What is IPO? Remember these things while investing in IPO 

The IPO of Paytm’s operator One97 Communications has weakened its listing as much as it has been discussed. As a result, millions of rupees were lost to investors. At the listing ceremony, the company’s CEO Vijay Shekhar Sharma himself became emotional. Despite the Corona epidemic, the IPO market is booming this year. Record IPOs in the first half.

So there is an atmosphere of excitement among many investors. Many retail investors are waiting for an IPO. In such a situation, it is important for you to know the things to keep in mind before investing in an IPO. Investing in an IPO can be as rewarding as it is profitable.

What is an IPO?

An initial public offer is made by a private company to raise capital from the market. This is the process of converting a private company into a public company. When companies need money, they list themselves in the stock market. The company spends the capital raised through IPO according to its needs. This fund can be used to repay a loan or to grow a company. Listing shares on a stock exchange helps the company get a fair valuation of its value.

Remember these things before becoming an IPO member

1. Before investing in any IPO, as an investor, you must first decide whether you want to take advantage of the profits listed on it or whether you want to invest for the long term. Sometimes it happens that in case of some stocks the listing profit is very high, but it is not necessary for it to continue rising.

2. When filing an IPO, the company also provides information on how the funds raised from the IPO will be used in the prospectus. Consider whether the company is raising funds to repay your loan or to increase its capacity. Generally, if a company raises funds to increase its capacity, then its growth potential is higher.

3. If the company whose IPO is starting has shares of Rakesh Jhunjhunwala and Radhakishan Damani, then investors are attracted to it. The investment decision should not only be influenced by their shares, but also gather the necessary information of all the promoters of the company.

4. It should be noted that the valuation of the company is fixed for IPO. It needs to be compared with other companies involved in the industry (Pierce). P / E (Price to Earnings) Ratio, P / B (Price to Book) Ratio. . The lower it is, the better. However, it depends on the size of the industry.

5. Many traders / investors also look at gray market trends before becoming members of any IPO. This allows them to estimate how much profit they can make on the price set for the IPO subscription. Although this strategy may only be effective for short-term investments, if you are considering a long-term investment, it should be based on the fundamentals of the company.

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