Indian SME IPOs show short-term overperformance but long-term underperformance, influenced by factors like issue size, profitability, and market conditions.
Authors
Parveen Siwach, Symbiosis Centre for Management Studies, Uttar Pradesh, Noida, 201 301, India; National Institute of Food Technology Entrepreneurship and Management, Haryana, Kundli, 131 028, India
R. Prasanth Kumar, University of Hyderabad, Andhra Pradesh, Hyderabad, 500 046, India
Vikas Gupta, Assistant Professor, Jindal Global Business School, O.P. Jindal Global University, Haryana, Sonipat, India
Summary
Purpose: The study aimed to analyze the long-run performance of 383 Indian SME IPOs offered from 2012 to 2020.
Methodology: The article used event time methods to examine company performance by creating equal and value-weighted portfolios. Furthermore, the study employed calendar time portfolios with the Fama-French three-factor model and Carhart fourfactor model to have robust results. The study used cross-sectional regression to examine factors shaping IPO performance.
Findings: Using 12-month buy-and-hold abnormal returns, the results demonstrated IPO overperformance for both equally weighted and value-weighted portfolios, while the positive alpha of calendar-time portfolios validated these findings for the same period. However, regression outcomes revealed IPO underperformance for 36-month calendar-time portfolios. The findings indicated a significant impact of issue size, oversubscription, debt-to-asset ratio, profitability, hot market conditions, and listing gains.
Practical Implications: Practical implications suggested informed IPO decisions, cautious IPO assessment, and risk management for IPO investors and other stakeholders. Originality: The study employed different approaches and investigated various significant aspects, providing valuable insights for investors and market players.
Published in: Indian Journal of Finance
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