IPO Valuation and Post-Listing Performance in India (2015–2024): An Integrated Analysis of Valuation, Demand, Sentiment, And Firm-Level Determinants

In this paper, the authors investigate the factors that affect the IPO listing gains and the one-year post-listing returns in India during the decade (2015-2024) that marks a period of major structural change in the primary equity market in India. The study uses a cross-sectional ordinary least squares (OLS) analysis, which is complemented by heteroscedasticity-robust inference along with binary logistic regression analysis, to analyse a sample of 230 mainboard IPOs from a universe of 354 IPOs that made it to the National Stock Exchange (NSE) or the Bombay Stock Exchange (BSE). Two outcomes are analyzed: listing gain (short run underpricing) and 1-year return (medium run performance). Explanatory variables include valuation (issue P/E ratio), demand (total subscription multiple), pre-listing sentiment (grey market premium, GMP), corporate governance (post-issue holding of promoters), macro-financial conditions (India VIX on listing date) and issuer scale (natural log of issue size). The listing-gain regression (R² = 0.58) confirms that the subscription rate (β = 0.42, p < 0.001) and GMP (β = 0.37, p < 0.001) are the two most important factors, which aligns with information cascade and investor sentiment theories. The constraints of valuation discipline and macro-financial stability, in the form of issue P/E ratio (β = −0.11, p < 0.05) and India VIX (β = −0.29, p < 0.05) are significantly negatively related to short-run underpricing. The holding of the promoter (β = 0.31, p < 0.01) and the volume of the issue (β = 0.24, p < 0.01) are the main factors over one-year periods (R² = 0.49), and sentiment variables are greatly reduced, suggesting a structural shift from the demand-driven to the fundamentals-driven pricing of this type of issue over the medium term. The logistic model correctly forecasts positive one-year returns 71.3% of the time based on the pre-listing observables alone. The results of the sectoral analysis indicate that the technology sector and the consumer-sector IPOs had materially higher returns compared to traditional industries while the return dispersion of issues revealed COVId-19 was significantly higher.