In the last 2-3 years many companies have launched their IPOs in India. When a private company decides to sell its shares to the general public to raise money it is defined as an IPO.
After the IPO the company gets listed on stock markets. Some IPOs have given good returns while some have opened on lower. Therefore, if you are planning to apply for IPO online, you should know the best upcoming IPO in 2024. In this article, we will provide you with tips that you should consider before investing in an IPO.
5 Tips for Retail Investors for IPO Investing in 2024
If you are planning to invest in any upcoming IPO then here are some tips to help you.
- Do Your Research
Whenever the IPO is declared you will find investing experts giving reviews about an IPO. Their opinions can be personal or biased. So instead of relying on them, it’s better to conduct your research before investing in an IPO.
You can conduct this research by going through the past performance of the company, its business operations, and more. Also, compare the company’s revenue with its competitors. There are so many factors that you can compare before investing in the IPO of the company.
- Read the Company Prospectus
Reading the company prospectus is very important. This prospectus gives you an overview of the company. It also highlights the strengths and weaknesses of the company as well as the risks and opportunities a company offers.
The prospectus also specifies how the company is going to utilize the funds raised through IPO such as paying debts, expansion, market research, and more.
- Conduct Background Check of Promoters
This is one of the most important tips. You should go through the background and experience of promoters involved with the company. Their decision can influence the business at a huge level. Suppose the company promoters are planning to exit the company, there can be a financial strain which is not a good sign.
By going through the background of the promoter you may also know if the company has defaulted in the past with any banks. The promoter’s performance can have an impact on such defaults.
- Consider the Valuation of the Company
When you plan to invest in an IPO, also consider the valuation of the company. Try to find the correct valuation of the company.
Underwriters and investment bankers find the valuation of the company based on their management and returns. However, you can set up your valuation benchmark to judge the company based on its peers.
- Investment Bank Matters
IPOs are managed by investment banks that look after underwriting and book building. Thus, pay attention to the investment bank involved in managing the IPO issue.
While this is not directly related to IPO valuation, the choice matters, especially for underwriting the IPO in case the subscription mark does not match.
Conclusion
The above-mentioned 5 tips will help you to choose the best IPO for investment. Don’t rely on generic advice and conduct your own research before investing in an IPO. This will help you to earn gains from investing in the long run. If you are looking to invest in IPOs, an investing platform like Dhan can be your ideal choice as it offers extensive research and analysis tools to help you make an informed decision.