You should watch the current market conditions before taking membership of IPOs.
Investors are in practice to invest in almost every initial public offer (IPO) in the market. For a long time, many companies have come to the IPO market. There were also very good opportunities for investors. However, the IPOs of some big companies also disappointed. Some have given more than 90% returns to investors, which almost doubles their investment. However, not every IPO is worth subscribing. In such a situation, you should assess the IPO on many aspects before investing your hard -earned money. Otherwise, your enthusiasm may soon turn into despair. Come, let’s discuss some such special things here.
What is the financial condition of the issuing company
Before investing in the IPO, know as much as possible about the financial status of the issuance company. See how the company has performed in the last few years, how much profit it has earned, how much revenue it has earned and how much money it has borrowed. You should subscribe to the IPO only when the issuing company looks financially strong. You will get information about the financial condition of the company in Draft Red Herring Prospectus (DRHP). This is a document that the company has to file to the Securities and Exchange Board (SEBI) to get the approval to issue an IPO.
Who is the promoter in the company
Another thing to watch before subscribing to the IPO is the promoter and management team of the release company. These are the people who run a company and make important corporate decisions. According to Motilal Oswal, companies that have strong and experienced promoters usually have strong growth ability. Shares of such companies can increase considerably over time, and you can get the best returns by investing in their IPO.
Strength and risk
Every company has its own strength and risk. Before investing in an IPO of a company, it is very important to investigate its Swot (strength, weakness, opportunity and danger). If strength is higher than possible risks, you can make your bid. All issuing companies refer to their strength and risk in DRHP.
Evaluation of IPO
The evaluation of the IPO depends on the price on which shares are issued to investors for the first time. This is one of the most important factors that you should analyze before you subscribe to IPO. If a company seems to be an IPO overwelled, it is better to avoid investing in it. However, if an IPO seems to be fair price, you can bid in it to get high returns.
What is the current market situation
You should watch the current market conditions before taking membership of IPOs. If there is a boom in the market, the IPO is likely to open in green. However, the best IPOs also open in red or give less returns during the recession market. If you only invest in IPO for listing gains, the current market situation becomes even more important.
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