IPO Buzz: Check out this FAQ answered by experts
The Indian equity market is buzzing with five initial public offerings (IPOs) issues opening as well as closing this week. The five IPO issues included Tata Technologies Ltd, Flair Writing Industries Ltd, Fedbank Financial Services Ltd, Gandhar Oil Refinery India Ltd, and Indian Renewable Energy Development Agency Ltd. This has led to many questions about IPOs. Livemint answers questions like how to apply for an IPO, what to keep in mind while buying an IPO and more.
How to apply for an IPO?
If you are a first-time investor, you will need to open a demat (dematerialised) account with a depository participant firm. You can open a demat account by applying online with any brokerage firm of your choice. Once your demat account is active, you can directly bid for the IPO or ask your broker to make the transaction for you.
What to look for in a company when applying for its IPO?
“A solid balance sheet, track record and potential for growth, and profitability are the most critical areas to look at for investors considering to invest in an IPO,” said Sunil Shah, Director at Khambatta Securities Ltd. Also, “how effectively a company executes its strategy and future plans depends most on its promoters, management and the leadership team,” Shah added. This is going to decide how its shares are going to perform in the Indian equity market.
Why there’s a buzz around IPOs?
“IPO is a good way to invest as it gives the opportunity to enter a company of high potential at the very first level. Also, it gives several options of either holding the IPO from a medium to long-term perspective or exiting on listing gains,” said Ravi Singh, Founder at Finvest.
What is the lot size?
An IPO’s lot size means the minimum number of shares an investor will buy in a single transaction. When applying for an IPO, you will need to buy at least one lot, which can hold multiple shares of the company you are applying for. You can buy more than one lot size when applying. For example Tata Technologies IPO’s lot size was 30 shares in each lot. So, in once transaction you will at least need to buy 30 shares of Tata Tech.
What is the price band of an IPO?
The IPO price band refers to the range of the offer price within which investors can make a bid. It is usually decided by companies and investment bankers for the initial public offering.
What things to keep in mind while applying for an IPO?
Investors should focus on the “objective of the issue and the ask IPO valuation in comparison to its industry peers; investors should also take time in evaluating all the parameters including management and founders’ quality, which is most important for a long-term investment,” said, Prashanth Tapse, Sr VP research analyst at Mehta Equities Ltd.
“Consider the overall market conditions. IPOs perform better in a bullish market, while a bearish market might pose challenges. Factor in economic trends and global events that could impact the stock market,” said Prashant Singh, a sub-broker at Motilal Oswal.
“Investors should, in such cases, be selective and not get carried away by looking at the grey market premium and euphoria in the street,” said Sneha Poddar, AVP, Retail Research, Broking & Distribution, MOFSL.
How to increase your chances of getting an IPO?
“Due to the lottery-based allocation system, applying through multiple applications (e.g., family members) can be more advantageous than a single application. For HNI investors, the strategy should be based on two key parameters: the number of unique applications and the total quantum of subscriptions,” Viral Shah, Head – Equity Brokerage, 360 ONE Wealth.
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Updated: 22 Nov 2023, 04:26 PM IST
