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Underpricing of infrastructure IPOs: evidence from India

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  • Michael Ritchie
  • William Dimovski
  • Saikat Sovan Deb

Abstract

This paper explores the underpricing of initial public offerings (IPOs) made by infrastructure companies in India from 2004 to 2010, and follows Dimovski who reported that in the Australian market, infrastructure IPOs did not produce underpricing returns that were statistically significantly different to zero. The objective of this paper is to investigate the underpricing of infrastructure IPOs in the emerging market of India and to explore factors that may influence the underpricing of infrastructure IPOs in India. The results show that, on average, the underpricing returns were 25.4% and statistically significantly different to zero, while money left on the table, in aggregate is not. In contrast to Australian evidence, significant underpricing in Indian infrastructure IPOs indicates greater risk of these investments. We find that oversubscription, government ownership and issue size are significant variables in explaining underpricing in Indian infrastructure IPOs.

Suggested Citation

  • Michael Ritchie & William Dimovski & Saikat Sovan Deb, 2013. "Underpricing of infrastructure IPOs: evidence from India," Journal of Property Research, Taylor & Francis Journals, vol. 30(1), pages 24-46, March.
    • Handle: RePEc:taf:jpropr:v:30:y:2013:i:1:p:24-46
    DOI: 10.1080/09599916.2012.731076
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    References listed on IDEAS

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    1. Rahnema, Ahmad & Fernández, Pablo, 1993. "Initial public offerings (IPOs): The Spanish experience," IESE Research Papers D/243, IESE Business School.
    2. Ajay Shah, 1995. "The Indian IPO Market: Empirical Facts," Finance 9507003, University Library of Munich, Germany.
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    Cited by:

    1. Qile Tan & William Dimovski & Victor Fang, 2015. "The Underpricing of Infrastructure IPOs: Evidence from China," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-31, December.

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