Impact of GMP on listing gain and retail participation

Abstract

After the deregulation of capital markets in 1992, the Indian capital markets has been a flurry of capital activity taking place. One of the reasons companies approach the capital market is to raise capital for business activity. When the company issues capital for the first time to the public and institutional investor, it is known as the Initial Public Offering (IPO). Until 1992, the prices of the IPO was regulated the Government of India through Controller of Capital Issues (CCI). But with the creation of SEBI, the capital markets is much regulated and fairer. This is also reflected in the number of companies approaching to raise capital. In 2021 itself, 63 IPOs were listed on the market raising Rs. 120,000 crores (Chittorgarh, 2022). IPO in India is issued through a book building process. The company files a DRHP with the regulator containing all the relevant information about the issue except the price. Based on the information and price band (which is issued later), the bookrunning lead manager performs the book building exercise.