Performance Quantiles for Venture Capital and Private Equity Affiliated IPO in India

Marut Dutt () and Seshadev Sahoo
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Marut Dutt: Indian Institute of Management
Seshadev Sahoo: Indian Institute of Management

A chapter in Proceedings of the Sustainability in Emerging Economies - Integrating Business Excellence in Management Education (SEE-IBEME-2024), 2025, pp 201-240 from Springer

Abstract: Abstract The study objective is to do the performance analysis of Venture Capital and Private Equity backed Initial Public Offering at various quantiles of initial price performance and do the comparative analysis of performance at the median quantile. The study conduct rigorous statistical analysis to assess post-IPO performance measures, including stock returns, using a comprehensive dataset of IPOs. The results of the study show that IPOs funded by Venture Capital and Private Equity performed significantly differently across various performance quantiles. Although IPOs funded by Venture Capital firms often do better in the upper quantiles, the difference becomes less pronounced or even reverses in the lower quantiles. The study also takes into account how firm-specific characteristics and industry dynamics affect the success of IPOs sponsored by Venture Capital and Private Equity & evaluates the significance of independent variables at various quantiles. The analysis makes use of data from 123 IPOs in India between 2004 and 2017 that were supported by private equity and venture capital. For VC affiliated IPO, At 25th percentile, Age, Weighted EPS, Post Issue Promoter Holding (PIPH) are statistically significant regressors for initial performance. At 50th percentile Age, PIPH are statistically significant regressor for initial price performance. At 75th percentile Age, Weighted NAV,PIPH are statistically significant regressors for initial return. For PE Affiliated IPO, At 25th percentile, Weighted NAV, PIPH, Offer Size are statistically significant regressor for initial return. At 50 percentile Weighted EPS, PIPH, Offer Size are statistically significant regressor for initial price performance, At 75 percentile PIPH, IT Industry, Hot and Cold are statistically significant regressor for initial performance. We also conclude that median initial performance is statistically significantly different between Venture Capital and Private Equity Backed IPO based on Mann Whitney U Statistics. Our study offers insightful information to a variety of stakeholders. Making better informed investment selections can be facilitated for investors by providing them with a more sophisticated understanding of the performance consequences linked to venture capital and private equity financing. Along the way to an IPO, entrepreneurs might learn about the possible advantages and disadvantages of working with VC or PE firms. Our results can also be used by scholars to investigate the intricate dynamics of the VC and PE environment and how they affect the IPO market. In short, this study adds significantly to the body of knowledge on the subject by revealing the performance disparities between VC and PE-backed initial public offerings (IPOs) across a range of quantiles. Our results highlight the significance of taking into account the particular performance quantile in addition to the kind of private equity support when assessing the possible outcomes of an initial public offering.

Keywords: VC Backed IPO; PE Backed IPO; Quantile Regression; Pricing Performance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-696-3_13

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DOI: 10.2991/978-94-6463-696-3_13

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