The IPO is actually the procedure through which the organizations raise funds from the market itself. The businesses may need funds for a variety of reasons like the expansion of the capacity; diversification or they might be looking to expand overseas. All their requirements of funds can be met through the IPOs. In today’s time of the dotcom mania, many of the investors decide to take a chance and look for investing in IPOs.
There are numerous of the organizations that jump into the world of the stock market with a sole intention to make a big name. But there have been instances too, that when the firms ended up leaving no mark of existence. Are you looking for ways to make the most out of such situations and investing in IPOs? Although there is no sure short way to make quite good money from the stock market, but investing in a good IPO (Initial Public Offering) can increase your chances of success. Finding quite a lucrative IPO can be a cumbersome task but it is not something which is not impossible. Given below are certain tips to the make most out of your IPO investment.
Few Best of the tips to investing in IPOs Stock Market
#1 – Eligibility for Investing in IPO
Any of the persons who are actually competent enough to enter into the legal contract is actually eligible for investing in the IPO share market. Of course, it is mandatory for the person to possess the PAN card which is being issued by the department of income tax and also a valid of the Demat account. In fact, there is no essential requirement of possessing a trading account. But when you want to sell out your shares then for that purpose the trading account would actually be required. This is mainly the reason why the brokers always ask you to open the trading account along with the demat account when you apply for the IPO.
#2 – IPO Selection:
Although a majority of the organizations tries to completely disclose the information in the prospectus. But since it is written by the firms itself and not by the unbiased third party, therefore you have to research online about the organization, its competitors, and financing, previous press releases along with the assessment of the overall industry health too. One of the tips is in case the QIB category is actually oversubscribed then you can think of participating in an IPO. The reason being, in that case, the institutions will have quite a better access to the organization’s data.
#3 – Choose Organization With Strong Brokers:
You should select the organization which possesses the strength of the underwriter. In most of the cases, it is the brokerages which bring the quality firms to the public. You should be more cautious while carrying out the selection of the smaller brokerages too, as they might be willing to underwrite the organization. You can find major share brokers of India here!
#4 – Read Prospectus Carefully:
Although there is no need to put all your faith into it, you should always read the prospectus thoroughly and carefully. It might be a dry read for you, but this document actually lays down all the risks and opportunities associated with a company and put forth the proposed uses of the funds which would be raised by the IPO. Read about the company’s history, its growth path along with the fundamentals that it actually believes in. Each and every matter is required to be considered while buying in IPOs.
#5 – Money Use:
For the organizations which are actually going public for raising funds from the investors, there should be a clear explanation in the prospectus where and how the funds will be utilized? You are required to investigate how the company will be generating or expanding its revenue for increasing the value of the shares that you are looking forward to buying? Along with that, just keep a sharp notice on anything and everything that seem to benefit the third parties.
#6 – Form Filling:
At the time of filling out the form, you should fill out each and every of the detail carefully. The incomplete forms tend to face rejections. In case you miss out filing the ECS return, then also you will be cut out too from the provision of getting the refund easily into the bank account.
#7 – Valuation:
The valuations are quite challenging to conclude for the retail investors. This is something which is a highly technical process. It is the investment bankers and also the underwriters who judge the management quality along with the returns too before actually arriving at the offer of the final price.