IPO means Initial public offering
The period between 2015-2018 can be said to be a IPO oriented period , as we have seen a lots of IPOs coming during this period and some them have done exceptionally well after listing like Avenue Supermart, Apex Frozen, Shankara Building products. The investor generally has questions and queries “How to choose good IPOs”
Here are some quick tips for choosing IPOs and deciding which one is good and which is not
Tips for taking IPO investment decision/Tips for choosing better IPO out of crowd:
- Check the history of promoters before investing, may be the promoters have bring any other IPO in the past too and have destroyed the wealth of investors. If the promoters have past corporate governance issues than its time for a clear avoid, you can check the recent wework IPO history or can compare satyam with Infosys what a bad management can do.
- Check for valuation at pricing, it do matters. You can check a company’s P/E ratio, growth trend of the company. Compare it with peers of same group, at price they are in current market and there trend. It is always better to do pre-investment scrutiny before buying anything.
- Check the objects of listing “For what purpose company is listing”. Where will it utilise the funds raised. If the company is raising funds to raise its production scale or strategic diversifications then it might be considered as a good idea but if a company is raising for investing in real estate’s or investing in group companies then you must be very conscious about investment.
- Many a times IPOs comes with an Offer for sales(OFS) where in promoters or anchor investors are diluting there shares or making a way to exit the company. Promoters stake in a company post IPO is a signal of their continued commitment towards the business of the company. These all are red signals and should be taken seriously before investment.
- The companies with higher debts are always shown lots of issues. The worst performing IPOs are ones with too many debts; these always have solvency problems and should be avoided.
So go through these points every time you are choosing to invest in an IPO. Good luck!!