Investors should consider below points while investing in IPO -
- Details about the management team and the promoters' background: This is the first thing an investor should look for, as the top management and the promoters are the most important assets of a company that can give you an idea about the work culture.
- Strengths of the issuer (the company offering the IPO): Understanding the issuer's strengths, its positioning and strategies help investors identify the prospects for the business.
- Examine financial summary: Analysing the financial reports for the last few years and checking if there have been any significant positive growth numbers can help you estimate how the company will perform once listed.
- Purpose of the issue: It is vital to understand how the funds will be utilised after the IPO. If it is for business expansion or for funding the existing business, it will give you an idea about the company's future. Further, one should also check the promoter shareholding before and after the IPO and always remember, the higher the promoter shareholding, the better it is for the minority shareholder.
- Evaluate the valuation: Evaluating the valuation is important to better understand the company's position. Comparing the company financials, both current and historical, with the IPO price will give you the company's valuation. Understanding if the IPO is overvalued, reasonably priced or undervalued can be a crucial driving factor when it comes to making a decision.
- Inputs from anchor allotments and research notes: Research notes published by brokers or reliable analysts can give you a comprehensive idea about how an IPO will perform. In case you do not manage to run through all of the points mentioned above, these notes can be quite helpful.
Team RYR&Co.
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