the demat account used in the IPO application belong to the same person.
2) The banks confirm whether the account numbers match or not.
3) The registrar rejects all IPO applications that are flagged as "3rd party".
15
4) The registrar draws a lottery or allocates shares on pro-rata basis to applicants as
applicable.
5) The money is withdrawn from the investor's account.
6) The shares are transferred to the investor's account.

9. IPO Shares Listing.

Trading of IPO shares is set up on the stock exchanges in two steps:

Step 1) Pre-open Session.

The pre-opening session is a pricing mechanism for newly listed shares. It is a special
trading session for IPOs on the first day of their listing. The Pre-Open Session lasts 45
minutes (9:00 a.m. to 9:45 a.m.), during which orders can be entered, modified and
cancelled.
From 9:45 a.m. to 9:55 a.m., orders placed during the first 45 minutes are matched, the
opening price of the IPO is determined and a trading confirmation is sent to traders.
Step 2) Commencement of trading.
Normal trading begins at 10 a.m. on the day of listing. At this time, anyone can buy or
sell the shares of the IPO on the market.
10. Post-Listing Documents.
After listing, the issuer must submit documents to the stock exchange, including
invitations to board meetings, annual reports, shareholding samples, audit reports,
corporate governance reports and audit reports.

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1.7 IPO Intermediaries.

IPO intermediaries provide services to help a company initiate and complete the IPO process
and get listed. IPO prospectus documents detail the involvement of all parties in the IPO. These
intermediaries act as a bridge between the company and investors and coordinate with other
intermediaries and parties to ensure a smooth IPO process.

1. Issuer Company.
The issuer of an IPO is a private company that wishes to go public and issue new shares
or sell existing shares to the general public for the first time through an IPO. Generally,
an issuer is a company that offers securities to raise capital.
Three categories of issuers can conduct an initial public offering:
1) Large-scale companies (Mainboard)
2) Small and medium enterprises (SME)
2. Stock Exchanges.
A stock exchange is a company that provides a trading platform where investors can
buy and sell equity shares, bonds, ETFs and other listed securities. Exchanges match
buy and sell orders and provide a legal guarantee for transactions.
The Securities and Exchange Board of India (SEBI) regulates the exchanges. SEBI sets
the rules and regulations for the exchanges and ensures that the exchanges follow them.
BSE and NSE are the two most prominent stock exchanges in India. Check out the list
of stock exchanges in India.

17
 Exchanges appoint stock brokers who work as intermediaries between investors and the
exchange. An investor (individual or institutional) must have an account with a stock
broker to trade on a stock exchange.
3. SEBI, The Market Regulator.
SEBI (Securities and Exchange Board of India) is a regulatory body for the capital
market in India. It is a government organization established by Government of India
4. Merchant Banker (Lead manager).
Merchant bankers are independent financial institutions registered with SEBI. They
assist companies in their IPO from start to end. They are also called Lead Managers or
Book-running Lead Managers (BRLM). An IPO can have one or more lead managers.
A merchant banker assists a company throughout the IPO process, from due diligence
and determining if the company is eligible for an IPO, to applying for an IPO with the
exchanges, to preparing a prospectus, IPO advertising, road shows, marketing, and the
post-listing process.
5. Bankers to an Issue.
The issuer company appoints banker/s to help them manage the funds collected in the
IPO process and transfer them to the Escrow Account, Allotment Account or Refund
account as the case may be. A company can appoint one or more bankers to the issue
that are registered with SEBI.
The responsibilities of the bankers to an Issue include the below:
I. Transfer all the funds collected in the Escrow account.
II. Transfer funds to Allotment account and thereafter to Company account on
receipt of instructions from Lead Manager.
III. Transfer funds to investor account from refund account in case of non-allotment
on receipt of instructions from Registrar and Lead Manager.
IV. Provide updated bank statement for each of the above accounts to Registrar,
Lead Manager and Company at regular frequency or as demanded.
V. Closure of all accounts once there is Nil balance in all the above accounts.
VI. Address investor complaints relating to refunds.
6. Self-Certified Syndicate Banks (SCSB).
Self-Certified Syndicate Banks commonly referred to as SCSBs are the SEBI registered
banks that provide ASBA services to the investors. With ASBA mandatory for IPO
application, investors can apply for an IPO provided they have an account with any of
the bank that offers the facility of ASBA.
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 i. The investors can apply online by using the Netbanking services of the SCSB
or offline by submitting the form to the nearest branch. The main responsibilities
of the SCSB include the following:
ii. Accepting the applications.
iii. Blocking the funds.
iv. Co-ordinating with brokers to confirm the fund blocking that allows broker to
upload bid to exchange.
v. Co-ordinating with the banker of issue for required transfer of funds.
vi. Co-ordinating with depositories and refund and ensure smooth execution of
allotment and refund process.
7. Registrar to the Issue.
The IPO registrar is an entity that assists the issuer in the allotment of IPO shares and
maintains records of the company's shareholding.
Registrar of IPO - The IPO Registrar is responsible for the final allotment of shares in
consultation with the issuer company and the stock exchanges after preparing a list of
valid and invalid IPO applications.
8. IPO Underwriter.
An IPO underwriter is an intermediary that undertakes the risk of purchasing the shares
in case of the IPO under subscription.
IPO underwriting is a process wherein the underwriter and the issuer company get into
an agreement wherein the underwriter agrees to purchase the unsold shares of an IPO
in return for an underwriting commission. The underwriting commission is a fee
charged by the merchant banker in its capacity as underwriter for entering into the
underwriting agreement. It is the fee charged by an investment banker for underwriting
an issue of securities.
9. Market Maker.
Market makers are licensed stockbrokers (NSE list | BSE list) who buy or sell stocks in
the stock market at specific prices to improve liquidity and price discovery. They
provide liquidity in thinly traded stocks. They also monitor the trading in the script and
report to the exchange when irregularities occur.
Market-making is mandatory for SME IPOs and voluntary for main board IPOs. Most
SME stocks face liquidity issues that could make it difficult for investors to exit. Market
makers are here to help. The market makers help with this.

19
 Market makers are paid by the issuing company for the risk they take. The risk includes
a market maker buying shares from a seller in the market and the share price begins to
fall and the market maker not being able to find another buyer because of the price
fluctuation, so the market maker takes a loss on the unsold shares.
Market makers are also allowed to place 2-way orders (buy and sell) simultaneously.
For example, they can place an order in the range of Rs.98-100. They will buy shares
at 98 and sell them at 100.
The lead manager introduces the market makers to the issuing company. They provide
the market makers' details in the DRHP document. The issuer company pays a fee to
the market makers.
10. Depositories.
Depositories are the financial institutions that hold the shares in electronic form. In
India, there are two depositories, NSDL and CDSL.
The issuer company enters into a tripartite agreement with both the depositories
individually and Registrar. Depositories play an important role in smooth execution of
managing of IPO shares.

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1.8 IPO Prospectus.

The IPO prospectus is an offering document that provides potential investors with
details about the company and helps them decide whether or not to invest in the
company.
The IPO prospectus is not an agreement for an initial public offering. It is an invitation
to the public to buy the shares. Investors may or may not invest in an IPO based on their
analysis. The IPO prospectus is prepared by the lead manager and the issuer which
helps investors make an informed decision. It contains all the necessary information
about the company including the financials.

Types of Prospectus:

1) Draft Red Herring Prospectus (DRHP):

The DRHP document is the preliminary prospectus that the issuer submits to initiate
the IPO process. The DRHP is required to be approved by SEBI/stock exchanges based
on where it is a mainboard IPO or SME IPO.

2) Red Herring Prospectus (RHP):

An RHP is filed with SEBI, exchanges and ROC once the IPO application has been
approved. The RHP contains all the latest and updated financial statements. All changes
to the offering structure and corporate information and all other updates and
modifications to the DRHP are included in the RHP. The RHP contains all details
except the price or number of shares of the issue.

3) IPO Final Prospectus:

The IPO prospectus is the final and definitive offering document that contains all
relevant information. This includes the offering price, the number of shares offered and
the size of the net offering.

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1.9 IPO Valuation:

IPO valuation is a process to determine an appropriate valuation of the company to help

determine the correct IPO price.
There are several factors that affect the valuation of a company. The merchant banker must
analyse all of these factors in detail. This data is then submitted to SEBI in the draft IPO
prospectus, which explains the basis for determining the price. SEBI thoroughly evaluates and
analyses the data to ensure that investors' money is in safe hands.
It is very important to price the stock correctly because an overvalued stock may not attract
many investors and an undervalued stock may create doubts amongst investors.
IPO valuation in India is done by qualified merchant bankers. The merchant banker reviews
and analysis every little detail of the company. This includes internal business metrics, key
performance indicators, previous financings, market situation and data from other companies.
These help the merchant banker decide on the best valuation approach for the company. The
merchant banker is responsible for having the data reviewed and for disclosing all information
considered in pricing the IPO.
Factors impacting IPO valuation:

o Demand:
Generally higher the demand for a stock, the higher is its price. This is because investors
are willing to pay a heavy price if they really want to be invested in the company.
o Past Financial Performance:
A company's financial track record plays an important role in its valuation. Quantitative
financial factors that form the basis for pricing an IPO include the company's assets,
liabilities, revenue, earning per share, price to earning ratio, net worth, net asset value
per share, etc.
o Peer Comparison:
The valuation of an IPO company is usually aligned with companies in the same
industry. Therefore, an issuing company reviews the valuations and current market
price of stocks in the same industry. If the valuations differ too much, investors tend to
hesitate to invest in the company.
o Potential Growth Rate:
Investors are attracted to companies that have good future prospects. For example, a
company that intends to raise funds for business growth may be valued higher than a
company whose goal is to pay down debt.
o IPO Timing and Market Trend:
Market trends and timing also affect a company's valuation. If the market is in a
downtrend, a higher valuation will not attract investors.
o Products and Services:
The products offered by the company can also affect the company's pricing. If a
company offers products and services that improve the lives of an average person or
are considered under necessities, the IPO may attract a higher price.

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IPO Valuation Process:
Given the wide range of factors, IPO valuation is an extremely complex process
performed by trained merchant bankers. Merchant bankers have the expertise and
knowledge to understand and analyse all factors impacting the IPO valuation.

Gather all previous data and details of the company, including its financials.
i. Analyse the data.
ii. Get the data audited.
iii. Map the competitive valuations.
iv. Analyse all factors that affect the valuation.
v. Adopt one or more IPO valuation techniques to derive the valuation.
vi. Include the information in the draft document.
vii. Submit the data to SEBI for analysis and approval.
Valuation of IPO in India:
IPO valuation in India is done by qualified merchant bankers. The merchant banker
reviews and analyses every little detail of the company. This includes internal business
metrics, key performance indicators, previous financings, market situation and data
from other companies. These help the merchant banker decide on the best valuation
approach for the company. The merchant banker is responsible for having the data
reviewed and for disclosing all information considered in pricing the IPO in the offering
documents under the section titled Basis for Offer Price/Issue Price.
IPO Pricing and Valuation:
Often the terms IPO pricing and IPO valuation are used interchangeably. There is a
difference between these two terms. IPO valuation is one of the factors that form the
basis for pricing an IPO. IPO valuation is a process that helps determine the IPO price
as seen in the IPO pricing chapter.

23
1.10 IPO Application Process.
The IPO application process can be carried out through brokers, exchanges, and self-certified
syndicate banks (SCSBs) using UPI and ASBA facilities.
Investors may submit only one IPO application per PAN number. If more than one application
is submitted under the same PAN number, all applications under that PAN number will be
rejected. This rule may or may not apply to IPO applications in the employee and shareholder
categories.
IPO Application Procedure:
1. Login to online IPO application offered by a broker or bank.
2. Select the issuing company.
3. Fill in the data in the IPO application form.
4. Submit the form.
5. Complete the payment either through UPI, ASBA Net Banking or by entering the
account details in the physical form.
IPO Application Categories:
Investor Categories IPO Application Limit
Retail Individual Investor (RII) Up to Rs 2 lakhs.
Non-Institutional Investor (NII) Small NII: More than Rs 2 lakhs to Rs 10 lakhs.
Big NII: More than Rs 10 lakhs.
Qualified Institutional Buyer (QIB) Anchor Investors: More than Rs 10 crores.
No specified limit specified for other QIB.
Employee As defined in RHP document.
Shareholders As defined in RHP document.

IPO Application Time:

An IPO remains open for a minimum of 3 days and a maximum of 10 days. Stock exchanges
accept subscription applications between 10:00 a.m. and 5:00 p.m. on days when the IPO is
open for subscription, except on stock exchange holidays.
Most banks and stock brokers allow investors to submit IPO application any time (24 hours)
when the IPO is open for bidding. Although the application may be submitted at any time, it
will not be forwarded to the exchange until 10:00 a.m. the next day.
IPO Application Charges:
The bank or stockbroker doesn't charge investors for participating in an IPO. They receive a
commission from the issuing company for processing the IPO application.
The stockbroker also charges a brokerage fee if the customer sells the IPO shares allotted to
him. Some stock brokers, such as Zerodha offer stock delivery trading with no brokerage fees,
so investing in an IPO is completely free.

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IPO Application Number:
The IPO application number is a unique reference number assigned to each transaction of the
IPO application. The IPO application number helps investors verify the status of their
application and the allotment status
For online bids, the IPO application number is generated as soon as the application is submitted
to the exchange by the bank/broker (between 10:00 am and 5:00 pm).
For paper forms submitted, the IPO application number is pre-printed as Bid cum Application
form No. on the IPO application form.
IPO Application Rules:
1. Only one application per PAN is allowed.
2. Payment for an IPO should be made from the investor's own bank account to avoid
rejection. In some cases, individuals receive allotment for third-party IPO applications
also.
3.
4. Applications are not processed and considered valid by the exchanges until the amount
is debited or a lien is placed.
5. The UPI facility is only available to retail investors.
6. The ASBA Facility is available to all types of investors, i.e., retail investors, non-
institutional investors, and qualified institutional buyers who are not anchor investors.
7. Only retail investors can apply for an IPO at a cut-off price.
IPO Application Status:
If the bid was submitted online through the broker, you can check the IPO bid status through
the broker's website/mobile app in their IPO section. There is a tab there that reflects the status
of your application.
The status of your application can be either of the following:

o IPO application under process.

o IPO application executed.
o UPI Mandate request pending/approved.
o Payment received by sponsored bank.
o Bid submitted.

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1.11 ASBA.

ASBA is a method of applying for shares in an IPO. ASBA gives the Self-Certified Syndicate
Bank (SCSB) permission to block funds in the applicant's bank account in exchange for
subscribing to the offering.

When an investor applies in an IPO through ASBA, his/her application funds are blocked in
the bank account. If the investor receives the allotment, the funds will be deducted from the
account. If there is no allotment of shares, the money will be released from the investor's bank
account on the day of the final allotment.

The ASBA route is the easiest, fastest and most convenient way to apply or bid for an IPO.
One of the biggest advantages to investors is that they continue to receive interest on the
blocked amount.

ASBA Features:

 Investors can apply for an IPO under ASBA either through online or offline mode.
 The application amount is not debited at the time of application.
 The SCSB simply blocks the respective amount from the investor's bank account.

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  Investors continue to receive interest on the blocked amount until it is debited in case
of an allotment. In case of a non-allotment/partial allotment, the lien on the amount will
be lifted after the allotment is announced. Unlike UPI, no mandate approval is required.

ASBA Charges:

There are no charges to apply using the ASBA facility.

ASBA IPO Timing:

 ASBA IPO apply time: 10 AM on the issue opening date.

 ASBA cut off time: 5 PM on the issue closing date (many banks allow only until 2 to 3
PM on the last day).

ASBA IPO Limit

 Investors can submit up to 3 bids for an IPO.

 Only one application can be submitted from a bank account.
 QIBs and NIIs cannot withdraw their bids once submitted.
 QIBs and NIIs cannot submit their bids at the cut-off price.
 Many banks have their own cut-off times for ASBA IPO applications on the last
day.

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.1.12 UPI IPO APPLICATION.
Investors can apply for an IPO via UPI either online or offline. The online UPI IPO application
process is much simpler, easier and convenient compared to the offline IPO application using
UPI. An UPI ID is mandatory to apply for an IPO using the UPI route. In the offline IPO
application, investors need to get the IPO application form, fill all the details manually and then
submit the form. On the other hand, an online IPO application is just a few clicks.

On November 1, 2018, SEBI announced the launch of the Unified Payment Interface (UPI) as
a new payment method for IPOs. The UPI based IPO application process is very convenient
and simple. It only takes a few minutes to pay for an IPO application via UPI and submit IPO
bids online.
UPI mechanism for IPO application:
UPI IPO means applying for an IPO through the UPI payment gateway. UPI stands for Unified
Payments Interface. It is an instant payment system developed by the National Payment
Corporation of India (NPCI) (an RBI-regulated entity) through which investors can transfer
money from one bank to another instantly or in real time. It is similar to IMPS (Immediate
Payment Service) fund transfer. To apply for an IPO, investors should have a UPI ID.
NPCI has partnered with several banks and digital wallet platforms that allow IPO applications
through UPI. Some of the UPI handles are only supported on Android, while others work on
both Android and iOS systems. For details, see the list of IPO UPI Apps.
IPO UPI ID:
The IPO application through UPI requires individual investors to have a UPI ID.
A UPI ID is a user's unique virtual payment address (VPA), similar to an email address. The
UPI ID for IPO application can be created by registering with one of the UPI-enabled mobile
applications (app) using the investor's bank account information.
The UPI ID for the IPO application has the format xxxxxx@bank/payment application. The
first part of the UPI ID is either the user's cell phone number, a partial email ID or the first
name. The second part is the name of the bank or the name of the payment application.
UPI IPO Limit:
 The UPI payment method to apply for an IPO is available only for individual investors.

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  The IPO UPI limit has been raised to Rs.5 lakhs from the earlier limit of Rs.2 lakhs.
However, the limit for retail individual investors continues to remain at Rs.2 lakhs.
 Individuals who wish to apply under the Non-institutional category for an IPO amount
up to Rs.5 lakhs can apply using UPI.
UPI IPO Time:
Once investors submit an IPO application, the application is not considered complete until the
UPI mandate request is approved. According to recent changes in the IPO process, only those
bids are considered valid and uploaded to the exchange where funds are blocked. Therefore, it
is important for investors to approve the mandate requests within the cut-off period of IPO UPI
to avoid rejection of their bids.
The cut off time for the I
PO UPI payment is 5 p.m. on the issue closure date. However, brokers usually keep a buffer of
half an hour or more to avoid last minute tech glitches. Investors must check with their broker
for the last time to complete the IPO UPI payment. The above IPO UPI mandate accept time
is also applicable for modification or cancellation of the bid.
IPO UPI Rules:
 The UPI payment gateway is available only for individual investors.
 Investors can apply for an IPO up to Rs. 5 lakhs using UPI payment mode.
 An UPI ID is mandatory to use UPI gateway.
 UPI IPO approval of mandate request is a must to complete the IPO application process.
IPO UPI Mandate:
It is necessary to approve the IPO UPI mandate request when investors apply for an IPO
through UPI. If the mandate request is not approved within the cut-off, the investor's bid is not
considered valid and does not get uploaded to the exchange.
 IPO UPI Mandate expired: Each UPI mandate request has a validity period as set by
the applicant/bank. Investors can check the IPO UPI mandate validity in the UPI app
under the "Mandate" section. If the mandate request has expired, investors will need to
re-initiate the transaction. According to the new rules of UPI IPO, the UPI mandate
request should be approved before 5 pm of the issue closure date.
 IPO UPI request not received: If the IPO UPI mandate request is not received within an
hour, delete the earlier IPO application and submit a new one.
 IPO UPI mandate failed: Sometimes, the IPO UPI payment gets failed or the
authorisation gets failed due to technical issues at the bank's end or with the UPI app.
In such cases, cancel the original request and submit the new IPO application request.
A. IPO UPI mandate revoked: If an applicant wishes to withdraw or cancel their offer after
the application has been submitted, they may do so by cancelling/withdrawing the offer
and then cancelling the mandate application. An applicant may revoke the mandate by
contacting the intermediary through which the offer was submitted. Once the mandate
request is revoked, the money will be released from the account immediately.
UPI IPO Application Status:

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The applicant can check the status of his/her UPI IPO application through the broker/bank
through which the application was submitted. If the application was submitted offline, you can
check and verify the bids on the website of the Stock Exchange (NSE/BSE) using the bid
number provided on the IPO application form.
Steps to check the IPO UPI confirmation status for bids submitted online:
A. Login to the broker platform.
B. Go to the IPO/Investment section from where you submitted the bid.
C. Go to the Bid history or the click on the applied IPO.
D. Investors will see the status of their application as any of the below:
 IPO UPI confirmation status pending.
 Bid submitted successfully.
 UPI Mandate Request pending approval/ IPO UPI mandate pending.
 Bid rejected.

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1.13 IPO Application Modification.
Once an has applied for an IPO, there may be scenarios when the investor may want to change
the bid quantity or bid price to increase their chances of allotment based on the IPO demand.
Sometimes, it may also happen so that the investor may think that the IPO is not right and
would like to cancel and withdraw their bid.
However, there are certain rules and restrictions for cancellation and modification of the IPO.
Rules for IPO application cancellation and modification requests:
 Only retail investors are allowed to cancel IPO bid.
 QIBs and NIIs cannot cancel their bids once placed.
 Retail investors may modify their bids to reduce or increase the size of their
application.
 QIBs and NIIs cannot reduce the size of their bid. They can only increase their bid.
 Modifications and cancellations can be made at any time while the IPO is open for
subscription.
 Post issue modification period in IPO - No post-issuance changes are allowed in an
IPO. Bid changes are only allowed during the bid submission window.
Rules based on investor category:
The below table summarizes the rules for IPO cancellation and modification:

IPO Investor
IPO Bid Cancellation Rule IPO Bid Modification Rule
Category

Retail Investor Bid can be cancelled. Bid size can be increased or decreased.

Can only increase the bid quantity or

QIB Bid cannot be cancelled.
price but cannot lower it.

Can only increase the bid quantity or

NII Bid cannot be cancelled.
price but cannot lower it.

Bid can be cancelled if the bid Bid size can be increased or decreased if
Employee
size is lower than Rs 2 lakhs. the bid size is lower than Rs 2 lakhs.

Bid can be cancelled if the bid Bid size can be increased or decreased if
Shareholders
size is lower than Rs 2 lakhs. the bid size is lower than Rs 2 lakhs.

1. IPO Application Cancellation

Investors can cancel/delete the IPO application online/offline. Online cancellation is much
faster than offline cancellation. However, the option to cancel/withdraw/delete the IPO request
is available only after the order has been submitted to the Exchange.
Steps for online withdrawal of IPO application:

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 1. Log in to the broker platform/Net banking from where investors have applied
for the IPO.
2. Go to the IPO tab.
3. Open the IPO applied for that needs to be cancelled.
4. Click on Cancel/Delete/Withdraw Bid/Application.
5. Confirm the transaction.
6. Revoke the UPI mandate (if required).

Steps for offline IPO order cancellation:

1. Prepare a cancellation letter with below details:

o IPO application No.
o Applicant Name and Application Details.
o PAN No.
2. Sign the letter.
3. Submit the letter to the intermediary through whom the application was submitted.

IPO Application Cancellation Time:

Investors can withdraw from an IPO anytime while the IPO is open for subscription. The
exchange IPO bidding window is open from 10 AM of the issue open date to 5 PM of the issue
closure date. Investors can cancel an IPO anytime during this bidding window.
Some brokers may have set a specific time for cancellation. On the last day, many banks and
brokers have a specific deadline for submitting cancellation requests to avoid last-minute
problems. Therefore, it is important for investors to check with their broker/bank in advance
for the exact deadlines for canceling the IPO application.
IPO withdrawal time: 10 AM of IPO open date to 5 PM of IPO closure date.
Investors can cancel an IPO at any time during this window.
2. IPO Application Modification:
An investor has the option to amend their IPO bid if they wish to change the bid amount or
quantity. Retail investors may adjust their bids by either upsizing or downsizing their bids.
QIBs and NIIs are allowed only to upsize their bids i.e. they can only change to increase the
bid quantity or bid price.
Like cancellation, investors can modify the IPO requests anytime while the IPO is open for
subscription. Though the IPO window is open from 10 AM of the issue open date to 5 PM of
issue close date, the investors should check with their broker/ bank for any specific timings for
modification request submissions; especially for the last day as not all banks/brokers allow
modification till 5 PM.
You can modify IPO bids either online or offline. The option to modify online is visible once
the bid is submitted to exchange.
Steps to modify IPO bid online:

1. Login to the broker platform or Net banking account.

2. Go to the IPO section.
3. Select the applied IPO.
4. Click on Modify Bid.
5. Modify the Bid quantity or bid price.
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 6. Click on Confirm/Update.
7. Approve the revised UPI mandate. In case of ASBA application, the additional amount
gets blocked in case of upward revision. In case of a downward revision, the amount
gets unblocked post allotment.

Steps to modify IPO bid offline:

1. Procure the IPO modification/revision form from the nearest broker/bank or download
it from the exchange website.
2. Fill the form with personal details like Name, Address, Contact Details, Email, PAN,
and DP details.
3. Enter the old bid data and the updated bid data.
4. Enter the ASBA account number/ UPI ID.
5. Sign the form.
6. Submit the form to the intermediary through whom the original application was made.

IPO Modification Form:

Investors can download the IPO revision form from the BSE or NSE website.
The NSE offers investors the option of downloading either a blank revision form or a pre-filled
form. For more details on the IPO application form, please refer to the IPO application process
chapter.
Sample IPO Modification or Revision Form:

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3. IPO Application Rejection Reasons:
While submitting an IPO application, investors must follow certain points for the application
to be valid, failing which the application may get rejected. There are several reasons why an
IPO application may be rejected. The rejection can be on account of error by the applicant,
bank or another intermediary, or due to technical problems.
The following are some of the most common reasons for the rejection of an IPO application:

 Application by an incompetent applicant under the terms and conditions of the company
or under the Indian Contract Act 1872.
 The bid price is outside the price band.
 Incorrect ASBA account number / UPI ID / UPI handle.

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  Application from another person’s bank account.
 Incorrect PAN or DP details.
 Mismatch in applicant name, name on DP account, and bank account or PAN.
 Bidding for an amount lower than the minimum bid size.
 Multiple applications using the same PAN in the same investor category.
 Bidding at cut-off price by NII or QIB.
 Insufficient funds in the bank account.
 Errors on part of the intermediaries.

IPO application rejected but amount blocked

Investors receive the blocked amount if their request is rejected after the mandate date.Some
banks may not refund until the mandate expires. In such cases, investors can ask the bank or
intermediary whether the funds will be released after the allotment date.
1. UPI handle:
UPI handle is the bank name or the payment application name that processes the UPI payment.
It is the virtual payment address used for making payment via the UPI gateway.

2. DP ID:
DP ID stands for "Depository Participant Identification". A Depository Participant, such as a
bank, financial institution or brokerage firm, is assigned a DP ID number by NSDL and CDSL.
DP ID varies depending on the depository institution where you have your account. The
investor's demat account number is composed of the customer number ID and the Depository
participant number DP ID.

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1.14 IPO SUBSCRIPTION.
IPO subscription indicates demand for an IPO. The IPO subscription data shows the number
of shares applied for by all investors during the IPO subscription period. This data is tracked
across all investor categories and is available in real time.
The IPO subscription period is 3-10 business days, depending on the type of IPO. The live IPO
subscription status is available on chittorgarh.com, BSE and NSE websites.
IPO subscription reflects the total number of public subscriptions in an IPO. It shows the
demand for an IPO in terms of the number of shares based on applications received. The IPO
subscription number changes throughout the IPO window and is finalized after the IPO bidding
period closes.
How IPO subscription data helps investors?
1. Check the total demand for the IPO shares. Higher demand may indicate a good IPO
and vice versa.
2. This is one of the most important factors in making an IPO investment decision. It helps
to build an IPO investment strategy.
3. Live IPO subscription data help investors choose the reserved category (i.e. retail, NII,
employee, shareholder) in an IPO to maximise profits.
4. Plays a role in the development of the IPO grey market price.
5. Subscription data helps investors select an IPO where there is a higher chance of
allocation. The higher the subscription, the lower the chance of allotment.
IPO Subscription Process:
The IPO subscription process is a way for investors to place bids for IPO shares. The following
parties are involved in the IPO bidding process:
 Investors (Individual investors, QIB)
 Brokers/banks (e.g. Zerodha, ICICI Bank)
 Stock Exchanges (BSE, NSE)
 Registrar or RTA (e.g. Link Intime,Cameo)
Steps of IPO Bidding Process:
The IPO bid is made online on the platform provided by the stock exchanges (i.e. BSE, NSE)
via stock broker or banks. The subscription process for the IPO begins on the opening day of
the IPO and continues until the closing day of the IPO. While an investor can submit the online
offer for shares at any time (24 hours), the broker/bank send it to the Exchange between 10:00
am and 05:00 pm. The following are the key steps involved in making a bid for IPO share offer:
1. Investors submit the bid for the IPO shares to a stock broker or bank.
2. The broker/bank consolidates all applications received and forwards them to the stock
exchange on a regular basis.
3. The IPO bidding platform of the exchange collects the applications and publishes the
demand (subscription) in real time between 10 am and 5 pm.
4. Once the issue is closed for subscription, the Exchange forwards this data to the
registrar for the issue (RTA).

36
 5. The IPO Registrar allocates shares based on SEBI regulations and the information in
the RHP document.
6. The registrar publishes the allotment status on its website and sends an allotment email.
7. The registrar instructs banks to release unused blocked funds.
8. The allocated IPO shares are transferred to investors one day before the IPO share is
listed at stock exchange.
IPO Subscription Timing:
The investor may submit the bid for the IPO shares to the stockbroker or the bank at any time
as long as the public issue is open for bidding. The IPO bidding platform of the stock exchange
is open from 10 am to 5 pm. Even if the bank/broker accepts the bids for 24 hours, the bids will
only be submitted to the stock exchanges between 10 a.m. on the opening day of the IPO and
5 p.m. on the closing day of the IPO.
Time to submit the bid for IPO shares:
Investor to broker/bank: Anytime time while IPO is open (24 hours). Bank to Stock Exchanges
between 10 AM of the IPO open date to 5 PM of the IPO close date.
IPO Subscription Charges:
The service of placing bids for IPO shares is offered free of charge by stockbrokers and banks.
When shares are allotted in an IPO, the broker may charge a brokerage fee and taxes when the
investor sells the shares on the exchange.
Stock brokers/banks receive a small amount from the issuing company for processing the IPO
application.
IPO Bidding Category:
IPO investors are classified in three broad categories. Depending on the type of investor and
the amount of investment, the investor can participate in an IPO through one of the below
categories.
 Retail individual investors (RII)
 Non-institutional investors (NII)
 Qualified institutional investors (QIB)
 Employee
 Shareholders
 Anchor Investors
IPO Subscription Types:
IPO subscription times indicate the demand for an IPO. IPO subscription type is based on the
number of subscriptions to an IPO. If the IPO subscription time is greater than 1, the issue is
considered oversubscribed; If it is less than 1, the is undersubscribed.

A. Oversubscribed IPO:

37
 An IPO in which the number of bids received in the form of shares is greater than the
size of the issue is called oversubscribed. In other words, the demand for shares is
greater than the supply of shares.

B. Undersubscribed IPO:
An undersubscribed IPO is an IPO in which the number of shares applied is less than
the number of shares offered. An under subscription is when the demand is less than
the supply.
IPO Subscription and listing price:
Subscription numbers for IPO shares help predict the share price once trading begins on
exchanges after the IPO shares are listed. An oversubscribed IPO indicates higher demand for
IPO shares, leading to a listing at a premium. However, in addition to demand, there are many
other factors that influence the share price:
 Market Sentiments.
 Grey Market Premium.
 Future Prospects of the company.
 Promoter offload of shares.
 Change in policy/economic factors related to the industry.
 IPO Subscription and GMP.
IPO Subscription and GMP:
Some IPO stocks are traded over-the-counter (unofficially) before they get listed on the stock
exchanges. The premium at which they trade is called the grey market premium (GMP). The
GMP indicates the premium over the issue price that investors are willing to pay for the IPO
shares.

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1.15 IPO Allotment.
IPO allotment is the allocation or distribution of shares to the investors in an IPO. The
allocation is determined by the Registrar in consultation with the Exchange. IPO allotment
announcement is done by the registrar 3-4 days after the IPO bidding period gets over. Investor
could visit registrar's website to check the allotment status.
IPO allotment depends on the demand of IPO shares. If the IPO is oversubscribed (received
more bids then the shares offered), not all investors may receive an allocation. If the IPO is not
fully subscribed, all investors will receive allotment.
IPO Allotment Rules:
 The IPO allotment is made by the Registrar in consultation with the designated stock
exchange.
 The IPO allotment depends on the number of shares offered and the bids received from
investor in the particular investor category (i.e. Retail, NII, QIB).
 The rules for IPO allotment vary by investor category (i.e. Retail, NII, QIB).
 Only valid applications are considered for allocation. Invalid applications (i.e.
application with wrong Demat account number, multiple applications with same PAN,
etc) are rejected.
 Only the applications received at or above the cut-off price are considered for
allocation.
 An under-subscription in one category (other than the QIB category) may be offset with
oversubscription from another category in consultation with the Lead Manager, the
Registrar, the Exchange and the issuer.
 Unsubscribed shares in the QIB category are not available for subscription in other
categories.
 The registrar prepares and publish the Basis of Allotment document that provides detail
about the allotment.

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1.16 Unblocking Funds of IPO.
When an investor applies for an IPO, the funds in the bank account are blocked or a lien is
marked in the bank account. On the day of the allotment, the funds required for the allotment
of shares are debited and the balance is released.
The release of funds in an IPO is the process by which some or all of the amount blocked for
the IPO application is released, depending on the allocation status. Once the funds are released,
the investor can use the amount as desired.
As per the rule, IPO refunds must be initiated within 4 working days of the close of the public
offer. If the money is not refunded/released within the specified timeframe, the issuer must pay
a penalty. The issuer has to return the money to the bidders with interest.
The issuing company is obliged to release the blocked money in the following cases:

A. Non-Allotment:
If an investor does not receive an allotment or receives only partial allotment, the
registrar or the bank must unblock all or the partial amount.
B. Non-receipt of minimum subscription:
If the issuer does not receive the minimum subscription of 90% of the net offering, the
issuer must refund the money/release the subscription amount.
C. Failure to obtain listing approval:
In some cases, the issuing company does not receive permission to trade from the
specified stock exchanges where the securities are to be listed. In such cases, the issuer
has to refund/release the IPO application money to the investors.
D. Failure to allot to minimum number of Allottees:
If the prospective allottees of the company is less than 1,000, the issuer must
refund/unblock the IPO subscription money to the bidders.

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1.17 IPO LISTING.
IPO listing is a process by which the shares of a private company are listed on the stock
exchange so that they can be publicly traded. After listing, any stock market investor can buy
or sell these shares through a stock broker.

IPO listing is the final step in the IPO process. It occurs after the IPO shares have been allocated
and credited to the investor's demat account. The issuing company decides on which stock
exchange to list the IPO shares. A mainboard IPO can be listed on one or both stock exchanges,
i.e., the NSE and the BSE, while a SME IPO can be listed on only one stock exchange.
An IPO is an offering on the primary market. However, once the issuing company's shares are
listed on the exchange(s), they become part of the secondary market.
IPO Listing Date:
IPO Listing Date is the date on which a company's shares are admitted to trading on a
recognized stock exchange. It is the first day on which investors can buy/sell shares of that
company on the stock exchanges.
IPO Listing Process in India:
The IPO listing is a process through which shares of a company get onboard on stock exchanges
for public trading. Listing occurs toward the end of the IPO process.
An issuing company must go through several steps (known as IPO process) before it is listed
on the stock exchange.
1. The issuing company appoints one or more merchant bankers (lead managers).
2. Merchant bankers evaluate IPO listing eligibility criteria and IPO listing requirements.

41
 3. Merchant bankers obtain in-principle approval from the stock exchanges for an IPO.
4. Merchant bankers prepare and submit draft offering documents to SEBI/Exchanges.
SEBI/Exchanges approve them.
5. Merchant bankers hire other intermediaries.
6. Company does publicity for the initial public offering through public relations(PR) and
advertising agencies.
7. Launch of IPO for bidding by investors.
8. Completion of allotment in consultation with exchange(s).
9. Initiation of procedure for refund and credit of shares to demat accounts of allottees.
10. Listing of the shares on the selected stock exchange platform(s).
IPO Listing Day Circuit Limit:
Stock exchanges set a circuit limit (upper and lower limits) for IPO stocks on the day of listing
to control sudden price movements. The circuit limit is a percentage of the listing price set by
the exchange in the pre-opening session. Below are the rules for setting a price limit for IPO
shares:
1) For issue size up to Rs 250 crores, the price band is 5% +/-
2) For issue size more than Rs 250 crores, the price band is 20% +/-

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1.18 IPO Grey Market Premium.
A higher GMP indicates higher demand for IPO shares, which leads to higher IPO subscription.
Conversely, a lower GMP indicates low demand, leading to lower IPO subscription.
The premium price which an investor is willing to pay over and above the IPO issue price in
the grey market is known as the Grey Market Premium. Kostak Rate or Subject to Sauda are
the price at which IPO applications/lots are sold in Grey Market.
In this chapter, we will understand the basic concept of grey market trading and basic terms
and strategies used in its dealing.
IPO Grey Market Premium Meaning:
Grey Market Premium, commonly known as GMP, is the difference between the price at which
IPO shares are traded in the grey market and the IPO issue price. For example, if the IPO issue
price is Rs 850 and an investor is willing to pay an additional Rs 300 to get the IPO share. This
means that the GMP of the IPO is Rs 300 per share.
IPO GMP helps predict listing prices. In the example above, investors anticipate a listing price
of Rs 1,150 (IPO issue price plus GMP I.e 850 + 300). Although there is no guarantee that the
IPO listing price will exactly match the GMP, the GMP is one of the most important indicators
that generally help investors predict the IPO price and make an investment decision
accordingly.
IPO Grey Market Dealers:
Grey market traders are unauthorized individuals who buy/sell IPO shares on an unofficial
market (over-the-counter market). In certain cases, the grey market dealers are also required to
underwrite a certain % of the IPO.
Since the IPO grey market is an unregulated and unofficial market, you cannot find registered
traders. You need to check with local dealers to see if they operate in the grey market and can
help you find buyers/sellers for your transactions.
Trading in Grey Market:
Trading in the IPO grey market begins with the announcement of the IPO issue price until the
shares are listed on the exchange.
The following are some of the key features of IPO grey market trading:
 Unofficial and unregulated market.
 Trading in the grey market takes place usually via telephone calls.
 Settlement of trade happens only in cash, generally using services.
 Transactions in the grey market are based on mutual trust.
 Round the clock market that works 24*7.
 No regulatory body governs IPO grey market trading.

43
  No official or registered dealers are involved.
 No formal contracts are issued for transactions conducted in the grey market.
Grey market trading usually involves three parties: the buyer, the seller, and the dealer. Grey
market trading takes place either through the trading of IPO shares or IPO applications.
To trade in the grey market, as a very first step, an investor needs to find a grey market dealer.
Since the grey market dealing happens solely on trust, the dealer builds clientele through
references. Thus, an investor can start trading in the grey market when he is referred to a dealer
through a good and reliable contact.
Once an investor finds the dealer, he can place the order over phone call. The trading in the
grey market starts as soon as there is any news of an IPO in the market till the previous day of
listing. The settlement happens on the listing day at 9.45 am. Once the listing takes place, the
grey market window for the said IPO gets closed. There is also a 90 day expiry period for the
grey market trades. If an IPO does not take place within 90 days from the grey market
transaction date, the deal gets cancelled.
On the listing date, the dealers punch in their buy/sell order as per their net delivery position at
equilibrium price.
In case of any default by either of the counterparty, there is nothing anyone can do. Thus,
trading in grey market is risky.
IPO Grey Market Rate Types:
1. IPO Grey Market Premium (GMP):
The IPO GMP price can be positive or negative.
 If the GMP value is positive or very high, this indicates that the IPO may perform better
on listing or bumper listing. Example: If the IPO issue price is Rs 500 and the GMP is
Rs 150, the listing is likely to be at Rs 650 (30% gain).
 If the premium is low or negative, investors may be uncertain whether the stock will be
successful after the listing and expect the listing to be at a discount. Example: If the
IPO issue price is Rs 500 and the GMP is Rs - 200, the listing is expected at Rs 300.
2. Kostak Rate:
The IPO Kostak price is an agreed-upon price at which IPO applications are sold and
purchased, regardless of their allotment status. The Kostak Price is the fixed price paid by the
buyer of the IPO Application to the seller of the IPO Application.
The Kostak rate is the price for the entire IPO application and not per share. It is a price
mutually agreed between the buyer and seller.
3. Subject to Sauda:
Subject to Sauda price is an extension to the IPO Kostak rate. In subject to the buyer of the
application agrees to pay a fixed price against the IPO application only if the seller of the IPO
application receives allotment in the IPO. The subject-to-Sauda rates are generally higher than
the Kostak rates.

44
1.19 MARKETING OF IPO.
The role of marketing, and particularly promotion, in the pricing and trading of Securities is
fairly limited
PRELIMINARY REQUIREMENTS:
The company has to complete all legal requirements, appoint all intermediaries and once they
get SEBI card (approval), the process of marketing of IPO can commence.
TIMING OF IPO:
This the most important factor for the success of IPO. If, secondary market is depressed, if
there is political unrest, if serious international problems are prevailing then it is considered to
be negative factors for timing of IPO's. If these factors are favorable then the Company must
find out about the timing of other prestigious IPO's. Normally in good times many companies
are crowding at the same time
A question of Timing
Timing the issue is critical as it determines the success or failure of an issue to a great extent
During 1995-96, Primary Market boom, there was a period during which there were two to
three issues in a day. This is a dangerous situation.
The ideal time for marketing an issue is a boom in the Secondary
Market, peaceful sociopolitical-economic environment and at least two days gap between two
issues.
Marketing initial public offers (IPO's) through the secondary market:
SEBI approved a proposal of marketing IPO's through the secondary market. It proposes to use
the existing infrastructure of stock exchanges (terminals, brokers and systems), presently being
used for secondary market transactions, for marketing IPO's with a view to get rid of certain
inherent disadvantages faced by issuers and investors like tremendous load on banking and
postal system and huge costs in terms of money and time associated with the issue process.
This system would confirm to all extant statutory requirements

 The investor would approach broker for placing an order for buying shares of
primary issues

 The registrar in consultation with merchant banker and the regional stock
exchange of the issuer will finalize the basis of allotment and intimate the same
to the exchanges who in turn shall inform the brokers

 The brokers will advise the successful allotte to submit the application form and
the amount payable towards the shares.

 The broker will deposit the amount received in a separate escrow account for
the primary market issue.

 The clearing house of the exchange will debit the primary issue account of the
broker and credit the issuer's account,

45
  Subsequently, the certificates would be delivered to the investors or the
depository account of the investor would be credited

 The securities can be listed on the stock exchange from the 15th day from the
closure of the issue as against 45-60days at present.

 As investors will have to part with their funds only on successful allotment, their
funds are not unnecessarily blocked. This would also ensure that refunds are
done away with. The system seeks to reduce the time taken presently for
completion of the issue process, as well as the cost of the issue.
The Effects of Marketing on IPO's:
An investment banker's marketing campaign for an IPO is critical. This campaign, as much as
anything that precedes or follows it, will determine the success or failure of the IPO. The key
is to stimulate investor demand for the stock so that, the demand will exceed the supply.
Through the marketing effort, the underwriter attempts to create an imbalance in the
supply/demand equation for the issue, so that there are more buyers than sellers when the stock
is finally released for sale to the public. effort a company gets to market through an IPO, it
spends a fortune on hype, Paperwork and publicity to create demand. The buzz is stirred up
before the shares are released. So you never get in cheap. And the ones that are cheap are
usually not worth holding five minutes.
To understand the sense of these statements one must understand the relationship between the
marketing of an IPO and its initial returns, and how different parties benefit from this
relationship. A security's value is an increasing function of the number of investors who know
about the security. Investor knowledge leads to greater value consequently, the efforts taken
by an investment banker to promote awareness in a firm can affect the valuation of its stock by
expanding the investor base.
The reputation of an investment banker could expand a firm's investor base at a lower cost than
the firm can, since the promotional efforts of an investment banker on behalf of the firm would
be more creditable. The efforts of an investment banker to promote an IPO through increased
medium coverage will increase retail interest in that stock
The effects of an investment banker's promotional efforts are not only important for explaining
the initial returns of some IPO's, but also for explaining the rankings of investment bankers
Promoting an issue sufficiently to insure a run-up in its carily aftermarket prices attracts further
investor interest catches the interest of analysis and helps to maintain or expand the investor
has of the stock.
If the sole motivation of a road show were to sell IPO's to their regular institutional investors
and if those investors were to hold onto these stocks, then there would be no motivation for an
investment banker to do more than a minimal amount of promotion since there would be no
need to attract retail investors in early aftermarket trading However, research contradict that
these institutional investors do not hold onto the shares allocated to them over the long-term,
instead they sell their allocation, primarily to retail customers in "hot" issues.

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GENERAL PROCEDURE FOR MARKETING OF IPO:
PRESS CONFERENCE.
Promoters and Lead Managers call for press conference in each major investment centre.
Reporters are briefed about the issue. They carry it as news-item in their papers.
INVESTORS CONFERENCE
The prospective investors are called by invitation. The Promoters and
Lead Managers give presentations. They reply to the questions of
the investors to boost the confidence.
ROAD SHOW
This is like the investors conference but normally is done abroad for
marketing ADR GDR Times. It is an expensive process and requires
a lot of legal compliances. The company has to observe the rules of
the concerned country. However, road shows are becoming more and
more popular in India.
NEWSPAPER ADVERTISEMENT
The company releases statutory advertisements in leading newspapers. The company has to
publish abridges prospectus in leading newspapers. It is the responsibility of the
promoters to ensure that the issuing company and their group companies should
not release any commercial advertisement, which may influence the investor's
decision for investment.
PRINTING STATIONERY-PROSPECTUS
The company has to print approved prospectus and provide enough copies to all intermediaries.
If any investor asks for a copy of prospectus it must be provided to him without any fees,
Sufficient quantities should be maintained at the registered office of the company and with
the Lead Managers.
PRINTING APPLICATION FORMS
Sufficient number of application forms must be printed much before the opening of the issue.
Each form must contain abridged prospectus in SEBI approved format. Sometimes different
coloured forms are issued to FI, FII, NRI and general public. It is compulsory to provide
stationery to all underwriters and brokers. They will arrange distribution to their sub-brokers
and other clients. Sometimes, company makes direct dispatch of forms to
prospective investors.
INEFFICIENCIES/BOTTLENECKS IN THE IPO PROCESS
Approval of the Draft Prospectus by SEBI: As per the SEBI guidelines, it takes 3 weeks to
approve a draft prospectus filed by the issuer company, but in reality this procedure takes
around 8-10 weeks. This increases the time line required to come out with an IPO
Market Timing The success of IPO's depends to some extent on the heath of the capital markets
in the country. If a company comes out with an IPO when the sentiment of the investors towards
the stock market is negative, it will get a very lukewarm response. Market volatility is a concern
for companies coming out with IPO'X, Issuer companies are sometimes forced to extend the
bidding period or cut the price at the lower end of the price band as seen recently in the cases

47
of Air Deccan and Prime Focus IPO. Some other companies which were planning to come out
with an IPO are waiting for the sentiments to tam positive on the stock marker before taking a
final call on public issues
According to Prithvi hands of Prime Data, currently there are three categories of IPO's in the
market. They are as follows,

 Firms where is same date for the IPO has been announced
 Firms which have filed draft prospectus with SEM and
 Firme planning for IPO

It is estimated that there are around 4-6 firms where the issue date has been announced to firms
whose prospect has been cleared by SEDI but the date ef IPO has not been announced, around
45 firms whose prospectus has not been cleared and around 130 form planning to come on with
an IPO in the near future.
Market Manipulation:
In some IPO's there are cases of market manipulation is prices of the shares of the company
are rigged by false information, false trading etc, within days of its listing and in many such
cases the shares are even delisted within years resulting in huge losses to the investors. This
erodes the investor's confidence in the primary market

Multiple Allotments of Shares to a Single Investor: As seen in the

recent IPO scams, multiple allotments of shares were made to a single
person in the retail investor category, resulting in a single person
cornering a huge proportion of the allotments reserved for retail
investors. This results in opportunity losses to genuine retail investors
who have applied for the shares under this category.

Opening of Multiple Demat Accounts (Benami Accounts) by a Single Investor: In recent

investigations by SEBI relating to the IPO scams it was found that the Depository
Participants(DP's) have not followed the stringent Know Your Client (KYC) Norms prescribed
by SEBI for opening of DEMAT accounts. This resulted in opening of multiple demat accounts
(benami accounts) by single investors to comer significant portions of IPO's reserved for retail
investors. Some of the discrepancy observed in following the KYC norms are as followed
 No signature across the photograps of the account holders
 Same signature signature for multiple accounts but different addresses
 Same address for multiple demat accounts.
 No proof of identification submit to the DP's
 No proof of address provided by the account holders.
 Photographs of the accountholders stapled and not affixed as per SEBI Guideline.

48
 The Depositories are aware of the possibility of the existence of accounts being
operated without following proper KYC norms, but they have not put in place a system
to detect such accounts and take proper actions.

Inefficiency by Depositories. The depositories are required to have adequate controls,

systems and procedures for monitoring and evaluating its compliances with the
statutory requirements laid down by SEBI and prevent any conduct by DP's which is
detrimental to the interest of the investors or the securities market. In this respect, the
depositories have failed to perform and supervise the operations of the DP's and also
failed to inform SEBI of the deficiencies. Some of the deficiencies are as follows:

 The penalties imposed on the DP's for account opening deficiencies are as low as Rs.
500-1000.

 NSDL system allows accounts to be stored in the databases with no check on the
addresses and other details.

 NSDL has to inspect the records of the DP's on timely intervals but the periodicity of
inspection is not established as per any document

 NSDL does not impose penalties for violation rectified immediately after inspection,
does not improve
 penalties harsher than monetary penalties for the remaining violations and also waives
the penalties imposed if the DP reports rectification of deficiencies. This system creates
no disincentive or deterrent for a DP to comply till NSDL inspects and finds the
violation, since rectification after inspection assures that no penalty of any kind
is imposed on DP. Deficiencies on the part of Bidders to the Issue: There are some
technical reasons for rejection of the bids made by the bidders in the retail and non-
institutional categories. Some of the reasons are as follows:

 The amount paid does not tally with the amount payable for the highest value of equity
shares hid for.

 Age of the first bidder not given.

 Bids by norms or by person's incompetent to contract as per the Indian Contracts Act.

 PAN not Mated the bid is for Rs. 50.000 or more.

 GIR, no stated instead of PAN.

 Proof of PAN not attached to bid cum application form.

 Bids for lower number of equity shares than specified for that category of investors.

 Bids at a price less than lower and of price band.

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 CHAPTER 2
2.Review of literature.
1. Retail Investor’s Investment Decision Criterion to Invest in IPOs - A Study.
Researcher: Dr.L.Balamurugan & P. Naresh Kumar.
ISSN Online: 2644-0490.
ISSN Print: 2644-0504.
Publisher Name: Journal of Economics, Finance and Management Studies.
Initial Public Offering is a kind of public offering by the companies to generate the funds from
primary market for the first time. Individual investors are becoming rational to investment in
Initial Public Offerings (IPOs) to gain from the listing and hold for short or long-term profits.
They use different strategies to gain from the IPOs. The present study examines the retail
investor’s criterion to invest in IPOs. For this purpose, a questionnaire was developed and
administered to 724 sample respondents in Hyderabad and Secunderabad city. The responses
are processed in SPSS - 26 version and applied few statistical tools i.e. descriptive statistics,
ANOVA and Factor Analysis for interpretation of the results. The present study reveals that
retail investor’s investment decision is based on the quota of equity shares available to retail
investors in IPO, Equity Participation by Financial Institutions & Foreign Institutional
Investors and followed by Price band. Further, the researcher founds that there is a significant
variation in means among retail investors on Industry and Sector that Company Issues the IPO
and Terms of Issue related to IPOs. The study concludes that, most of the investor’s investment
decisions are based on market attractiveness and corporate image. Further the study may be
useful to conduct the research in the following directions, to measure the investor’s perception
and behaviour towards in participation of IPOs, Factors affecting investment decision of retail
investors in different geographical areas in India.
2. Investors Perception towards IPO in Khairahani Municipality, Chitwan.
Researcher: Bijaya Kandel.
ISSN Online: 2961-1938.
ISSN Print: 2961-1946.
Publisher Name: Journal of Bhuwanishankar (Bhuwanishankar College)
An investor is any natural or legal person (such as a company or mutual fund) who invests
capital with the expectation of receiving financial returns. Investors rely on a variety of
financial instruments to generate a return and meet key financial goals, such as building
retirement savings, funding a college education, or simply building additional wealth over time.
There are a variety of investment vehicles to achieve goals, including stocks, bonds,
commodities, mutual funds, exchange-traded funds, currencies, gold, silver, bonds, and real
estate. Investors can analyse opportunities from different perspectives and generally prefer to
minimize risk while maximizing return.
A company selling its stocks to the public for the first time is called an IPO. It refers to the
selling of securities to the general mass of investing public in the primary market. The main
purposes of an IPO are to raise capital and to offer an exit strategy. For businesses started with
a relatively small number of shareholders including the founder,

50
their families, and friends, as well as professional investors such as venture capitalists or angel
investors, an IPO is a big step for raising a lot of money. This gives the company a greater
ability to grow and expand. Brealy and Myers (2003) define initial public offering "as the
original sale of a company's securities to the wider public for the first time in the primary
market." An IPO is a special case of public issue. It is the first stock offering by a company to
the public at large. The stocks are then listed on the stock exchange to facilitate trading.
3. A Study on Performance of IPO (Initial Public offering) with Special Reference
to Selected Companies at BSE.
Researcher: Anil Kumar & DR. Ravi Kumar.
ISSN Print: 2582-7421
ISSN Online: 2582-7421
Publisher Name: International Journal of Research Publication and Reviews.

There are several reasons for a company to go public, and they differ from one company to
another. Growing business owners approach the new issue market to finance their operations
while also gaining recognition and exposure on a global scale by listing their company at the
stock exchange. Diversifying the equity base, attracting and retaining better management and
employees through liquid equity participation, facilitating acquisitions,and increasing the
liquidity of the investments for the previous owners are just a few additional specific
advantages (for a company to launch an IPO) to consider. From their point of view, investing
in IPOs currently gives them a stake in the company and gives them hope that they will one
day share in its future profits. They aim to get the best possible return on their investments.
Therefore, a successful IPO is essential for both a company's growth and investors' confidence.
This study looked again at the post-issue performance of IPO firms in India. Researchers from
all over the world have discovered a sizable discrepancy between the issue price and the
comparably higher listing price, or "under-pricing," known as. This significant difference
increases the appeal of investing in IPOs on the Indian stock market and gives investors the
chance to realize good listing gains quickly. These quick profits drive investors crazy to invest
in IPOs. The study's analysis of performance variables scaled by sales as well as asset-scaled
performance variables sets it apart from earlier studies. To evaluate performance, it looked at
turnover ratio, return on sales, and sales growth in addition to return on assets and the operating
cash flow to total assets ratio. We can infer from the study that an initial public offering is a
fantastic way for investors to make quick money. The investors sell off their shares on the day
of the listing because they see this as a chance for speculation. On the day of listing, abnormal
returns are also at their peak before gradually declining. The over subscription is one of the
most important factors a potential investor should take into account when applying for an IPO
because it significantly affects the IPO's performance.
4. To study the performance of initial public offer price in Indian capital market.
Researcher: DR. Sejal Christian.
ISSN Online: 2349-6002
ISSN Print: 2349-5998
Publisher Name: International Journal of Creative Research Thoughts.
In recent years, the IPO market in India has witnessed many landmark developments like the
introduction of ASBA (Application Supported by Blocked Amount), grading of IPOs,

51
launching of IPO Index, introduction of Anchor Investors, introduction of Safety Net for IPOs,
derivatives, circuit filter, price–volume tracking by the SEBI to detect price manipulations.
Therefore, future studies on IPOs may link to these developments. For example, the grading of
IPOs which is based on the fundamentals of the issuing company may be correlated to the
initial as well as long run performance of the IPOs. The listing day and long run performance
of IPOs that have gone public after the launching of S&P BSE IPO index in 2009 may be tested
against the performance of this IPO index. Also, the return from this index (which includes
IPO stocks for up to two years from listing) may be tested against the returns from a portfolio
consisting of seasoned securities to see whether IPOs offer better investment opportunities than
seasoned securities to the investors. The important implications of our study are that like many
other capital markets, companies in India time their issues. They come out with their IPOs
during the time when the market sentiment is high. In the long run, the same IPOs which had
initially offered positive return, later underperform. Considering the existence of such windows
of opportunity for issuers, policy-makers must come out with measures to protect the long run
interest of investors. The retail investors while investing in IPO shares should consider the
fundamentals and prospects of IPO companies rather than the prevailing market sentiments.
Otherwise, they will incur loss due to the underperformance of IPOs in the long run.
5. A STUDY ON PERFORMANCE OF IPOs IN INDIA FOR THE PERIOD 2018-
2021.
Researcher: Divya Pusa.
ISSN Online: 2455-3662.
ISSN Print: 2455-3668.
Publisher Name: EPRA International Journal of Multidisciplinary Research (IJMR).
Indian IPOs' long-term performance, their cross-sectional and time-series patterns, and last but
not least, the various justifications for their performances of share price in the long run. Upon
examining it may be claimed that, in terms of share price performance over time, Indian IPOs
exhibit very significant abnormal returns in the period of five years after issue. The
performance of share price of Indian IPOs is not supporting the evidence from other countries
showing considerable long-term underperformance. Indian IPOs portray notable differences in
their cross-sectional patterns and time-series and, suggesting that numerous issue-related and
firm-related features have a substantial impact on the long-term performance of enterprises.
Last but not least, the performance of the share price for five years under study following the
public offer is heavily impacted by early returns, market returns, and issue price inverse.
6. A Study on Investors Perception towards Investment Plans in Bhubaneswar.
Researcher: DR. Somabhusana Janakiballav Mishra.
ISSN Online: 2582-2421.
ISSN Print: 2582-2410.
Publisher Name: International Journal of Research Publication and Reviews.
Investment involves making of a sacrifice in the present with the hope of deriving future
benefits. Two most important features of an investment are current sacrifice and future benefit.
Investment is the sacrifice of certain present values for the uncertain future reward. Investment
may be defined as an activity that commits funds in any financial/physical form in the present
with an expectation of receiving additional return in the future. The expectation brings with it
a probability that the quantum of return may vary from a minimum to a maximum. This

52
possibility of variation in the actual return is known as investment risk. Thus, every investment
involves a return and risk. A proper planning and analysis should be done in order to reach to
the perfect decision of investment or portfolio management.
7. DETERMINANTS OF INITIAL PUBLIC OFFERINGS: A CASE FROM
INDIAN CAPITAL MARKET.
Researcher: Rohit Bansal & DR. Ashu Khanna.
ISSN Online: -------
ISSN Print:--------
Publisher Name: Management Dynamics.
Taking into account all firms which have gone public on the official market of the Stock
Exchange of Bombay for the period 1999 until 2011, this study examines the evidence on the
short-run under-pricing of IPOs. In particular, an average under-pricing level within the range
50% is found based on first day. Using a regression approach, the degree of under-pricing is
explained by the ex-ante uncertainty hypothesis and the ownership structure hypothesis.
However, there is limited support for the signaling hypothesis. In particular, the results show
that the ex- ante information and have a significant positive impact on the initial returns while
the ownership structure has no relevant negative effect on short-run under-pricing. Conversely,
the results show that there is no statistically significant relationship with other explanatory
factors such as return on firm's age, and IPO years, ownership structure and the level of under-
pricing. The results obtained from this study show that fresh issues on the BSE are subject to
under-pricing, consistent with developed and other emerging markets. In this respect,
prospective investors should pursue the strategy of buying the new issues at the offer and
selling them immediately on the initial day of trading. Notwithstanding, the study also reveals
that investors should not hold new issues very long as the highest component of the initial
returns is found on the first day of trading and that the average original returns turn negative
on the fourth day of trading.
8. SURVIVAL OF THE FITTEST: AN EMPIRICAL ANALYSIS OF IPOs.
Researcher: Garima Baluja.
ISSN Online: 0973-211X
ISSN Print: -----------
Publisher Name: DAV University.
This paper explores the survival profile of initial public offerings in India during the post-SEBI
and hot-issue period of 1992-1996. The introduction of SEBI and the abolition of CCI brought
the tremendous changes in the Indian primary market. During this fluctuative period, several
firms followed the herd behavior and introduced their new issues in the market, however only
a few managed to sustain their identity in the aftermarket. This phenomenon is provided in the
‘Window of Opportunity’ hypothesis or ‘Hot issue’ phenomenon. The present study examines
this theory in light of IPOs in the hot issue period by taking their offering, market, and corporate
specific characteristics. The sample of this study comprises of 3125 IPOs during 1992-1996
and they are tracked till the end of 2011. The empirical analysis has been done using most
sophisticated methodologies i.e, Logistic Regression model, Kaplan-Meier estimation, and
LogLogistic Accelerated Failure Time (AFT) model. The study validates the theory of Window
of Opportunity and exhibits that most of the issues in the hot period are of low quality who just
entered the market to take the benefit of favourable market environment, but in reality they do

53
not possess the ability to withstand the tough market conditions and hence they failed to survive
in the aftermarket (Hensler et al., 1997; Boubakri et al., 2005; Demers and Joos, 2007). The
survival profile of IPOs across offering characteristics reveals that issue size, lead manager’s
reputation, and IPO demand have a positive influence, whereas initial returns, risk, and list
delay have a negative influence on the endurance of IPOs on the trading exchange. Further, the
analysis of market specific variables reveals that issues in the period of high IPO activity fail
to sustain longer in the aftermarket. The empirical analysis of age of the firm at the time of
issue supports the hypothesis that older firms have more potential to sustain longer on the
exchange as compared to younger firms. The survival profile of IPOs has been tested across
the several industries as well, which exhibits that IPOs in agriculture and administration sectors
have lower likelihood of survival and smaller survival duration, whereas IPOs in information
and communication, construction, accommodation, wholesale and retail, finance and
insurance, and other sectors have higher likelihood of survival and longer survival duration in
the aftermarket. However, no significant influence could be obtained from mining and transport
sectors. Overall, the KM estimation method shows a significant decline in the survival rate and
a growth in the hazard rate during the first 50-60 months of listing of IPOs on BSE.

54
 CHAPTER 3
3.Research Methodology.
A research methodology describes the techniques and procedures used to identify and analyze
information regarding a specific research topic. It is a process by which researchers design their
study so that they can achieve their objectives using the selected research instruments. It
includes all the important aspects of research, including research design, data collection
methods, data analysis methods, and the overall framework within which the research is
conducted. While these points can help you understand what is research methodology, you also
need to know why it is important to pick the right methodology.
3.1 The objective of this research paper:
• To measure the relationship between income, risk, return, time period, and
intention to invest in initial public offerings (IPOs).
• To analyse the factors that influence investors decision-making regarding IPO
investments.
• To study the Investors has certain objects while investing IPO.
• To study the numbers of problems are faced by investors while investing IPO'S.
• To identify the factors affecting short-run underpricing of IPOs in India.
• To study the Investors has certain objects while investing IPO.
• To analyse which type of investor categories (like students, employed,
unemployed, etc) are investing the IPOs.
• To identify the interest of people towards the Book Building Method of the IPO
issue.
• To evaluating the effectiveness of IPO regulations.
• To examining the motivations of IPO investors.

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3.2 The scope of the research paper:
• The scope of the study is confine to assess the investment criterion and factors
influence the investment decision of retail investors in IPOs.

• A quantitative analysis of the relationship between under-pricing and investor

subscription rates for IPOs in emerging markets.

3.3 The limitations of the research:

• The study conducted has certain limitations which recommends future researchers.
• Time was limited to collect data.
• Sample could only be collected from 100 respondents only.
• Scope of the project was confined to Thane District only.
• As this project was confined to Thane District only the data showed the attitude of
customers of Thane District only.

3.4 METHODOLOGY & SOURCE OF DATA:

A detailed survey of customers was carried out to find out investor preference towards IPO
with special reference to Thane District. A well-structured questionnaire was served as the
primary source. 100 samples were taken from the customers residing in Thane District for
the study with the help of random sampling method. Secondary data was collected through
online journals, magazines, bank websites, books.
To address the key research objectives, this research used both qualitative and quantitative
methods and combination of primary and secondary sources.

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3.5 Sources of data:
The study is based on both primary and secondary data.
Primary data:
The primary data were collected through structured questionnaire.
Secondary data:
The required secondary was collected from websites, online journals, articles,
3.6 Research Methodology(Details):
Methodology is the study of research methods or more formally, "'a contextual framework'
for research, a coherent and logical scheme based on views, beliefs, and values, that guides
the choices researchers [or other users] make". It comprises the theoretical analysis of the
body of methods and principles associated with a branch of knowledge such that the
methodologies employed from differing disciplines vary depending on their historical
development. This creates a continuum of methodologies that stretch across competing
understandings of how knowledge and reality are best understood. This situates
methodologies within overarching philosophies and approaches. Methodology may be
visualized as a spectrum from a predominantly quantitative approach towards a
predominantly qualitative approach. Although a methodology may conventionally sit
specifically within one of these approaches, researchers may blend approaches in
answering their research objectives and so have methodologies that are multimethod
and/or interdisciplinary. Overall, a methodology does not set out to provide solutions - it
is therefore, not the same as a method. Instead, a methodology offers a theoretical
perspective for understanding which method, set of methods, or best practices can be
applied to the research question(s) at hand.
1. Methodology is the systematic, theoretical analysis of the methods applied to a field
of study. It comprises the theoretical analysis of the body of methods and principles
associated with a branch of knowledge. Typically, it encompasses concepts such as
paradigm, theoretical model, phases and quantitative or qualitative techniques. A
methodology does not set out to provide solutions - it is, therefore, not the same thing as a
method. Instead, it offers the theoretical underpinning for understanding which method,
set of methods or best practices which can be applied to specific case, for example, to
calculate a specific result.

2. Research: The process of research came into being due to man’s quest to be at tune with
his environment and also understand nature. To achieve this, man uses the tools of
experience and reasoning available to him. Man also makes use of experience and
authoritative sources beyond his immediate circle. Experience and authority are rich and
major sources of hypothesis, which are based mainly on common sense knowledge and
haphazard events, therefore it can be unjustified for drawing conclusions on events. Hence
research hypothesis formulation using experience and authority is judged to be
unscientific. Research anchors on scientific reasoning; which could be inductive and
deductive or both. Research is a combination of both experience and reasoning and can be
said to be the most appropriate way of discovering the truth, precisely in the natural
Sciences.

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 3. Research methodology: This is a set of systematic technique used in research. This
simply means a guide to research and how it is conducted. It describes and analysis
methods, throws more light on their limitations and resources, clarify their pre-
suppositions and consequences, relating their potentialities to the twilight zone at the
frontiers of knowledge. Advantages of Research Methodology:
The following are the advantages of research methodology
1. Advancement of wealth of human being
2. Provision of tools for carrying out the research
3. Develops a critical and scientific attitude, disciplined thinking to observations
4. Enrichment of the research process and provision of chance for in-depth study and
understanding of the subject
5. Helps to inculcate the ability to evaluate and use research results with reasonable
confidence and in decision making
6. Inculcates the ability to learn to read and think critically. The Purposes of Research
serves many purposes. Three of the most common and useful purposes, however, are
exploration, description, and explanation. Many studies can and often do have more than
one of these purposes, however each have different implications for other aspects of
research design.

3.7 Selection of Problems:

With the scope defined, the next step is choosing a specific problem or research
question within investor preference towards IPOs.
1. Do investors consistently overestimate the true value of IPOs due to under-pricing,
leading to suboptimal investment decisions?
2. Do limited information access and cognitive biases lead to systematic errors in
investor preferences towards IPOs?
3. Are investor preferences for IPOs driven purely by financial considerations, or do
non-financial factors like brand reputation or social impact play a role?

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CHAPTER 4
DATA ANALYSIS

Question No.1 : WHAT IS YOUR GENDER?

GENDER NO. OF RESPONDENTS In percentage

MALE 52 74.6%

FEMALE 18 25.4%

It seems like you've provided data on the number of respondents by gender. There are 52 male
respondents and 18 female respondents. If you need any analysis or further assistance with this
data, feel free to ask!

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Question 2 : What is your age?

AGE NO. OF RESPONDENTS In percentage

BELOW 25 56 80.3%

25-35 8 11.3%

35-45 1 1.4%

ABOVE 45 5 7%

The age distribution of respondents indicates a predominantly younger demographic, with 56

individuals below the age of 25. In contrast, only 8 respondents fall within the 25-35 age range,
while 1 respondent is aged between 35-45, and 5 respondents are above 45. Understanding this
age distribution is crucial for interpreting survey findings accurately, as age can significantly
influence perspectives, behaviors, and preferences among respondents.

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Question 3 : What is your occupation

Occupation No. of respondent IN Percentage

Student 47 67.6%
Employee 18 25.4%
Business 1 1%
Other 4 5.6%

The data reveals a varied occupational composition among respondents. With 47 students and
18 employees, education and employment sectors dominate. The presence of a solitary business
owner underscores entrepreneurial diversity. Four respondents fall into the "Other" category,
representing diverse or unconventional professions. Understanding this occupational
distribution is vital for contextualizing survey insights, considering differing perspectives, and
ensuring inclusive analyses. Each occupational group contributes unique viewpoints, enriching
discussions and facilitating comprehensive understanding within research or survey
frameworks.

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Question 4 : What is highest level of education?

Education level No. of respondent In percentage

High school 24 33.8%
Bachelor degree 37 53.5%
Master degree 5 7%
Professional degree 4 5.6%

The data illustrates a diverse educational background among respondents. With 24 individuals
holding a high school diploma, followed by 37 with bachelor's degrees, it reflects a significant
representation of undergraduate education. Additionally, 5 respondents possess master's
degrees, while 4 have professional degrees. Understanding this educational distribution is
essential for contextualizing survey responses, as educational attainment often influences
perspectives, knowledge base, and decision-making processes among respondents.

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Question 5 : You understand the basic concept of an IPO?

Understanding the concept No. of respondent In percentage

of IPO
Agree 65 92.9%

Disagree 5 7.1%

Among respondents, 65 individuals agree with the concept of Initial Public Offering (IPO),
while 5 disagree. An IPO is a pivotal event where a private company transitions to a publicly
traded entity by offering its shares to the general public. The overwhelming agreement with
the concept suggests recognition of its significance in capital markets, enabling companies to
raise funds and expand operations. However, the minority dissent may stem from concerns or
skepticism regarding IPO processes or outcomes.

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Question 6 : I believe investing in IPOs can provide significant returns?

Significant return in IPO No. of respondent In percentage

Agree 63 90%

Disagree 7 10%

Out of the respondents, 63 agree that significant returns are attainable through Initial Public
Offerings (IPOs), while 7 disagree. This reflects a prevailing sentiment among the majority
that IPOs present opportunities for lucrative returns on investment. However, the dissenting
opinions from the minority suggest varying perspectives or skepticism regarding the reliability
or consistency of returns associated with IPOs. Understanding these viewpoints is crucial for
informed decision-making in investment strategies.

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Question 7: I consider the risks associated with IPO investments before making a decision?

Risks associated in IPO No. of respondent In percentage

Agree 57 81.4%

Disagree 13 18.6%

Among respondents, 57 agree that there are risks associated with Initial Public Offerings
(IPOs), while 13 disagree. This suggests a widespread recognition of the inherent uncertainties
and potential downsides involved in participating in IPOs. Common risks may include market
volatility, valuation uncertainties, regulatory compliance issues, and post-IPO performance
fluctuations. The dissenting opinions from the minority could indicate varying levels of risk
perception or confidence in IPO investments among respondents. Understanding these risks is
crucial for investors considering IPO participation.

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Question 8 : I think IPOs are a suitable investment option for long-term financial goals?

I think IPOs are a No. of respondent In percentage

suitable investment

Agree 54 77.1%

Disagree 16 22.9%

Out of the respondents, 54 agree that Initial Public Offerings (IPOs) are suitable investments,
while 16 disagree. This suggests a considerable portion of the sample views IPOs as viable
investment opportunities, possibly due to their potential for significant returns and
opportunities to invest in promising companies early in their growth stages. However, the
dissenting opinions from the minority may stem from concerns about volatility, valuation risks,
or uncertainties associated with IPO investments.

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Question 9 : Are you aware of any upcoming IPOs?

Are you aware of any No. of respondent In percentage

upcoming IPOs?

Agree 55 78.6%
Disagree 15 21.4%

Among respondents, 55 are aware of upcoming Initial Public Offerings (IPOs), while 15
disagree. This indicates a substantial awareness of IPO activity within the surveyed group,
reflecting an interest or involvement in investment opportunities within the stock market. Those
who are unaware may miss out on potential investment prospects or may not actively follow
financial news or market developments. Staying informed about upcoming IPOs can be crucial
for investors seeking to capitalize on new opportunities.

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Question 10 : Which type of IPO you preferred to invest mainly ?

Which type of IPO you No. of respondent In percentage

preferred to invest
mainly
Main line IPOs (Regular 27 38.6%
IPOs)
SME IPOs (Small medium 20 28.6%
enterprises)
Both 23 32.9%

Among respondents, 27 prefer to invest mainly in Main Line IPOs (Regular IPOs), while 20
favor SME IPOs (Small and Medium Enterprises), and 23 are open to investing in both types.
This diversity in preferences suggests varying investment strategies and risk appetites among
respondents. Main Line IPOs may offer stability and established companies, while SME IPOs
could present opportunities for growth potential and early-stage investment prospects. The
option to invest in both reflects a balanced approach to diversifying investment portfolios.

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Question 11 : If yes, which industries are these IPOs from?

If yes, which industries No. of respondent In percentage

are these IPOs from
Technology 19 27.1%
Healthcare 26 37.1%
Consumer goods 9 12.9%
Industrial 10 14.3%
Financial services 6 836%

Among respondents, IPOs from various industries attract interest, with 19 respondents favoring
Technology, 26 opting for Healthcare, 9 showing interest in Consumer Goods, 10 preferring
Industrial sectors, and 6 expressing interest in Financial Services. This diverse range of
industries reflects differing investment preferences and perceptions of growth potential among
respondents. Understanding industry dynamics and market trends is crucial for informed
decision-making when considering IPO investments in specific sectors.

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Question 12 : What is your investment strategy while investing IPOs?

What is your investment No. of respondent In percentage

strategy while
investing IPOs?
For listing gain 32 45.7%
For short term gain 24 34.3%
For long term gain 14 20%

Out of the respondents, 32 focus on investing in IPOs for listing gains, aiming to profit from
the price appreciation upon the stock's initial trading. Meanwhile, 24 prioritize IPO investments
for short-term gains, leveraging market volatility or momentum. Additionally, 14 respondents
adopt a long-term investment strategy, seeking sustained growth and value appreciation over
an extended period. These varied approaches reflect diverse investment goals and risk appetites
among respondents.

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Question 14 : What do you think, Is IPO is safest Investment ?

IPO is safest No. of respondent In percentage

Investment
High risk investment 19 31.4%
Medium risk investment 41 58.6%
Moderate risk investment 10 10%

Among respondents, 19 consider IPOs as high-risk investments, while 41 view them as

medium-risk investments. Additionally, 10 respondents perceive IPOs as moderate-risk
investments. This distribution of risk perceptions underscores the varying attitudes towards the
risk associated with IPOs. While some investors acknowledge the potential for significant
returns, others recognize the inherent uncertainties and volatility inherent in investing in newly
listed companies.

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CHAPTER 5

5. CONCLUSION:

The Indian initial public offer (IPO) market has always had more than its fair share of
doomsayers. Right from the Maruti issue, which pundits decried as being overpriced, to the
ONGC and TCS issues, where the huge sizes of the offerings drew predictions of calamitous
effects on the secondary markets, the opinions of the "experts" have proved to be wide off the
mark.

Not only did the mega issues sail through, but the secondary markets proved to be far more
resilient than anybody had anticipated.

Nevertheless, there is no denying the enormous interest retail and other investors have shown
in the primary market, perhaps even more so than in the secondary one. This interest has been
sustained despite the lack of bounce in the secondary market and is not confined to the big
issues, even smaller issues have sailed through with large oversubscriptions.

If investors are gung-ho about IPO's, there are several reasons for it. Unlike earlier IPO booms,
this one is being driven by a much better quality of offering, Missing in action so far are the
fly-by-night operators of the 1990s who made public offers only to collect the
money and vanish.

Next, most recent IPO's have resulted in gains on listing for the investor. The listing gains have
probably initiated a kind of virtuous cycle, tempting investors who have already made money
to return to the primary market.

Companies have been quick to take advantage of the investor interest in IPO's, and banks,
broking houses, retail outfits, media houses and government companies are lining up issues,

Even mutual funds have got into the act, and are tailoring their offerings to match current
market fancics-mid-cap funds, dividend yield funds, and what-have-you. If the government
wants to get some money into its kitty through disinvestment programmes, this is the time to
make a dash for it.

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5.1 Annexure:

1. Age group?
O Below 25
o 25-35
o 35-45
o Above 45

2. Gender?
O Male
o Female

3. Occupation?
O Student
o Employee
o Business
o Other

4. What is highest level of education?

O High school
o Bachelor’s degree
o Master’s degree
o Professional degree

5. You understand the basic concept of an IPO?

O Agree
o Disagree

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6. I believe investing in IPOs can provide significant returns?
O Agree
o Disagree

7. I consider the risks associated with IPO investments before making a decision?
O Agree
o Disagree

8. I think IPOs are a suitable investment option for long-term financial goals?
O Agree
o Disagree

9. Are you aware of any upcoming IPOs?

O Yes
o No

10. Which type of IPO you preferred to invest mainly?

O Main line IPOs (Regular IPOs)
o SME IPOs (Small medium enterprises)
o Both

11. If yes, which industries are these IPOs from?

O Technology
o Healthcare
o Consumer goods
o Industrial
o Financial services

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12. What is your investment strategy while investing in IPOs?
O For, Listing Gains.
O For, Short-Term Gains.
O For, Long-Term Gains.

13. What do you think, Is IPO is safest Investment?

O High risk investment
o Medium risk investment
o Moderate risk investment

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CHAPTER 6

BIBLOGRAPHY

 https://www.chittorgarh.com/ipo
 https://www.researchgate.net/publication/358770082_A_Study_on_Performance_Eva
luationof_Initial_Public_Offering_IPO
 https://www.nseindia.com/market-data/all-upcoming-issues-ipo
 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2708995
 https://journals.sagepub.com/doi/10.1177/0971890720914100
 https://ipowatch.in
 https://www.5paisa.com
 https://groww.in/ipo
 https://ijcrt.org/papers/IJCRT2111153.pdf
 https://ijrpr.com/uploads/V3ISSUE11/IJRPR7787.pdf

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