Page 206 - ES 2020-21_Volume-1-2 [28-01-21]

Process Reforms: Enabling decision-making under uncertainty 189

over-subscribed (or under-subscribed) and their prices move up (or down). As Figures 5 and 6
show, oversubscription and first-day gains for IPOs in the private sector are quite significant for
many years; at the same time, reflecting the uncertainty involved in predicting the listing price,
losses are large too in some years. Figure 5 shows the number of times Indian IPO stocks listed
on BSE and NSE between 2010-2020 were oversubscribed by different class of investors. In the
last 5 years, average total subscription has been 20-40 times for these IPOs though it has been
lower in previous years. Figure 6 shows that most private sector IPOs in the last 7-8 years have
had positive listing gains though losses have been large too in previous years. Even in 2019,
nearly 60 per cent IPOs had positive listing gains. Table 6 lists the information on some specific
stocks to buttress this point that the expected listing price and the amount of subscription is quite
uncertain apriori.

Figure 5: Oversubscription of Indian IPOs listed on BSE and NSE (2010-20)

140
Oversubscription (number of times) 80
120

100

60
40
20

0
2010
2013
2014
2011
2012
Average of QIB oversubscription 2015 2016 2017 2018 2019 2020
Average of HNI oversubscription
Average of RII oversubscription Average of Total oversubscription

Source: BSE and NSE. Note: All Indian IPO stocks listed after 2007 are covered. QIB: Qualified
Institutional Buyer; NII: High Net-Worth Individual Investor; RII: Retail Individual Investor; Total
Oversubscription: Number of Times Issue is Subscribed (BSE + NSE)
Figure 6: Listing Gains of Indian IPOs listed on BSE and NSE (2010-19)

30 90
25 80
Average listing gain of IPOs (%) 10 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 60 gain Percentage of IPOs with positive listing
20
70
15
50
40
30
-5
-10
10
-15 20
-20 0
Average listing gain of IPOs (%)
Percentage of IPOs with positive listing gain (%)

Source: BSE and NSE. Note: All Indian IPO stocks listed after 2007 are covered.