Abstract

The last decade has witnessed a remarkable surge in PIPE transactions as companies resort to private equity due to the hardships associated with traditional stock offering. Private equity placements in different financial markets across the globe have evoked differing investor responses engendering both positive and negative announcement period returns. This paper aims to examine the impact of a PIPE announcement on investor behaviour and stock market performance in Indian context. To treat our research question and to test the hypotheses developed, we collected data on 44 listed companies, spanning the four major sectors of Indian Infrastructure firms- telecommunications, energy, transportation and utilities, and observed the price reactions surrounding 21 days of the announcement dates using market model-based event study methodology. The analysis shows that average Abnormal Return on the day of the announcement is 1.22% and Cumulative Average Abnormal Return is about -0.062% on the event day while, at the end of the event window it is 4.19%. The study reports significant impact of the announcement of privately placed issues on the stock price of the sample companies.

Keywords: PIPE, Infrastructure Sector, Event Study, Abnormal return