Determinants of IPO Pricing in Emerging Markets: Evidence from India Using Regression and Structural Equation Modeling

Initial Public Offerings (IPOs) represent a critical financing mechanism for firms transitioning into public markets. The determination of IPO issue price is a complex process influenced by firm-specific financial indicators, market dynamics, and investor perceptions. This study investigates the determinants of IPO issue pricing in the Indian market, focusing on key financial variables such as Return on Equity (ROE), Earnings Per Share (EPS), Profit After Tax (PAT), and Price-to-Earnings (P/E) ratio. Using a sample of 106 IPOs listed in India during 2024, the study employs correlation analysis, multiple regression, and Structural Equation Modeling (SEM) to examine the relationships between these variables and IPO issue price. The findings reveal that EPS is the most significant predictor of IPO pricing, followed by P/E ratio, while ROE and PAT exhibit statistically insignificant effects. The model explains 28.3% of the variance in IPO pricing, highlighting the dominant role of earnings-based metrics in investor decision-making. The study contributes to the literature on IPO valuation in emerging markets by integrating traditional financial metrics with SEM-based validation, offering implications for issuers, underwriters, and policymakers. Mediation analysis is done in order to understand the role of P/E Ratio in connection with EPS in IPO Issue Price.