News: India outsmarts US with higher investor returns from IPOs

(PTI 23/04/2007) New Delhi - Concerns may have been raised about newly listed companies trading below their issue price, but domestic firms have outperformed their US counterparts in terms of investor returns in the stock markets.

Initial public offers on the domestic bourses have given an average return of about 13 per cent over their issue price so far this year. This is against a lower eight per cent return in the much-mature market of the US, according to an analysis of IPOs in the two countries by PTI Research team.

The study is based on data collected from the US and Indian stock exchanges and covers IPOs from January till April 20 this year.

The analysis allays fears over investors losing their wealth in IPOs due to a large number of stocks plunging sharply after a dream listing with huge premium. This is because the average return at the current levels is actually higher than the return at the time of listing in India.

In comparison, the current average return from the IPOs in the US is lower than the average return on the first day of listing. This indicates that listings have been at overvalued levels and were followed by softening in share prices.

Incidentally, the number of new listings is also higher at 53 in the US, as against 40 at India's two premier bourses -- Bombay Stock Exchange and National Stock Exchange.

"It validates the point that IPOs in India are actually under-priced. All IPOs have been listed at a premium and investors will continue to gain from investment in them," Prithvi Haldea of IPO-tracking firm Prime Database, told PTI.