Escolar Documentos
Profissional Documentos
Cultura Documentos
STUDY
ON
„SHORT TERM & LONG TERM PERFORMANCE OF IPO
(INITIAL PUBLIC OFFER) ‟
(Conducted on behalf of „India Advantage Securities .Pvt. Ltd.Majura Gate, Surat.)
(From 6th January, 2011 to 6th March, 2011)
A Project Report submitted in partial fulfillment of the requirements
For the award of the degree of
BACHELOR OF BUSINESS ADMINISTRATION
TO
VEER NARMAD SOUTH GUJARAT UNIVERSITY, SURAT
Submitted By:
DESAI PRADIP
T.Y.B.B.A. (SEM –VI) Roll No: 112
1
DECLARATION
I, Desai Pradip, hereby declare that the project report entitled “SHORT
TERM & LONG TERM PERFORMANCE OF IPO(INITIAL PUBLIC
OFFER)” under the guidance of Ms. SWATI MEHTA submitted in partial
fulfillment of the requirements for the award of the degree of Bachelor of
Business Administration to Veer Narmad South Gujarat University, Surat is
my original work – research study – carried out during 6th January, 2011 to 6th
March, 2011 and not submitted for the award of any other
degree/diploma/fellowship or other similar titles or prizes to any other
institution/organization or university by any other person.
Signature
Place: Amroli, Surat
Date:
(Desai Pradip)
(T.Y.B.B.A., Roll No: 112)
2
PROF. V. B. SHAH INSTITUTE OF ANAGEMENT,
R. V. PATEL COLLEGE OF COMMERCE,
V.L.SHAH COLLEGE OF COMMERCE,
R.K.SHAH WOMEN‟S ARTS COLLEGE,
AMROLI (SURAT).
This is to certify that the Project Report entitled “SHORT TERM &
LONG TERM PERFORMANCE OF IPO (INITIAL PUBLIC OFFER)”
(Conducted on behalf of „India Advantage Securities .Pvt. Ltd.Majura Gate,.
Surat‟) submitted in partial fulfillment of the requirements for the award of the
degree of BACHLOR OF BUSINESS ADMINISTRATION to VEER NARMAD
SOUTH GUJARAT UNIVERSITY, SURAT is a record of bonafide research work
carried out by Pradip. p. Desai under my supervision and guidance.
Signature Signature
3
ACKNOWLEDGEMENT
4
PREFACE
In this period fast developing and changing world. I am proud for a study of
B.B.A. full time course offered by South Gujarat University at Prof. V.B. Shah
Institute of Management, Amroli.
Finance is most important parts of economics activities. Today the financial
management is branch of business administration. The firm or management can
accept or reject proposal on the basis of financial statement. So I am selecting the
specialized subject of Finance.
Today, financial markets is more dynamic with changing the environment
and changing in to SEBI rules, regulation and structures and depend to the capital
market & securities market to SEBI. Hence with a view to knowing more about
investment practice and to get practical knowledge of what we learn in the college
and class, I have decided to do my project work at of „India Advantage Securities
.Pvt. Ltd..Majura Gate, Surat.‟
Here, In My Project I am analyzing 25IPO company From Different Sector like IT,
BANKING, CHEMICAL, AUTOMOBILE, CEMENT, etc. with collection of IPO
price of last three years, And also analyze the model like CAAR (Cumulative
Abnormal Adjusted Return), MAAR (Market Adjusted Abnormal Return), And By
analyzing all this data I am find that IPOS Different sector is continuously growing
in last Three years.
5
CHAPTER PAGE
NO: TOPICT NO:
1 INTRODUCTION OF INDIA ADVANTAGE SECURITIES LTD. 7-9
VISION 10
PHILOSOPHY 10
COMPANY PRODUCT 10 - 12
2 RESEARCH METHODOLOGY 13 - 15
3 INTRODUCTION ABOUT CAPITAL MARKET 16
MEANING OF CAPITAL MARKET 17
STRUCTURE AND SIZE OF CAPITAL MARKET 18
PRIMARY MARKET & SECONDARY MARKET 19
4 INTRODUCTION OF IPO 20 - 23
WHAT IS AN IPO? 24 - 25
WHY MAY A COMPANY NEED AN IPO? 26
WHAT ARE THE TWO SIDE OF IPO COIN? 27
WHO CAN" TOSS THE IPO COIN" 28
PREPARING FOR IPO REGULATORY 29
PROCESS OF IPO 30 - 31
IDEAL PROCESS OF IPO 32
THE PROCEDURE FOR THE ISSUE OF AN IPO 33 - 34
DOCUMENT OF IPO 35
IPO MARKET IN INDIA 36
5 GENERAL ANALYSIS 37
LIST OF IPO 38
CLOSING PRICE OF IPO 39
CALCULATION METHOD FOR SHORT TERT &
LONG TERM PERFORMANCE OF IPO 40 - 41
SHORT TERM PERFORMANCE OF IPO 42 - 43
LONG TERM PERFORMANCE OF IPO 44 - 57
6 CONCLUSION 58 - 59
7 BIBLIOGRAPHY 60 - 61
6
CHAPTER 1:
INTRODUCTION
OF
COMPANY
7
INTRODUCTION OF COMPANY:
India Advantage Securities Pvt. Ltd. is a member of The Bombay Stock
Exchange Ltd. (BSE) as well as the National Stock Exchange (NSE). The
institutional desk was established in 2009 with a vision to provide quality research
and execution services to institutional as well as corporate clients. IASL has
significant net worth as well as expertise in managing large transactions in the cash
and derivatives market. Our expertise lies in Futures and Options where we are the
market leaders in Delta / Gamma Neutral arbitrage in the Indian markets IASL
services Financial Institutions, Mutual funds and Foreign Institutional Investors.
The quality, commitment and experience of our Institutional Sales Team is an
essential element of our ability to meet and surpass our clients expectations. We
are confident and committed to devise and conceptualize various investment and
trading themes with respect to dynamic market conditions in Indian equities and
derivatives domain. Our team remains committed to provide highest standards of
Research, execution and client satisfaction.
8
the key success of our organization. With latest IT infrastructure set-up we provide
hassle free connectivity and fastest trading platform. It is backed up by focused
professionals. We have catered number of clients by giving end to end wealth
solutions. We are based on the principles of highest standards of excellence,
ethics, efficiency and professionalism.
We channel our energies towards bringing out our best skills to ensure a
maximum financial benefit for you. Along with this, we uphold and augment the
values of our shareholders. We are a visionary team with a deep understanding of
the financial diversity. We are a tram with intense passion for our goal of setting
excellent standards of Corporate Governance and meeting the financial needs and
demands of society.
9
Vision:
Protect Investor Interest and Enhance Investment Value.
Philosophy:
The India Advantage philosophy has a social base with associates and
client centric, with a clear focus on providing long-term value addition to all, while
maintaining the highest standards of excellence, ethics and professionalism.
Company Products:
Equities:
India Advantage Securities Ltd. encourages its clients to deal on both the
prominent exchanges of the country – the Bombay Stock Exchange and the
National Stock Exchange of India Ltd. Capital Market segments though smaller in
volumes than Derivatives, are very vital for the success of the medium and small
investors. We advance client dealings on BSE and NSE for equities segment.
Dedicated sales and trading teams in our trading desks support these client
Derivatives :
India Advantage Securities Ltd., also provides services for its clients
wanting to deal in the Derivatives segment of the NSE. All client dealings on the
exchange in all types of Futures and Options (Call and Put), conducted through us
are duly supported by a dedicated sales & trading teams in our trading desks
10
Commodities:
NRI Service:
11
RESEARCH
METHODOLOGY:
Statement of problem
Scope of the study
Objective of study
Selection of Sample
Significance of study
Reference period
Source of data
Tools & techniques
Chapter schema:
Limitation of study
12
Statement of problem:
„To measure short term means same day & long term
performance of IPOs.(1 month, 3month, 6month, 12month, 24month, 36month,)‟
Secondary:
To understand the return & risk associated of time.
To understand profit potential in IPOs & in secondary
market.
Selection of sample:
Project is covered 25IPO from different sectors from the
year2006,2007,2008,
Significance of study:
The profit opportunity for investor.
13
Reference period:
6th January,2011 to 6th march, 2011
Source of data:
Primary data
Secondary data: magazine, newspaper. book
Chapter schema:
1. Introduction of India Advantage Securities Ltd.
2. Research Methodology
3. Introduction About Capital Market
4. Introduction Of IPOs
5. General Analysis
6. Conclusion
7. Bibliography
Data collection:
25IPOs-offer price of all 25 IPO. & price (in same day, after
1month, 3month, 6month, 1year, 2year, 3year,) from listing date.
14
Limitation of study:
15
CHAPTER 3:
INTRODUCTION
ABOUT
CAPITAL MARKET
16
CAPITAL MARKET
Capital market is a wide term used to comprise all operation in the new
issues market and stock market. New issues made by the companies constitute the
Primary marker. While trading in the existing securities relates to the secondary
market. While we can only buy in the Primary market, we can buy and sell
securities in the secondary market. Market comprises some who demand and other
who supply these resources.
The origination of the Indian securities market may be traced back to 1875,
when 22 enterprising brokers under a Banyan tree established the Bombay Stock
Exchange (BSE). Over the last 125 years, the Indian securities market has evolved
continuously to become one of the most dynamic, modern and efficient securities
markets in Asia. Today, Indian markets conform to international standards both in
terms of structure and in terms of operating efficiency.
17
Structure and Size of the Markets:
18
1.) Primary Market:
Primary market is the market for those securities which are issued first
time in the market for the public. The New Issue Market deals with new securities
i.e. securities which were not previously availably and are offered to the investing
public for the first time. Primary market is a market for New issues or New
financial claims. Hence, it is called New Issue Market. The market, therefore,
derives its name from the fact that it makes available a New Block of Securities for
public subscription. In the Primary market, borrowers exchange new financial
securities for long term funds. It facilitates capital formulation.
Companies raise its capital in the primary market though:
(i) Public Issue
(ii) Right Issue
(iii) Primary placement/subscription
The most popular method of raising capital is sale of securities to the
public by new companies is called Public Issue. Right Issue means, when existing
company first offered. The security to existing shareholders on a Pre –emptive
bases, while company want to raise additional capital is called capital is called
Right Issue. Private placement imagine private sale of securities to small group
investors.
2.) Secondary Market:
Secondary market is the market for those securities which have
already been available in the market and listed on a stock exchange. The main
benefit of Secondary market is securities sold and purchased continuously among
investors without involvement of company. This market consists of all stock
exchange recognized by the Government of India. The stock exchange in India are
regulated under the securities contracts (Regulation) Act, 1956.
19
CHAPTER 4:
INTRODUCTION
OF
IPO
WHAT IS AN IPO?
WHY MAY A COMPANY NEED AN IPO?
WHAT ARE THE TWO SIDE OF IPO COIN?
WHO CAN" TOSS THE IPO COIN"
PREPARING FOR IPO REGULATORY.
PROCESS OF IPO.
IDEAL PROCESS OF IPO.
THE PROCEDURE FOR THE ISSUE OF AN IPO.
DOCUMENT OF IPO.
IPO MARKET IN INDIA
20
INTRODUCTION OF IPO:
The transition from being a private company to a public one is one of the
most important events in the life of a firm. It is also one of particular interest to
institutional investors, and the transition is facilitated through the INITIAL
PUBLIC OFFERING (IPO) process. The IPO provides a fresh source of capital
Shareholders such as venture capitalists a liquid market for their shares. From an
institutional investor's perspective, the IPO provides an opportunity to share in the
rewards of the growth of the firm.
When a firm issues equity to the public for the first time, it makes an initial
public offering consisting of two kinds of issues – the primary issue and the
follow-on issue. In a primary, the firm raises capital for itself by selling stock to
the public, whereas in the follow on issue, existing large shareholders sell to the
public a substantial number of shares they currently own.
There have also been various studies made to suggest the reasons for such
underpricing. From the investors‟ point of view, this under-pricing appear to
provide the sure and quick profit that most dream about. Though first day return
could vary, few of the issues tend to provide a very high return over the first day.
One of the examples is VA Linux which had a first day return of 700%. It is also
seen that for some of the issues, the first day return could also be negative. It then
becomes inevitable for most investors to measure the performance of IPOs by the
short term (usually within one week of issue), as the general scheme is to buy
the shares at a low initial offering price and sell it the next day when the price
increases.
Pricing of the IPOs are done by the issuers with guidance from underwriters
from investment banks. There are various ways to price the stocks but what is
commonly used now is a process called book building. It is basically a capital
issuance process used in an Initial Public Offer which aids price and demand
21
discovery. It is also a process used for marketing a public offer of equity shares of
a company. During the period for which the book for the IPO is open, bids are
collected from investors at various prices, which are above or equal to the floor
price. The offer/issue price is then determined by the issuing company after the bid
closing date based on the various bids that have been collected. For a more detailed
discussion of book building, one can visit any of the many stock exchanges. An
example of the book building process can be seen from the National Stock
Exchange. This Initial Public Offering can also be made through the fixed price
method or a combination of both book building and the fixed price method.
There have been various studies conducted on the price changes of the
shares after prolonged periods (six months to five years). These studies show that
while the short-run performance of IPOs is often quite impressive, the long-run
performance over the subsequent three to five years is not as impressive. Excluding
the initial-day return, IPOs tend to underperform various benchmarks. However,
these studies focus mainly on developed economies and tend to neglect the
developing counterparts. A study by Madhusoodanan and Thiripalraju studies the
performance of Indian IPOs prior to 1996.
The study uses various methods to ascertain the significance of the over or
underperformance of IPOs. Among the many reasons for the performance which
22
we see, one of them could be the sensitivity of the results to the choice of
benchmarks. Dimson and Marsh, Ritter, Gregory et al, Fama and French and Fama
have successively demonstrated the sensitivity of the long-run performance of the
IPOs the benchmark used in the study. For this reason, the effect of various
benchmarks on the return measurements will be studied so as to elucidate the
possibility that the magnitude of the performance is benchmark dependent.
23
What is an IPO?
An IPO or an Initial Public Offer is a company's first sale of equity shares to
general public. Shares offered in an IPO are often, but not always, those of newly
set up companies seeking outside equity capital and a public market for their
shares.
“An initial public offer is an equity product that allows you to buy cheap
tomorrow’s possible winners”
-George Mathew
An Initial Public Offering (IPO) can be a good investment avenue for equity
investors. While the IPO market is dry these days, a fresh crop is expected soon.
Let us take five minutes to understand IPOs and to decide whether to invest in
them or not.
24
bonuses. They also have the option to exit from the shares by selling their stock in
the secondary market, making a capital appreciation or loss as the price changes
from the issue price.
25
Why may a Company need an IPO?
26
What are the two sides of IPO coin?
Advantages Disadvantages
Money non-refundable except in the case of Time consuming process
winding up or buy back of shares Expensive
No financial burden i.e. no fixed rate of Several Legal formalities.
interest payable. However, in order to Involvement of many intermediaries
service the equity, dividend may be paid. Transparency Requirements and public
Enhances shareholder's value if the disclosure of information may lead to
company performs well lack of privacy
Greater Transferability Continuous Compliance of provisions
Trading & Listing of securities at stock of listing agreement and other legal
exchanges requirements
Better Liquidity of securities Constant scrutiny of performance by
Helps building reputation of promoters, investors
company & its products / services, provided May lead to takeover of the company
the company performs well Securities of the company may be
made subjective to speculative attacks.
27
Who can “Toss the IPO Coin”?
Yes No
And
28
Preparing for IPO – Regulatory:
Company should adopt best corporate governance practices to assist Investors
appreciate greater transparency and disclosure. These have to be complied with
before listing.
29
Process of IPO:
For private companies in the United States , the first issue of securities
to the speculative and rarely do they result in large gains for investors.
However, since capital is often needed to grow a private company and values of
companies are public is referred to as an Initial Public Offering (IPO). IPO's are
extremely best determined in the marketplace, IPO's continue to be used as a
way for growing private companies.
Once an IPO team (Investment Banker, Legal Council, SEC Expert, Outside
Auditor, etc.) has been formed, you can establish a plan for the IPO Process. A
basic timeline for an IPO will usually consist of:
Month 12: Recruit new management to run the public company - CEO, CFO,
etc. Start compiling the financial information.
Month 11: Start due diligence work - worthless assets are written off,
inconsistencies with GAAP are resolved, etc.
Month 10: Start drafting the prospectus. Coordinate the collection of data to
minimize duplicative efforts.
Month 9: Establish a board of directors for the newly formed public company.
Month 6: Establish transition contracts for services and products that will now
be provided to the newly formed public company. Some new contracts will be
needed, such as independent audits of financial statements.
30
Month 5: Finalize historical financial statements. Start preparing interim (stub)
financial statements for current period.
Month 4: Finalize pro forma and interim financial statements. Make revisions to
draft prospectus.
31
Ideal IPO Process:
On Monday morning, the newspaper should carry an advertisement which is the
prospectus of the IPO, which only talks about the firm and is silent on
valuation.
The IPO should take place on Tuesday evening, from 4 PM to 5 PM. The
auction should be a simple uniform-price auction with full transparency. A
picture of the demand schedule, and the cut-off price, should update on the
screen in real-time.
Investors should be able to go to any NSE terminal and place orders into the
auction. This harnesses 10,000 odd computer screens in 300 cities all over India
in the auction process. From the issuers perspective, NSCC should perform the
credit enhancement exactly as it does on the equity market. At a legal level, all
orders on the screen should be placed by NSCC, thus shielding the issuer from
the credit risk associated with anonymous order placement.
32
The Procedure for the Issue of an IPO:
Due diligence.
=Offer document.
Business overview.
Management discussion.
Statutory disclosures.
Pre-issue marketing.
33
Launch IPO
34
Document of IPO:
A company coming out with a public issue has to come out with an offer
document/prospect.
An offer document is the document that contains all information you need
about the company. It will tell you why the company is coming is out with a
public issue. It‟s financial and how the issue will be priced.
The Draft Offer Document is the offer document in the draft stage. Any
company making a Public issue is required to file the draft offer document
with the Securities and Exchange Board of India(SEBI).The market
regulator.
If SEBI demands any changes. They have to be made. Once the changes are
make. It is field with the registrar of companies are the Stock Exchange. It
must be filed with SEBI at least 21 days before the company files it with the
ROC/ Stock Exchange during the period. You can check it out on the SEBI
website.
Red Herring prospectus is just like the above except that it will have all the
information as a draft offer document. It wills, howrver, not have the details
of the price or the number of shares being offered or the amount of issue.
That is because the Red Herring prospectus is used in bookbuiling issues
only, Where the details of the find price are know only after bidding is
concluded,
35
IPO MARKET IN INDIA:
The IPO Market in India has been developing since the liberalization of the
Indian economy. It has become one of the foremost methods of raising funds for
various developmental projects of different companies.
The IPO Market in India is on the boom as more and more companies are
issuing equity shares in the capital market. With the introduction of the open
market economy, in the 1990s, the IPO Market went through its share of policy
changes, reforms and restructurings. One of the most important developments was
the disassembling of the Controller of Capital Issues (CCI) and the introduction of
the free pricing mechanism. This step helped in developing the IPO Market in
India, as the companies were permitted to price the issues. The Free pricing
mechanism permitted the companies to raise funds from the primary market at
competitive price.
36
CHAPTER 5:
GENERAL
ANALYSIS
LIST OF IPO.
CLOSING PRICE OF IPO.
CALCULATION METHOD FOR SHORT TERT & LONG TERM
PERFORMANCE OF IPO.
SHORT TERM PERFORMANCE OF IPO.
LONG TERM PERFORMANCE OF IPO.
37
For the analysis I have selected following IPOs. I have collect IPOs from
year 2006 to 2008. So it is possible to measure long-term performance.
Listing
Name of IPO Date Offer Price(RS.)
1. Porwal auto component Ltd 17-Dec-06 68
2. Aries agro ltd 14-Dec-06 120
3. Transformer and rectifier ltd 7-Dec-06 425
4. Burnpur cement ltd 28-Nov-06 12
5. Jyoti laboratory ltd 12-Nov-06 620
6. Renaissnce jwellary ltd 19-Nov-06 125
7. Edelweiss capital ltd 15-Nov-07 725
8. Mundra port & SEZ ltd 1-Nov-07 400
9. Barak valley cement ltd 29-Oct-07 37
10. Allied computer int. ltd 19-Oct-07 12
11. Chemical biotech ltd 9-Sep-07 16
12. Vishal info. Technology ltd 21-Jul-07 140
13. KSK energy venture ltd 23-Jun-07 240
14. Sejal architectural glass ltd 9-Jun-07 105
15. Avon washing system ltd 9-Jun-07 10
16. Bafna Pharmaceuticals ltd 27-May-07 40
17. Aishwariya telecom ltd 15-Apr-08 32
18. Sita Shree food product ltd 11-Apr-08 27
19. Niraj cement structureal ltd 22-Jun-08 175
20. Godrej properties ltd 9-Dec-08 100
21. Think soft global service ltd 22-Sep-08 120
22. Euro multivision ltd 24-Sep-08 70
23. C mahendra export ltd 31-Dec-08 95
24. Punjab &Sind bank 13-Dec-08 113
25. Power Grid corporation of
india ltd 9-Nov-08 85
38
CLOSING PRICE OF IPO:
12 24 36
SAME 1MONTH 3MONTH 6MONTH MONTH MONTH MONTH
NO Offer Price DAY (RS.) (RS.) (RS.) (RS.) (RS.) (RS.)
1 68 79.6 110.397 75.147 76.21 65.174 45.167 49.176
2 120 172.197 178.264 140.397 150 143.287 98.271 109.175
3 425 534.17 476.397 379.379 32 370.9 482.754 439.647
4 12 19.175 10.37 7.254 7.36 12.271 16.387 13.27
5 620 734.15 679.87 611.52 725.2 598.217 570.33 625.149
6 125 115.274 112.397 145.697 159.2 120.32 142.254 111.351
7 725 824.1 752.165 612.14 633.2 575.153 545.254 698.14
8 400 297.145 364.254 387.42 411.54 370.198 375.159 403.31
9 37 47.19 42.17 22.254 26.3 17.975 59.147 60.37
10 12 10.97 11.36 11.254 15.21 19.254 15.364 13.215
11 16 27.197 33.14 19.675 24.12 15.364 17.98 16.01
12 140 179.87 211.31 145.64 157.25 180.364 137.264 122.746
13 240 197.157 221.296 321.264 357.21 225.172 238.12 207.985
14 105 92.154 86.15 67.198 51.21 104.031 107.1 119.31
15 10 8.257 7.982 14.987 12.58 19.854 27.379 11.31
16 40 35.198 33.31 29.987 22.14 37.154 39.17 39.19
17 32 57.191 49.11 35.14 39.25 31.294 29.146 34.371
18 27 21.254 25.364 31.476 33.21 33.21 27.29 28.12
19 175 227.9 221.25 152.14 157.69 142.35 163.98 159.89
20 100 135.96 96.36 141.71 157.21 163.65 112.94 92.21
21 120 98.12 99.365 142.95 125.21 148.57 125.917 109.07
22 70 63.94 69.5 42.92 44.2 47.16 44.51 72.69
23 95 115.95 122.35 112.35 159.6 142.36 113.67 78.137
24 113 95.87 76.98 74.25 74.21 62.24 92.81 101.35
25 85 99.31 87.25 109.7 111.25 103.54 72.19 87.21
39
CALCULATION METHOD FOR SHORT- TERM PRAFORMANCE OF IPOS:
Where Pil is the closing price of the stock i at the first trading day, and Pi0 is
its offering price and Ril is the total first-day return on the stock. The return on the
market index during the same time period is:
where P m1is the closing market index value at the first trading day and P m0 is
the closing market index value on the offering day of the appropriate stock, while
R m1 is the first day‟s comparable market return.
Using these two returns, the market-adjusted abnormal return for each IPO on the
first day of trading is computed as:
MAAR is the sample mean abnormal return for the first trading day and may
be viewed as a Performance index which reflects the return, in excess of the market
return, on an investment divided equally among N new issues in a sample:
40
CALCULATION METHOD FOR LONG- TERM PRAFORMANCE OF IPOS:
Average CAART=
where the abnormal return in month t after the IPO for firm I is given by εit
and N is the number of firms in the sample.
41
SHORT- TERM PRAFORMANCE OF IPOS (SAMEDAY):
CL.PRICE
Offer OF SAME Ril= OPEN CLOSE
NO Price(pio) DAY(pil) (pil/pio-1) NIFFTY(Pmo) NIFFTY(Pm1) Rm1 MAAR (%)
1 80 79.58 -0.005 6037.95 5777 -0.0433 94.17
2 180 172.197 -0.043 5730.25 5731.15 0.0002 94.72
3 422 534.17 0.266 5699.55 5617.55 -0.0144 124.16
4 25 19.175 -0.233 5564.65 5519.35 -0.0082 74.88
5 755 734.15 -0.028 5908.05 5907.65 -0.0001 96.19
6 125 115.274 -0.078 5942.7 5912.1 -0.0052 90.68
7 725 824.1 0.137 5903.8 5866.45 -0.0064 112.06
8 400 297.145 -0.257 5708.9 5905.9 0.0346 76.76
9 50 47.19 -0.056 5360.35 5215.3 -0.0271 90.69
10 19 10.97 -0.423 5214.23 522.15 -0.8999 -33.29
11 25 27.197 0.088 5140.6 5317.25 0.0344 111.24
12 160 179.87 0.124 5120.55 4857 -0.0515 106.25
13 350 197.157 -0.437 4877.52 4838.25 -0.0081 54.49
14 145 92.154 -0.364 4836.55 4929.45 0.0193 64.53
15 18 8.257 -0.541 5278.4 5280.8 0.0005 44.95
16 46 35.198 -0.235 5267.15 5154.45 -0.0214 73.36
17 32 57.191 0.787 5266.35 5285.1 0.0036 178.06
18 27 21.254 -0.213 5112.25 5200.7 0.0174 79.44
19 190 227.9 0.199 5279.24 5271.21 -0.0016 118.74
20 120 135.96 0.133 4223.5 4231.4 0.0019 112.49
21 125 98.12 -0.215 5007.65 5083.95 0.0153 79.03
22 95 63.94 -0.327 4993 4945.2 -0.0096 65.34
23 137 115.95 -0.154 85200.9 5232.2 -0.9386 -10.26
24 145 95.87 -0.339 5277.15 5277.9 0.0002 65.12
25 135 99.31 -0.264 5278.15 5281.8 0.0007 72.67
TOTAL 2036.47
MAAR 81.46
42
CHART OF MAAR :
MAAR(%)
200
150
100
MAAR
MAAR(%)
50
1 3 5 7 9 11 13 15 17 19 21 23 25
-50
INTERPRETATION:
The average first day returns for the entire sample of 25 selected
company. Figure 1 shows the frequency of the market-adjusted initial returns of
IPOs for the entire sample of Indian stocks. For the Indian market, the Average
MAAR is found to 81.46%.so Average MAAR has a greater return in a first day.
And it is a high profit potential in a first day of initial public i.e. 81.46% return on
first day. And the positive for the investor. So IPOs are generally performed better
in same day for giving good return.
43
LONG- TERM PRAFORMANCE OF IPOS:
The long term performance of IPOs for them. 1month. 3month .6month
.12month .24month 36month. The analysis is below:
44
CHART OF 1 MONTH RETURN :
1MONTH RETURN(%)
60
40
20
1MONTH
0
RETURN(%)
1 3 5 7 9 11 13 15 17 19 21 23 25
-20
-40
-60
INTERPRETATION:
The Average CAAR for monthly is -0.92. So it is a negative for the
company & the investor. Also company takes a risk for IPOs. And less profit
potential of IPOs after long period i.e. monthly for investor.
.
45
LONG- TERM PRAFORMANCE OF IPOS (quarterly):
RETURN ON 3 MONTH
N CL.PRICE OF CL.PRICE AFTER QUARTERLY
O Name of IPO SAME DAY 3MONTH RETURN(%)
1 Porwal auto component Ltd 79.58 75.147 -6
2 Aries agro ltd 172.197 140.397 -18
3 Transformer and rectifier ltd 534.17 379.379 -29
4 Burnpur cement ltd 19.175 7.254 -62
5 Jyoti laboratory ltd 734.15 611.52 -17
6 Renaissnce jwellary ltd 115.274 145.697 26
7 Edelweiss capital ltd 824.1 612.14 -26
8 Mundra port & SEZ ltd 297.145 387.42 30
9 Barak valley cement ltd 47.19 22.254 -53
10 Allied computer int. ltd 10.97 11.254 3
11 Chamical biotech ltd 27.197 19.675 -28
12 Vishal info. Technology ltd 179.87 145.64 -19
13 KSK energy venture ltd 197.157 321.264 63
14 Sejal architectural glass ltd 92.154 67.198 -27
15 Avon washing system ltd 8.257 14.987 82
16 Bafna Pharmaceuticals ltd 35.198 29.987 -15
17 Aishwariya telicom ltd 57.191 35.14 -39
18 Sita Shree food product ltd 21.254 31.476 48
19 Niraj cement structureal ltd 227.9 152.14 -33
20 Godrej properties ltd 135.96 141.71 4
21 Think soft global service ltd 98.12 142.95 46
22 Euro multivision ltd 63.94 42.92 -33
23 C mahendra export ltd 115.95 112.35 -3
24 Punjab &Sind bank 95.87 74.25 -23
Power Grid corporation of india
25 ltd 99.31 109.7 10
46
CHART OF 3 MONTH RETURN :
QUARTERLY RETURN(%)
100
80
60
40
20 3MONTH
0 RETURN(%)
-20 1 3 5 7 9 11 13 15 17 19 21 23 25
-40
-60
-80
INTERPRETATION:
The Average CAAR for Quarterly is -2.84. So it is a negative for the
company & the investor. Also company takes a risk for IPOs. And less profit
potential of IPOs after long period i.e. quarterly return for investor. As compare to
monthly return it is a high risk for each 25 companies & investor.
47
LONG- TERM PRAFORMANCE OF IPOS (haft yearly):
RETURN ON 6 MONTH
CL.PRICE OF SAME CL.PRICE AFTER HAFT YEARLY
NO Name of IPO DAY 6MONTH RETURN(%)
1 Porwal auto component Ltd 79.58 76.21 -4
2 Aries agro ltd 172.197 150 -13
3 Transformer and rectifier ltd 534.17 32 -94
4 Burnpur cement ltd 19.175 7.36 -62
5 Jyoti laboratory ltd 734.15 725.2 -1
6 Renaissnce jwellary ltd 115.274 159.2 38
7 Edelweiss capital ltd 824.1 633.2 -23
8 Mundra port & SEZ ltd 297.145 411.54 38
9 Barak valley cement ltd 47.19 26.3 -44
10 Allied computer int. ltd 10.97 15.21 39
11 Chamical biotech ltd 27.197 24.12 -11
12 Vishal info. Technology ltd 179.87 157.25 -13
13 KSK energy venture ltd 197.157 357.21 81
14 Sejal architectural glass ltd 92.154 51.21 -44
15 Avon washing system ltd 8.257 12.58 52
16 Bafna Pharmaceuticals ltd 35.198 22.14 -37
17 Aishwariya telicom ltd 57.191 39.25 -31
18 Sita Shree food product ltd 21.254 33.21 56
19 Niraj cement structureal ltd 227.9 157.69 -31
20 Godrej properties ltd 135.96 157.21 16
21 Think soft global service ltd 98.12 125.21 28
22 Euro multivision ltd 63.94 44.2 -31
23 C mahendra export ltd 115.95 159.6 38
24 Punjab &Sind bank 95.87 74.21 -23
Power Grid corporation of india
25 ltd 99.31 111.25 12
48
CHART OF 6 MONTH RETURN :
50
0
6MONTH
1 3 5 7 9 11 13 15 17 19 21 23 25 RETURN(%)
-50
-100
-150
INTERPRETATION:
The Average CAAR for haft yearly is -2.75. So it is a negative for the
company & the investor. Also company takes a risk for IPOs. And less profit
potential of IPOs after long period i.e. haft yearly return for investor. As compare
to monthly return it is a high risky but quarterly return less risky for each 25
companies & investor.
49
LONG- TERM PRAFORMANCE OF IPOS (yearly):
RETURN ON YEARLY
CL.PRICE OF SAME CL.PRICE AFTER YEARLY RETURN
NO Name of IPO DAY 1YEAR (%)
1 Porwal auto component Ltd 79.58 65.174 -18
2 Aries agro ltd 172.197 143.287 -17
3 Transformer and rectifier ltd 534.17 370.9 -31
4 Burnpur cement ltd 19.175 12.271 -36
5 Jyoti laboratory ltd 734.15 598.217 -19
6 Renaissnce jwellary ltd 115.274 120.32 4
7 Edelweiss capital ltd 824.1 575.153 -30
8 Mundra port & SEZ ltd 297.145 370.198 25
9 Barak valley cement ltd 47.19 17.975 -62
10 Allied computer int. ltd 10.97 19.254 76
11 Chamical biotech ltd 27.197 15.364 -44
12 Vishal info. Technology ltd 179.87 180.364 0
13 KSK energy venture ltd 197.157 225.172 14
14 Sejal architectural glass ltd 92.154 104.031 13
15 Avon washing system ltd 8.257 19.854 140
16 Bafna Pharmaceuticals ltd 35.198 37.154 6
17 Aishwariya telicom ltd 57.191 31.294 -45
18 Sita Shree food product ltd 21.254 33.21 56
19 Niraj cement structureal ltd 227.9 142.35 -38
20 Godrej properties ltd 135.96 163.65 20
21 Think soft global service ltd 98.12 148.57 51
22 Euro multivision ltd 63.94 47.16 -26
23 C mahendra export ltd 115.95 142.36 23
24 Punjab &Sind bank 95.87 62.24 -35
Power Grid corporation of india
25 ltd 99.31 103.54 4
50
CHART OF YEARLY RETURN :
100
50
YEARLY RETURN(%)
0
1 3 5 7 9 11 13 15 17 19 21 23 25
-50
-100
INTERPRETATION:
The Average CAAR is -1.75.So it is a negative for the company & the
investor. Also company takes a risk for IPOs. And less profit potential of IPOs
after long period i.e. Yearly return for investor. As compare to monthly return it is
a high risky but quarterly return & haft yearly return less risky for each 25
companies & investor.
51
LONG- TERM PRAFORMANCE OF IPOS (FOR 24 MONTH):
RETURN ON 24 MONTH
CL.PRICE OF SAME CL.PRICE AFTER 2YEARLY RETURN
NO Name of IPO DAY 2YEAR (%)
1 Porwal auto component Ltd 79.58 45.167 -43
2 Aries agro ltd 172.197 98.271 -43
3 Transformer and rectifier ltd 534.17 482.754 -10
4 Burnpur cement ltd 19.175 16.387 -15
5 Jyoti laboratory ltd 734.15 570.33 -22
6 Renaissnce jwellary ltd 115.274 142.254 23
7 Edelweiss capital ltd 824.1 545.254 -34
8 Mundra port & SEZ ltd 297.145 375.159 26
9 Barak valley cement ltd 47.19 59.147 25
10 Allied computer int. ltd 10.97 15.364 40
11 Chamical biotech ltd 27.197 17.98 -34
12 Vishal info. Technology ltd 179.87 137.264 -24
13 KSK energy venture ltd 197.157 238.12 21
14 Sejal architectural glass ltd 92.154 107.1 16
15 Avon washing system ltd 8.257 27.379 232
16 Bafna Pharmaceuticals ltd 35.198 39.17 11
17 Aishwariya telicom ltd 57.191 29.146 -49
18 Sita Shree food product ltd 21.254 27.29 28
19 Niraj cement structureal ltd 227.9 163.98 -28
20 Godrej properties ltd 135.96 112.94 -17
21 Think soft global service ltd 98.12 125.917 28
22 Euro multivision ltd 63.94 44.51 -30
23 C mahendra export ltd 115.95 113.67 -2
24 Punjab &Sind bank 95.87 92.81 -3
Power Grid corporation of india
25 ltd 99.31 72.19 -27
52
CHART OF 2 YEARLY RETURN :
2YEARLY RETURN(%)
250
200
150
100 2YEARLY
50 RETURN(%)
-50 1 3 5 7 9 11 13 15 17 19 21 23 25
-100
INTERPRETATION:
The Average CAAR is -0.848 .So it is a negative for the company & the
investor. Also company takes a risk for IPOs. And less profit potential of IPOs
after long period i.e. 24 Monthly returns for investor. As compare to monthly
return it is a less risky but quarterly return & haft yearly return also less risky and
from the duration of 24 month the risk has been reduced for each 25 companies &
for investor.
53
LONG- TERM PRAFORMANCE OF IPOS (FOR 36 MONTH):
RETURN ON 36 MONTH
3YEARLY
CL.PRICE OF CL.PRICE AFTER RETURN
NO Name of IPO SAME DAY 3YEAR (%)
1 Porwal auto component Ltd 79.58 49.176 -38
2 Aries agro ltd 172.197 109.175 -37
3 Transformer and rectifier ltd 534.17 439.647 -18
4 Burnpur cement ltd 19.175 13.27 -31
5 Jyoti laboratory ltd 734.15 625.149 -15
6 Renaissnce jwellary ltd 115.274 111.351 -3
7 Edelweiss capital ltd 824.1 698.14 -15
8 Mundra port & SEZ ltd 297.145 403.31 36
9 Barak valley cement ltd 47.19 60.37 28
10 Allied computer int. ltd 10.97 13.215 20
11 Chamical biotech ltd 27.197 16.01 -41
12 Vishal info. Technology ltd 179.87 122.746 -32
13 KSK energy venture ltd 197.157 207.985 5
14 Sejal architectural glass ltd 92.154 119.31 29
15 Avon washing system ltd 8.257 11.31 37
16 Bafna Pharmaceuticals ltd 35.198 39.19 11
17 Aishwariya telicom ltd 57.191 34.371 -40
18 Sita Shree food product ltd 21.254 28.12 32
19 Niraj cement structureal ltd 227.9 159.89 -30
20 Godrej properties ltd 135.96 92.21 -32
21 Think soft global service ltd 98.12 109.07 11
22 Euro multivision ltd 63.94 72.69 14
23 C mahendra export ltd 115.95 78.137 -33
24 Punjab &Sind bank 95.87 101.35 6
Power Grid corporation of
25 india ltd 99.31 87.21 -12
54
CHART OF 3 YEARLY RETURN :
3YEARLY RETURN(%)
60
40
20
3YEARLY
0
RETURN(%)
1 3 5 7 9 11 13 15 17 19 21 23 25
-20
-40
-60
INTERPRETATION:
The Average CAAR is -1.69.So it is a negative for the company & the
investor. Also company takes a risk for IPOs. And less profit potential of IPOs
after long period i.e. 36 Monthly returns for investor. As compare to monthly
return it is a less risky but quarterly return & haft yearly return also less risky and
from the duration of 36 month the risk has been reduced for each 25 companies &
investor.
55
CHART FOR CAAR :
AVERAGE CAAR
0
1 2 3 4 5 6
-0.5
-1
-1.5 CAAR
-2
-2.5
-3
INTERPRETATION:
The Average CAAR has Been Negatives for Entire 36 Month .so in long
term performance is poorly for the 25 selected companies. And negative response
by Indian invertors. And negative returns get in long term IPOs.
56
COMMAN TABLE FOR LONG-TERM PERFORMANCE OF IPOS:
RETURN AFTER
HAFT
NO Name of IPO
1MONTH QUARTERLY YEARLY YEARLY 2YEARLY 3YEARL
(%) (%) (%) (%) (%) (%)
1 Porwal auto component Ltd 39 -6 -4 -18 -43 -38
2 Aries agro ltd 4 -18 -13 -17 -43 -37
3 Transformer and rectifier ltd -11 -29 -94 -31 -10 -18
4 Burnpur cement ltd -46 -62 -62 -36 -15 -31
5 Jyoti laboratory ltd -7 -17 -1 -19 -22 -15
6 Renaissnce jwellary ltd -2 26 38 4 23 -3
7 Edelweiss capital ltd -9 -26 -23 -30 -34 -15
8 Mundra port & SEZ ltd 23 30 38 25 26 36
9 Barak valley cement ltd -11 -53 -44 -62 25 28
10 Allied computer int. ltd 4 3 39 76 40 20
11 Chamical biotech ltd 22 -28 -11 -44 -34 -41
12 Vishal info. Technology ltd 17 -19 -13 0 -24 -32
13 KSK energy venture ltd 12 63 81 14 21 5
14 Sejal architectural glass ltd -7 -27 -44 13 16 29
15 Avon washing system ltd -3 82 52 140 232 37
16 Bafna Pharmaceuticals ltd -5 -15 -37 6 11 11
17 Aishwariya telicom ltd -14 -39 -31 -45 -49 -40
18 Sita Shree food product ltd 19 48 56 56 28 32
19 Niraj cement structureal ltd -3 -33 -31 -38 -28 -30
20 Godrej properties ltd -29 4 16 20 -17 -32
21 Think soft global service ltd 1 46 28 51 28 11
22 Euro multivision ltd 9 -33 -31 -26 -30 14
23 C mahendra export ltd 6 -3 38 23 -2 -33
24 Punjab &Sind bank -20 -23 -23 -35 -3 6
Power Grid corporation of
25 india ltd -12 10 12 4 -27 -12
57
CHAPTER 6:
CONCLUSION
58
The short-term is positive i.e. Average MAAR is 81.46% and the long-term
performance is negative for each month i.e. average CAAR. and short-term
performance of IPOs is the positive and the higher chance to earn return in
short-term IPOs for Indian investor.
59
CHAPTER 7:
Bibliography
60
Book:
The IPOs Decision: Why And How Companies Go Public, Jason
Draho, 2nd Edition.
Magazines :
Capital Marketing
(March, Jun, Sept, Des. - 2010)
Web sites :
WWW.Capital Market.Com
WWW.Money Controal.Com
WWW.yahoofinance.com
Www.indiaadvantage.co.in
61