The study focuses on the performance of Initial Public Offerings (IPOs) made by the Indian companies on the basis of the IPO size. A sample of 219 IPOs made by the Indian companies during the period 2001 to 2010 was considered for the study. Using standard event study methodology, an event window was constructed for a period of 75 days from the date of listing of securities in the stock market. To eliminate market factors, market-adjusted return was calculated by deducting the market return from the actual return of shares. The size of issues was classified as small, medium and large. The results revealed that the performance of large-size IPOs was better than that of small and medium-size IPOs. The results further revealed that small-size IPOs were overpriced than medium and large-size IPOs.

Equity issues are made on the basis of market conditions. If the market perceives that a company will continue to have good earnings in future, the market price of the company’s share will remain at the same level or will go up. On the other hand, if the market doubts about the future earnings capacity of the company, it may place lesser value on its share price. Of course, any new investments made for expanding a business bear results only after a short gestation period, extending sometimes to a few years. These aspects would of course be considered by the market and the prices get normalized over a period of time. How quick the market adjusts the price, factoring in the new information would reveal the efficiency of the market. Hence, this aspect was studied with regard to the companies which made Initial Public Offerings (IPOs) during the study period. From the market point of view, it is essential to know how the market reacts to the IPOs of the Indian companies.

The price fixation of shares at the time of issue is important because it is considered to have a long-term impact on the market value determination of these shares. There are a number of instances where high prices are fixed for IPOs, with the prices going down subsequent to listing, causing heavy losses for the initial investors. Earlier studies have documented that in certain cases price recovery up to the IPO level was not attained even after two years of issue, indicating heavy overpricing of issues.

Companies may issue shares to public either under fixed price method or book-building method or under a combined method. Under fixed price method, the offer price for the securities is fixed and is intimated to the investors in advance. Under book-building method, the issue price is not fixed or intimated in advance. Companies offer shares at a range of price which is referred to as a price band, and within this price band the investors are allowed to bid. The final price of the security is determined only after the closure of the bidding.

Applied Finance Journal, Initial Public Offerings, An Empirical Analysis, Indian Scenario, Initial Public Offerings (IPOs), Market Conditions, Bombay Stock Exchange (BSE).