This paper attempts to empirically explore the determinants of the underpricing of Initial Public Offerings ('IPOs')2 listed on the National Stock Exchange ('NSE'). Various theories explaining the underpricing are examined and the regulatory framework around the IPOs is discussed. The results indicate that the offer price fixation by the merchant banker in book building process and the listing delay positively impact the first day underpricing whereas the money spent on the marketing of the IPO, reputation of the Book Running Lead Manager ('BRLM'), issue size, IPO grading, age of the firm, internal risk, equity retained by the promoters and the PSU/ Private classification of IPOs are insignificant in explaining underpricing. This insignificance can be due to the idiosyncrasy of the IPO study based on the time period and the markets in which the study is conducted. The findings of the study have useful implications for the retail investors, policy makers, market intermediaries as well as investors in the book built IPO.
Keywords
Initial Public Offerings, Book Building, Underpricing, Investment Decisions
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