On March 15, 2018, Bandhan Bank Ltd., a commercial bank focused on micro banking and general banking services in West Bengal, India, conducted its initial public offering (IPO) of common stock. In the primary market the company’s shares were priced at 375 (Indian Rupees) per share, but after one day of trading on the Bombay Stock Exchange (BSE), the share price closed at 476.85. The company sold 119 million shares in the offering.
a. To what extent (in Rupees and on a percentage basis) was Bandhan Bank’s stock underpriced in its IPO?
b. How much cash (before deducting fees to investment banks) did Bandhan Bank raise? How much more would it have raised if the shares had not been underpriced?