Over the past couple of years, the number of companies making their debut in the stock markets has witnessed a sharp rise. The route through which they make their debut is called an Initial Public Offering (IPO). Basically, an IPO is the process through which a private company offers its shares to the public for the first time. The shares are offered to investors through the primary market. Once a company gets listed on the stock exchanges, its shares are traded in the secondary market.
IPO investment is popular among investors due to its attractive pricing, convenient bidding process & potential listing gains.
However, as a beginner, you should note that each IPO performs differently. So it is important to have an IPO investment strategy. PL can help you on that front, with its research backed advisory and personalised guidance. You can invest in IPOs with PL within minutes. If you aren’t a PL client, then open a Demat account with us by clicking here
As a beginner in the stock markets, there are a few guidelines that you should remember for IPO investment.
In this article, we will cover:
- What to do before IPO Investment
- Things to remember: IPO investment strategy
- How to invest in an IPO: Beginner’s Guide
To know more about what is an IPO and how it works, read our article here
What to do before IPO Investment
IPO investment is no different from any other investment. So, when any IPO is announced, the first thing you need to do is thorough research.
You can begin this research by going through the Draft Red Herring Prospectus (DRHP). This is also called an ‘Offer Document’ and comprises details about the company’s business model, risks, why it is going in for an IPO, how the funds will be used, etc. Before the launch of the IPO, an updated Red Herring Prospectus (RHP) is also filed by the company. This comprehensive document will give you a fair idea about the business.
Besides this, you should also understand and analyses the sector, competitive landscape, and other macro factors that may impact the business. With this, you will be able to evaluate the company’s growth prospects. You will also get a good understanding of its financial health.
Another important aspect to consider is the valuation. IPO valuation is based on the company’s future growth projection. Based on your research, you can analyse whether you believe it is fairly valued or not.
Don’t worry, you don’t need to do all this by yourself. This is where PL’s team of highly experienced professionals step in. Whether it is evaluating an IPO, or identifying if it is the right fit for your portfolio – PL does it all. To open a Demat account with PL, click here
Things to remember: IPO investment strategy
IPO investment has several benefits. To get a detailed understanding of the benefits of investing in an IPO, click here
As explained earlier, you should analyse the company thoroughly before investing in its IPO. But, it is equally important to keep a few other things in mind, such as:
Self Assessment: Understand your own financial goals, risk appetite, and investment horizon before making any investment.
Portfolio Analysis: Analyse your investment portfolio and see whether investing in this IPO would be beneficial for you. Some of the questions you can ask yourself are – does this add sectoral diversification By investing in this IPO, are you getting exposure to a different market cap from those already present in your portfolio? How does this align with the other investments you have made? and so on.
No Guarantees: Not every IPO turns out to be a multi-bagger, and a broad range of factors could impact its performance in the stock market. It is not possible to predict the outcome with absolute surety. So, make sure you invest prudently.
Don’t follow trends: Remember that you should never invest in an IPO simply because everyone else is. See whether the IPO is the right fit for your portfolio and aligns with your financial needs.
Evaluate all options: IPO investment enables investors to benefit from potential listing gains. At the same time, an IPO is ultimately an equity investment. So, another IPO investment benefit is that if you remain invested for a long term, it has the potential to generate good returns. Also, as a shareholder, you are entitled to benefits such as dividends, bonus shares, voting rights during the Annual General Meetings, etc.
To build an IPO investment strategy and also build a well-diversified portfolio, you can seek expert guidance from PL’s highly qualified professionals. Click here to open a demat account with PL.
How to invest in an IPO : Beginners Guide
As a beginner in the stock market, you should first open a demat account.
With IPO investment, you can get early access to companies that have a high growth potential. But you also need to undertake due diligence and have an IPO investment strategy in place that is aligned with your own risk appetite and investment horizon.
PL’s in-house team of experts can help you on that front. Our team of qualified professionals can Analyse your portfolio and recommend the right IPO investment strategy for you.
Open a Demat account with us by clicking here . Next, download the PL DigiTrade App or visit our partner pl india .com website and follow the simple steps:
- Choose the IPO and click on Bid
- Enter bid and lot details
- Finish the application by accepting the UPI mandate request