1 A Study on Determinants of Retail Subscription in Indian IPOs A dissertation report submitted in the partial fulfilment of the requirements of the degree of Master of Business Administration Submitted by: Akash Rai Registration No: 2023MMBA01ASB017 Under the Guidance of Dr. Kapil Arora 2 3 4 ACKNOWLEDGEMENT A project may be called to be an individual’s work, but in actuality, a project involves contribution of many people. This project also bears the mark of many people, and it is a pleasure for me to acknowledge and thank all of them. I am deeply indebted to Dr. Kapil Arora for his mentorship and guidance throughout the entirety of the project. It is only because of him providing his knowledge and his valuable time out of his busy schedule that this project came into being. I also am very grateful to my grandparents and my family for providing me with the necessary resources and understanding that helped me to gather required information and timely complete this project. I am also thankful to my friends who have supported me throughout the project and have suggested me solutions whenever I had a problem. I also take this opportunity to express my sincere gratitude to each and every person, who may have indirectly helped me complete this study. Thank You. 5 EXECUTIVE SUMMARY The primary aim of this report is to investigate the factors that influence the retail subscription levels of the Indian IPOs during the period 2021- 2024. This research work adopted the quantitative research methodology and used multiple linear regression analysis to test the hypotheses formulated for the study regarding the influence of the various factors on the subscriptions in retail IPOs. Along with this, the study also tries to establish and describe correlation among different factors that may affect retail subscription levels. This study sought to establish the factors influencing retail investors’ participation in IPOs while giving specific focus on the Indian IPO market. The empirical results show that the Grey Market Premium (GMP) significantly influences retail subscription levels; the results imply that the high GMP attracts the investors towards IPOs. Moreover, the firm’s age is also identified as being a factor, where new relevant firms are likely to appeal to retail investors given that the former are innovative oriented corporations. This study also finds that reputed individual investor influences the behaviour of the retail investor in the stock market. Moreover, the results reveal significant positive relationships between QIBs/NIIs and the IPO subscriptions for retail investors thereby pointing out the nature of interaction between different categories of investors in influencing IPO subscription rates. This report can help the investors, the companies, and the regulators as it contains recommendations for better investment opportunity prospectus and IPO markets. The research findings suggest applied importance for the Indian IPO market and call for a fresh perspective towards the retail investor behaviour in question. The research study can be used to provide insights to make investment decisions in a company that is launching its IPO. 6 TABLE OF CONTENTS Sl. No. Chapter Page No. 1 Introduction 7 2 Review of Literature 9 3 Research Methodology 14 4 Results & Discussions 18 5 Conclusions 23 7 CHAPTER 1: INTRODUCTION The recent news of Resourceful Automobile’s IPO, a Yamaha two-wheeler dealership, which operates 2 showrooms with only 8 employees, getting oversubscribed 496 times by retail investors sparked an interest to further study as to what could possibly be driving such exuberance and extreme optimism. In recent years, the Indian stock market has experienced a substantial recovery in IPO activity, with a notable increase in the number of businesses preparing to list. In 2023 alone, 87 companies intended to raise over ₹1,40,000 crores through IPOs, demonstrating a robust market but also heightened volatility and overly optimistic patterns. According to research, market sentiment, regulatory changes, and investor preferences all have an impact on IPO subscriptions. A study found that, while allocation proportions and issue features have typically gotten attention, external factors such as the Grey Market Premium, IPO ratings, and broker recommendations all have a considerable impact on overall subscription levels (Shetty et al., 2023). Given the complexities, a concentrated study on retail subscriptions could provide important insights into investor behaviour and decision-making processes. Retail investors' behaviour is especially notable because they are frequently perceived as less informed than institutional investors. According to studies, retail investors make judgments based on a variety of characteristics, including the availability of equity shares, market attractiveness, and corporate image (Kumar & Balamurugan, 2022). Understanding these characteristics can help you better understand how retail investors interact with IPOs, making your research more relevant and timelier. Despite numerous studies on IPO subscriptions, there remains a gap in literature specifically addressing the determinants affecting retail subscriptions in the Indian context. Most existing research has focused on institutional investors or broader market trends or foreign equity markets, leaving a niche for detailed exploration of retail investor behaviour in the context of IPOs 8 Aim & Scope of the Study This study focuses on identifying the determinants of Retail Subscription in IPOs in the Indian stock market during the last 4 years (FY22 to FY25), taking into consideration 53 IPOs. Company and IPO specific factors, such as Grey Market Premium (GMP), IPO Rating/Grading, IPO size, IPO lot size, post-issue promoter holding, firm’s age at the time of IPO, existing investors (institutional & reputed individuals), valuation of the firm, and Qualified Institutional Buyers (QIB) & Non-Institutional Investors (NII) subscription levels are taken into account. The study (Shetty et al., 2023) has found that GMP and IPO Rating has significant impact on the overall subscription, whereas other factors like issue price and issue size has no significant impact on overall subscription. With our research, we would like to assess whether these factors are determinants of retail subscription. There is limited existing literature on the other mentioned determinants of IPO subscription, especially retail subscription, in the Indian context. We expect to see that all the factors in our study having significant impact on the retail subscription in an IPO. Through Regression Analysis, we try to develop a Regression Model that would help us determine the level of Retail Subscription in Indian IPOs with as many independent variables as possible and significant. Conducting Correlation Analysis amongst the independent variables, we also try to understand if there is any existing correlation between a pair of such independent variables. With this study we would like to contribute to the existing literature, and open a new opportunity for further research specifically on retail subscription in Indian IPOs. The scope of this study is limited as it only considers 53 IPOs launched in the last 4 years. Further research may include a broader sample across a broader time period and may also include even more possible determinants of retail subscription in Indian IPOs. 9 CHAPTER 2: REVIEW OF LITERATURE A subscription rate shows the extent of demand of investors in a new IPO (Sahoo & Rajib, 2010). Also called the oversubscription rate, this is arrived at by dividing the number of applications by the issue size. Subscription rate is calculated on the basis of all classes of investors including QIBs, NIIs and retail class. Research on subscription rate has been split into two main categories: there is one discussing the effect on the IPO returns and the other discussing the factors affecting the subscription rate covered by different authors (Agarwal et al., 2006; Cheng et al., 2005; Ellikkal et al., 2022; Hossain & Omar, 2017; Jacob & Agarwalla, 2015). The Securities and Exchange Board of India (SEBI) controls and determines the allocation criteria of all sorts of investors via the book-building method for every IPOs available in the market. In the IPO process, the 50% of the floats are reserved for QIBs, 35% for RII and the rest 15% to NII. Subscriptions per each investor category are approximated by dividing the number of bids by the number of shares offered to each investor category. IPO Lot Size The lot size is the minimum number that an investor must purchase in order to participate in an Initial Public Offering (IPO). This factor is critical to individual investors in retail because it affects their ability to invest and has a large effect on subscription rates. Survey evidence indicates that a direct relationship exists between small lot sizes and enhanced subscription rates for the retail investors. It is observed that when companies decided to choose smaller lots, then the number of subscriptions grows significantly. This paper establishes that smaller lots can lead to increased participation from investors of different categories including the new ones who may not be willing to risk their large capital. It is also relevant to discuss the relationship between lot size and the company’s performance after the listing. Research also indicates that IPO lots that are usually small leads to better performance once listed since they are likely to be more demanded in the initial period by a broad pool of retail investors (Hossain & Omar, 2017). Grey Market Premium (GMP) A grey market is an unauthorized market where listing premiums are announced before listing in an IPO business (Pinki & Sharma, 2022). IPOs interest is evaluated by issuers and 10 underwriters through the use of grey markets. High dwarf premium encourages investors to create hype around an IPO that is popular with the public hence a high grey market premium. As noted by Krishnamurti et al. (2011), the IPO grey market in India is very active and provides preview of feelings on the market. While institutional investors have very small grey market premium, it is perceived that any grey market premium – big or small – involves the sentiment of retail investors only. GMP is actively monitored by large numbers of retail investors to establish the current status of market forecasts and make appropriate choices about getting involved (Chandu et al., 2024). This is one of the foremost ways through which GMP is used by most of the retail investors when assessing value in investment opportunities. An IPO’s GMP may be positive to encourage investors to invest in an IPO since it suggests that the stocks might move up and be sold at a better price once listed. On the other hand, low or negative GMP may be unfavourable in IPO because it may dissuade investors from subscribing probably due to low or negative IPO returns after listing of stock (Kumar & Lee, 2006). While Loffler et al. (2005) concluded that listing prices are accurately reflected by grey market premiums, Dave (2022) made no such conclusion. Further, the earlier research (Krishnamurti et al., 2011; Neupane et al., 2014) mainly focused on the impact of GMP on listing price instead of retail subscription. Chandu et al. (2024) noted that GMP increases the probability of retail investors participation in the offering stating that they fancy their odds of profiting quickly once the firm lists its stock. IPO Grade The paper (Cohen and Dean, 2005) brought to light information asymmetry between present owners and future IPO investors, that the credibility of the top management team serves as a useful benchmark for worth for future investors. This evident, suggests that the information about the IPO affects retail investors and potential investors greatly. There is ample evidence that due to behavioural biases, investors are often overconfident and unable to allocate capital efficiently when analysing IPOs (Ljungqvist, Nand, & Singh, 2006). This is how IPO grading becomes beneficial for an IPO investor because the IPO is graded depending on the fundamentals of the issuing company and this makes the retail investor to be in a better position to determine the quality of the IPO (Jacob & Agarwalla, 2012). A related research study by Khurshed et al., (2011) advocated that grading does influence the institutional investors’ subscription behaviour thus the impact on the general retail subscription levels. Banerjee, 11 Rangamani and Banerjee (2013) carried out research among 162 companies and identified that there is no significant difference in the IPO retail subscription rates and the IPO grading. IPO Size Another consideration is the absolute size of the IPO, that is, a large IPO automatically means that a significant proportion will be available to the retail investors. The study (Agarwal et al., 2006) suggests that bigger IPOs attracts more individual investors because of the reliability and lower risk associated with established companies. Hossain & Omar (2017) also contribute to this by arguing that large offerings improve the liquidity and visibility of securities making them more appealing to individual investors. On the other hand, firms that issue small IPOs are likely to struggle to gain attention from the market without unique selling propositions or from well-connected investors. Firm’s Valuation Company valuation process plays a pivotal role in IPOs and directly affects opinions of individual investors and subscriptions to the company. The price at which shares are sold to the investors is decided through the valuation process and due to this valuation affects the level of investor interest. The rationale of having an accurately supported valuation is that it is able to attract the attention of the retail investors who are willing to get into growth companies at fair prices. Some of the popular types of valuations include the Discounted Cash Flow method, the Comparable Company Analysis, Precedent Transactions for newer industries and Asset Based Valuation. Lastly, the value is aggregated based on the importance to reliable methods of valuation. The weights are decided based upon the preference of the entity determining the valuation, its judgment, experience and the amount of confidence that it has in its methods. Theories of behavioural finance suggest that the average investor suffers from loss aversion, whereby the investor will respond negatively to overvaluation possibly by abstaining from subscribing (Ravi Sharma, 2024). Post-Issue Promoter Holding Promoter ownership in a company is the ownership held by the founders or their friends and family. When evaluating a company or business, investors/analysts view a high promoter holding percentage as a good investment because it shows that the promoters are also involved in the company and its future activities. 12 Post-Issue Promoter Holding refers to the proportion of a company's ownership that is retained by the promoters or founders following a public offering. An Offer-for-sale (OFS) is a type of issuance in which current investors have the opportunity to sell their investments. In this scenario, the promoters determine whether they will partially withdraw their investment or not. A promoter, confident in the business and the company, typically avoids reducing their ownership. Research by Sahoo & Rajib (2010) and Bansal & Khanna (2012) indicated a favorable correlation between post-issue promoter holding and IPO subscription. Firm’s Age at the time of IPO The age of a company can be used as a signal of its stability, maturity, and operational history, all of which are important factors for potential investors to consider. Research conducted by Kumar & Lee (2006) has indicated that established companies with well-established business models are considered as secure investments and are seen as being dependable, which leads to increased interest from retail investors, particularly those who prefer lower risk. Established companies are often viewed as more recognizable because of their long-standing existence in the industry, resulting in increased interest from retail investors who favour investing in familiar organizations (Ravi Sharma, 2024). Existence of Institutional & Individual Investors The participation and standing of current investors, like VC firms, private equity groups, and notable individual investors, are key in forming retail investor opinions and impacting subscription rates in an IPO. A study conducted by Jeppsson (2018) discovered that retail subscriptions see a notable increase when prominent institutional investors take part in an IPO, leading to boosted confidence among individual investors. However, research say that this is symptomatic of herd mentality by retail investors, that, when they see large and known entities investing in such an IPO they follow suit thinking it is the right thing to do. Jeppsson (2018) also discovered that firms with institutional investors’ support indicate improved performance in the aftermarket compared to the firms that do not have institutional investors’ support. Post-Issue PE Ratio One of the ratios that investors use to evaluate the value of a firm before it joins the stock market is the Price to Earnings ratio or P/E ratio before it goes for an IPO. This proportion gives a relative sense of how current prices of a company’s share relate to its EPS this provides 13 information concerning market forecast on the company’s growth and profitability in the future. It is also used as a tool which investors use to identify whether a stock is overvalued or undervalued or fairly valued. A company with a higher PE ratio is overvalued than it is worth probably due to market expectations about the company. According to Shetty et al., (2023), this measure is often used by the retail investors to take informed decisions relating to investment in IPOs. Research shows that market P/E ratio affects investor interest in IPOs with statistical significance. Karami & Hasami (2018) explain that the P/E ratio in IPOs leads retail investors to exhibit behavioral biases. The use of P/E ratios can be problematic, for investors may avoid investing when they come across high P/E ratios because of concern over overvaluation. Low P/E ratios on the other hand have the possibilities of attracting more investors since they point likely investment opportunities. Market investors often compare the P/E ratio of a stock with the industry mean or its previous year’s figure to find out its value Avci (2021). The behavioural finance theories imply that self- biases could affect how the retail investor understands the P/E ratio. For example, high P/E may be overlooked by investors because of overconfidence in the growth prospects; thus, more subscriptions are made despite possible risks (Kumar & Lee, 2006) Firm’s Industry & Sector Ang & Boyer (2009) analyzed 6000 IPOs from 1970 to 2002, dividing them into Established Industries and New-age Industries. Ang & Boyer discovered that Venture Capitalists (VCs) frequently support IPOs in emerging industries, despite their lower Return on Equity (ROE), uncertain profitability, and obscure risks. Ang & Boyer also discovered that IPOs in emerging industries outperform those in established industries when held for one to ten years, indicating that new industry IPOs are more appealing to investors due to higher returns. The research also mentions that the initial companies in a new sector are expected to have better quality than the ones that come later. 14 CHAPTER 3: RESEARCH METHODOLOGY Research Design The study is quantitative and longitudinal in nature and is focused on identifying and analysing the determinants of retail subscription levels in IPOs of Indian companies. This involves collecting and analysing the quantitative data (such as GMP, IPO Lot Size, Valuation, etc.) related to the IPO, which would assist us in understanding the relationship between various factors and retail subscription levels in Indian IPOs. Sampling Design The sampling is done through a non-probability sampling method, specifically convenience sampling, where the sample is taken based on the availability of required data and the relevance of the IPOs to the research. The IPOs of state-owned companies are not considered. Through the sampling, we have taken a sample of 53 IPOs launched between 2021 and 2024. Hypothesis of the Research The null hypotheses of the research are as follows: H01: The price for each lot in the IPO has no significant impact on the retail subscription of the IPO. H02: The GMP for the issued shares has no significant impact on the retail subscription of the IPO. H03: The Rating/Grading assigned to the IPO has no significant impact on the retail subscription of the IPO. H04: The size of the IPO has no significant impact on the retail subscription of the IPO. H05: The valuation of the firm has no significant impact on the retail subscription. H06: The post-issue promoter holding has no significant impact on the retail subscription of the IPO. H07: Firm’s age at the time of IPO has no significant impact on the retail subscription of the IPO. 15 H08: The existence of institutional investors has no significant impact on the retail subscription of the IPO. H09: The existence of reputed individual investors has no significant impact on the retail subscription of the IPO. H010: The subscription level of QIB and NII has no significant impact on the retail subscription of the IPO. H011: The post-issue PE ratio multiple has no significant impact on the retail subscription of the IPO. Data Collection Methods The data collected is identified to be of secondary nature. Majorly, the data will be collected from the official website of SEBI, NSE, NSE Emerge, BSE, BSE SME, along with news articles from reputed sources such as Economic Times, Business Standard, MoneyControl, LiveMint, etc. The IPO related data such as GMP, Subscription Levels, etc. are taken from websites like Chhitorgarh, Investorgain, IPOwatch, etc. The Red-herring Prospectus of the issue would also be analysed to collect data on the IPO size, lot price, issuing company’s industry and age. The Grey Market Premium (GMP) for the IPO on the 2nd day is important as most retail subscriptions for Indian IPOs are received on the final day, potentially impacting subscription. Prior to 2018, every IPO in the Indian Stock Market required assessment by one or multiple credit rating agencies in India, with ratings typically being in alphabetical (A-E) or numeric (1- 5) form as shown in Table 1. Table 1: IPO Grading Scale IPO Grade Assessment A or 5/5 Strong Fundamentals B or 4/5 Above Average Fundamentals C or 3/5 Average Fundamentals D or 2/5 Below Average Fundamentals E or 1/5 Poor Fundamentals 16 In 2018, SEBI eliminated all rules regarding IPO grading, so now companies are not required to have their IPO graded by a SEBI registered Credit Rating Agency (CRA). Nonetheless, investment banks and brokerage firms in India frequently release their own analysis, known as an "IPO note", on the IPOs of certain Indian companies, in order to assist retail investors in comprehending the IPO more easily. These analyst notes suggest either recommending a 'Subscribe' or 'Avoid' call based on a detailed analysis of the IPO's Prospectus. The 'Subscribe' call is made for offerings with strong fundamentals and are a good investment option for earning high returns. On the other hand, a 'Avoid' rating is assigned to investments that lack solid fundamentals and are not a wise choice for investing. These companies might offer minimal returns while carrying significant risks. Upon examining multiple IPOs, it was discovered that only a limited number of organizations frequently researched Indian IPOs, including AXIS Capital, Canara Bank Securities, Ventura Securities, ICICI Capital, Aditya Birla Capital, Motilal Oswal, Swastika Investments, Reliance Securities, SBICAP Securities, and BP Equities. We will investigate whether any of these entities have analyzed an IPO for our research. If none of them analyzed the IPO or made a 'Subscribe' or 'Avoid' recommendation, indicating a neutral position, we would rate the IPO as 0. In the event of a 'Subscribe' call, a score of 1 would be assigned, while a score of -1 would be given for an 'Avoid' call. The post-issue PE Multiple is extracted from both the red-herring prospectus (RHP) of the issue and the IPO note published by investment banks in India. If the PE Multiple is unknown, we determine the ratio by using the most recent earnings per share (EPS) from the company's financial statements and setting the price equal to the upper price band. The valuation after the issue is also computed based on the higher price range and obtained from the RHP, as well as the previously mentioned IPO Note. Institutional investors are represented as a dummy variable in which IPOs without institutional investors are assigned a value of 0, while IPOs with institutional investors are assigned a value of 1. Likewise, distinguished individuals are also treated as a dummy variable. 17 Other factors such as the size of the IPO (in absolute figures), post-issue promoter holding (in percentage), firm’s age at the time of IPO, and the lot size of the issue (in INR) are taken from sources such as Red Herring Prospectus, Websites, News Articles from reputed sources, the issuing company’s website, NSE, BSE, and SEBI. Tools for Analysis The analysis will be done through MS Excel to develop a Multiple Linear Regression model in order to assess the strength of association between the dependent variable and the independent variables, where the Retail Subscription will be the dependent variable, and the factors mentioned before would be the independent variables. Pearson’s Correlation Coefficients are also measured using MS Excel to describe any correlation that may exist between the dependent variable and the independent variables, and among the different independent variables. Limitations The methodology adopted may have several limitations, such as the sample size, the time horizon, and the sampling technique. As the research only takes into consideration 53 IPOs as the sample, the finding may not be inferred to all the IPOs. Similarly, the time horizon considered is also limited i.e., between 2021 & 2024, thus the research may not be representative of the broader market and might fail to accurately capture the long-term trends and the change in market sentiment. Also, as the research only considers the IPOs launched in the Indian stock market, they are not representative of the IPOs launched elsewhere in the world. Growing optimism towards India and its growth in the upcoming years may have caused biases in the investors, which are not captured in this study. 18 CHAPTER 4: RESULTS & DISCUSSIONS Table 3 indicates that the regression model is statistically significant even at the 1% level. Nevertheless, the model indicates that only 50.44% of the fluctuation in Retail Subscription levels can be clarified by the variables such as Lot Size (in ₹), GMP, IPO Grade, IPO Size (in ₹ Crs), Valuation (in ₹ Crs), Post-Issue Promoter Holding, Firm’s age, Existence of Institutional Investors & Reputed Individual Investors, QIB & NII Subscription Levels, and the Price- Earnings (PE) Ratio. Table 2: Model Summary of the Regression Equation in MS Excel Model R R Square Adjusted R Square Standard Error 1 0.781 0.609 0.504 23.72 Table 3: Output of ANOVA Test in MS Excel Model Sum of Squares df Mean Squares F Sig. 1 Regression 35976.863 11 3270.624 5.812083928 0.000 Residual 23071.859 41 562.7282679 Total 59048.722 52 Table 4 displays the initial regression results with all independent variables included. The data in the table indicates that the GMP and the age of the firm at the time of the IPO are statistically significant at a 5% level. This indicates that retail investors take into account the IPO's GMP when subscribing. GMP, paid in the grey market for new shares above issue price, is seen by retail investors as a direct indicator of listing gains and can motivate them to subscribe to an IPO for quick profits. Interestingly, we discovered that the age of the company has a negative impact on the level of retail subscriptions. This could be because retail investors nowadays prefer to invest in innovative companies in unconventional industries or those creating new 19 markets. These up-and-coming firms often challenge the status quo, offering potentially higher returns for retail investors compared to older companies. Table 4: Coefficients of the Regression Equation Coefficients Standard Error t Stat P-Value Retail Subscription 98.47 161.65 0.61 0.55 Lot Size -0.01 0.01 -0.47 0.64 GMP 44.57 18.77 2.37 0.02 IPO Grade -0.45 7.63 -0.06 .95 IPO Size 0.00 0.01 -0.29 .78 Valuation 0.00 0.00 0.02 .99 Post-Issue Promoter Holding -10.87 23.00 -0.47 .64 Firm’s Age -0.63 0.32 -1.96 .06 Institutional Investment 0.87 8.96 0.10 .92 Reputed Individual Investment 8.88 7.17 1.24 .22 QIB & NII Subscription Level 0.07 0.07 1.07 .29 Post-Issue PE Ratio 0.00 0.06 0.08 .93 As there are various variables that have a p-value of more than 0.05 and thus are not statistically significant, we iterated another regression model where we excluded the variable (or factor) that had the highest p-value. We continued the iterations as long as the dependability of the model, which is measured by Adjusted R2, increased. We iterated 8 Regression models, with the 7th Model being the most dependable model with an Adjusted R2 of 0.562 (see Table 5), which means that 56.2% of the variability in Retail Subscription Levels can be explained by 20 the variables GMP, IPO Size, Firm’s Age, Existence of Reputed Individual Investors, Subscription levels of QIB & NII. Table 5: Model Summary of the Final Regression Equation in MS Excel R R Square Adjusted R Square Standard Error 0.777 0.603 0.562 22.31 Table 6: Output of ANOVA Test in MS Excel df SS MS F Sig. Regression 5 35653.276 7130.655 14.325 0.000 Residual 47 23395.445 497.775 Total 52 59048.722 The final regression equation obtained is: �̂� = 15.064 + 47.207𝑥1 − 0.002 𝑥2 − 0.648 𝑥3 + 9.486𝑥4 + 0.07𝑥5 Here, �̂� is the retail subscription 𝑥1 is the Grey Market Premium 𝑥2 is the IPO Size 𝑥3 is the Firm’s Age 𝑥4 is the Existence of Reputed Individual Investors 𝑥5 is the QIB & NII Subscription Levels Table 7 indicates that the significance of GMP & Firm’s Age is observed even at a 1% level. Variables such as the size of the IPO and the presence of well-known individual investors are important at a significance level of 10%. The presence of well-known individual investors has a beneficial effect on retail subscription levels, as retail investors may be inspired by their success and aim to achieve similar results by emulating them. Additionally, the sectors in which 21 these companies operate, and are supported by these investors, are appealing to investors because they have the potential to become successful, and investors are interested in profiting from these investments. Table 7: Coefficients of Regression Equation Coefficients Standard Error t Stat P-value Retail Subscription 15.064 7.646 1.97 0.055 GMP 47.207 15.749 2.99 0.004 IPO Size -0.002 0.001 -1.65 0.105 Firm's age -0.648 0.278 -2.34 0.024 Reputed Individual Investors 9.486 6.449 1.47 0.148 QIB & NII Subscription Level 0.070 0.060 1.17 0.250 With the findings of the final regression model, we must reject the hypotheses H02, H04, H07, H09. Correlation In Table 8, we can see that Retail Subscription and GMP have a moderately positive correlation, which also supports our previous finding from regression analysis. The table also shows that the QIB and NII subscription levels in an IPO have a moderately positive relation with retail subscription. The possible reason for this may be, retail investors often check the subscription levels of QIB and NII in an IPO as these groups are often much more informed that the retail investors and their judgement is that much more reliable to retail investors. We can also see that the subscription levels of QIB and NII have a strong positive relation with the GMP. As per our earlier reasoning, this relationship may mean that people are willing to pay a higher premium for those companies in which the groups of QIB and NII are interested. 22 Table 8: Correlation Coefficients Retail Subscript ions Lot Pric e G M P IPO Grad e IPO Size Val uati on Promote r Holding Firm ’s Age Institution al Investors Individua l Investors QIB & NII PE Rati o Retail Subscripti ons 1.000 Lot Price 0.008 1.00 0 GMP 0.708 - 0.11 8 1. 00 0 IPO Grade 0.162 0.11 4 0. 24 3 1.00 0 IPO Size -0.264 - 0.58 3 - 0. 18 4 - 0.14 8 1.0 00 Valuation -0.263 - 0.60 8 - 0. 16 5 - 0.10 9 0.9 87 1.00 0 Promoter Holding -0.106 - 0.01 0 - 0. 00 9 0.22 2 - 0.1 64 - 0.08 0 1.000 Firm’s Age -0.213 - 0.11 1 0. 02 4 0.14 7 0.0 21 0.07 9 0.191 1.00 0 Institution al Investors 0.149 - 0.00 1 0. 21 2 0.00 7 0.1 10 0.10 6 -0.293 0.03 7 1.000 Individual Investors 0.142 - 0.12 5 0. 06 6 0.09 5 0.2 59 0.26 2 -0.201 0.03 6 0.254 1.000 QIB & NII 0.680 - 0.00 6 0. 83 7 0.28 9 - 0.2 05 - 0.18 3 -0.035 - 0.05 3 0.068 0.085 1.00 0 PE Ratio 0.011 0.12 9 0. 00 4 - 0.18 2 - 0.1 22 - 0.09 1 0.103 0.10 8 0.141 -0.017 0.04 9 1.0 00 23 CHAPTER 5: CONCLUSIONS This paper was focused on identifying factors affecting subscription in retail Indian IPOs in the years 2021 to 2024, along with developing a regression model that would help us predict retail subscription level. The research sampled 53 IPOs and employed multiple linear regression analysis to estimate and explain retail investor IPO participation. The Grey Market Premium is identified to be statistically significant when it comes to retail subscriptions. This study also showed a positive relationship with the number of retail subscriptions, consistent with prior work that established that GMP plays a crucial role in shaping the retail market. This finding corresponds with the findings made by Chandu et al., (2024) where they noted that where GMPs are generally high, the retail subscription levels follow suit. The study also showed that firm’s age is negatively correlated to the number of retail subscriptions in the IPO of the firm. This suggests that companies which are relatively younger, and have more technologically advanced business models, are the most popular among retail investors. This study however goes against previous research (Kumar & Lee, 2006) that established companies are usually preferred by retail investors. It brings a shift in the focus of retail investors to the newer, young firms which may be attributed to the fact current/future growth potential is believed to be higher than these firms. The final regression model accounts for roughly 56.16% of the variability in retail subscriptions. This indicates that even though factors such as GMP and firm age have a bearing on the ability of a magazine to gain subscription, there could be other factors that are inexhaustible and basic in determining subscription levels. This research also found that the presence of reputed individual investors had a positive effect on the overall retail subscriptions. Also, the results revealed a marginal significance of IPO size and the subscription level of QIB and NII. From these findings it becomes clear that social factors such as market perception of investors and general sentiments, trends set by institutional and other individual investors are factors that influence retail investors. The paper has also several limitations such as counting 53 IPOs and a timeframe of 2021-2024 only. In addition, any regional or market specific bias may have affected the findings of the study. Such limitations should be addressed in future works involving larger sample size as well as increase in the time horizon to include changes in the market trends. If other variables 24 like, macroeconomic factors, sectoral factors, and the effects of change in regulation on the market could be included, the model would give a general understanding of the behaviour of the retail investors. 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