The IUP Journal of Applied Finance
Performance of IPOs During Covid-19 Pandemic and Factors Affecting Investors' Perception

Article Details
Pub. Date : April, 2023
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF030423
Author Name : Nupur Veshne and Jyoti Jamnani
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 23



Initial Public Offering (IPO) is a fund-raising tool through which a company gets listed for the first time under SEBI regulation and issues IPOs to raise funds from the public. The shift from a privately-owned to a publicly-owned firm via an IPO is the most significant event in a company's life (Pagano et al., 1998). In an IPO investment, there is limited historical data to analyze and predict the future performance of the company; hence it becomes a risky investment for the investors as they cannot predict how the shares will perform in the future. Most companies that go for an IPO are in the growth or expansion phase so it becomes more difficult to predict their market position and performance in the future, which leads to uncertainty in deriving their future value. Also, most IPOs are of companies going through a transitory growth period, and are therefore subject to additional uncertainty regarding their future value. This study analyzes the performance of the IPOs issued during the Covid-19 pandemic, when the markets across the world faced massive disruptions. The IPOs from various sectors like finance, technology, service, infrastructure, food, pharmaceutical and information technology were considered for the study. The study also analyzes the factors affecting investor perception towards investment in an IPO. The study considered the IPOs issued during the pandemic, and their performance on the listing day was measured by considering issue price, listing price and closing price. It was observed that 90% of the IPOs selected performed well during the listing day and 10% underperformed. It was also found that factors like company brand, company sector, fundamental analysis, company ratings, expert opinion and stock market conditions had a positive impact on the investors' decision to invest in an IPO. The study also revealed that factors like risk factor in primary market, returns on IPO on the listing day and Gray Market Premium have no significant impact on the investors' perception.


Initial Public Offerings (IPOs) are the most important sources of funding for Indian companies looking to start new businesses or expand the existing ones. The shift from a privatelyowned to a publicly-owned firm via an IPO is likely the most significant event in a company's life (Pagano et al., 1998). "IPOs in India are underpriced based on their performance on the first trading day. Underpricing is the pricing of the IPO at less than the fair value of the issue. There have been two major anomalies concerning IPO literature worldwide: listing day underpricing and post-listing underperformance in the medium to long run" (Hawaldar and Mallikarjunappa, 2018). Three categories of IPO underpricing exist: voluntary, pre-market,