A surge in the secondary markets and a revival of interest amongst retail investors in 2014 has led to an increase in the number of companies looking to raise money through initial public offerings (IPOs).

However, the first few IPOs that came to the markets in early 2015 have seen a tepid response. One reason for this could be the historical performance of IPOs in India. According to a report by proxy advisory firm Institutional Investor Advisory Services (IiAS), about 60% of investors lost money by investing in IPOs and they were, on the whole, better placed investing in fixed deposits. High valuations are solely responsible for the anaemic IPO market, the firm said in the report.

IiAS’ analysis of 394 IPOs between 1 April 2003 and 31 July 2014 shows that only 164 companies are currently trading above the offer price, which is 42% of the total IPOs. One is more likely to get a higher success rate by flipping a coin 394 times.

The report adds that of these 164 companies, the returns are not significant. In 20% of them, investors would have made higher post-tax returns by investing in fixed deposits rather than these IPOs.

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