What are the Things to Consider in IPO Investment?

Calendar 2021 is expected to be a record year for investment in IPOs in India, with a vast number of IPOs scheduled for the following months. In addition, the IPO equities that got issued in 2020 are currently trading above their issue prices. They gained up to 400% since listing. These factors combine to make IPO investment an appealing alternative for new investors. A few notable brands, such as LIC, are expected to enter the market before the conclusion of the fiscal year. You can even get the best opportunity to invest in LIC IPO Date & Price with the IIFL Securities. 

However, like the stock market, IPOs include a certain amount of risk, and due investigation is essential before investing in them. If you decide to invest in an IPO, keep the following considerations in mind:

  • Before investing, it is essential to understand the nature of its business. After she has grasped the business, the next stage is to identify a fresh market opportunity. Because the extent of the opportunity and the company’s ability to gain market share may make or break growth and shareholder returns. On the other hand, an investor should avoid an IPO if the company’s operations are uncertain.
  • It is crucial to examine how the funds from the IPO will be utilised. For example, if the company thinks only debt will get repaid, it may not be an appealing option to consider. However, suppose the company wants to raise funds to pay off debt and grow the business partially or to use for working capital. In that case, it shows that the funds will genuinely circulate into the business, which is helpful for an investor.
  • An investor should investigate who is in charge of the firm. It is essential to consider its promoters and managers, who play a significant part in its operations and activities. The company’s management is in charge of propelling it forward. The average number of years spent in the organisation by senior management also gives insight into the company’s working culture.
  • The DRHP provides investors with information on the company’s primary strengths. It is also essential to learn about the company’s position in the industry in which it works. Reading more about the firm, it’s positioning, and its strategy might provide insight into the company’s prospects.
  • Investors can examine the firm’s potential in its market to understand the future possibilities with more excellent knowledge about the company around the time of an IPO. If the firm does well after raising funds, investors will see a substantial return on their IPO investment. In addition, the firm that makes an initial public offering should have a solid business plan that can be sustained in the future.
  • Investors should conduct extensive research on the company’s competitors. The DHRP will be compared to its competitors in terms of both financial data and values. Comparable values can determine if the company’s valuations are in line with its peers.
  • The company’s financial performance must be evaluated regarding whether its revenues and earnings have increased or decreased during the last several years. It would be a beneficial investment if revenues and profits increased. Before investing in an IPO, investors should attempt to evaluate the company’s financial condition. Check the values because based on the industry specifications and profitability measures, the offer price may be low, reasonably priced, or overvalued.
  • An investor should have a specific investment horizon in mind. One must decide if she wants to invest in the IPO to earn a rapid profit on a listing day or whether she wants to keep the shares for a more extended period. Because a short-term plan is based on current market sentiment, a long-term strategy is based on the business’s fundamentals.
  • From a single Demat account, one IPO application can get submitted. If a LIC policyholder has a shared Demat account, they should check to see if it is the principal Demat account holder. Secondary Demat account holders would not be allowed to apply for the LIC IPO as policyholders.
  • LIC policyholders who want to receive the 10% reserved quota bonus for policyholders should check to determine if their policy is seeded with their PAN. If their PAN is not connected to their LIC policy, their application would be denied if they apply under the policyholder’s category. However, policyholders should remember that the final day for PAN policy connection is February 28th, 2022. After this deadline, LIC policyholders who have not linked their insurance to their PAN would be unable to receive the 10% quota designated for policyholders.

IIFL Securities is a leading stock broking firm in India that has been operating in India for more than two decades now. So you can get the best low price shares to buy today

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