IPO: What mistakes should be avoided while investing in Public Offerings. a checklist!

In 2022, IPO The volatile market conditions due to macroeconomic uncertainties, rate hikes and geopolitical tensions were on a completely different roller coaster ride. The IPO market witnessed a lull in demand in the first few months of 2022, and at the same time, leading startups that launched their IPOs made a huge correction post-listing. While the second half of 2022 saw some traction and stability, investor demand remained volatile. During 2022, the amount raised from the IPO was halved as compared to last year.

be part of the primary Market, IPOs are issued in two types namely ‘Fresh Issue’ and ‘Offer for Sale’. Under offer for sale, the selling shareholders participate where they offload a portion of their stake in the company that is going to go public. Whereas in case of new issue, the company uses the money for future growth plans. It is said that IPOs pave the way for the listing and trading of the company. securities on Indian markets.

In 2023, it is important as an investor to search for a valuable IPO that has the potential to deliver good returns going forward. There are some mistakes that can be avoided while investing in the IPO market.

Manoj Sharma, Co-Founder &; Group Deputy CFO Policybazaar.com and Paisabazaar.com.

1. Don’t think of investing in every IPO. An investor should plan to invest in only select IPOs which you feel have better company prospects and valuations are not high.

2. Don’t invest just on the basis of information spreading on the internet. Sometimes these are managed by companies and their advisors.

3. If the IPO is oversubscribed in the first 1-2 days then people generally believe that they should also apply. They believe that the stock is in high demand and will open at a huge premium. This can certainly be a good thing to do for an IPO by the banker of the company but expecting a huge profit/premium in listing may not be right.

4. Invest only those funds which are available for at least next 1-2 years. Debt/funding should be avoided for investing in IPOs.

5. There are some online websites that provide information about upcoming IPOs. They also spread some news/rumours on the prevailing premium before listing. Investors should avoid making investment decisions based on such misleading and baseless news.

6. If the last few IPOs have given bumper returns, it does not mean that the upcoming IPOs will also give the same returns. Sometimes people hear news from their friends and colleagues that they invested in IPOs and made good returns. They start feeling that they have missed out on such opportunities and are applying for the next upcoming IPO without knowing the details and applying their mind.

7. Brand Name: A familiar or popular brand name does not mean you will get a sure shot of listing profit/premium. You should check the valuation at which the shares are being offered.

8. Multiple demat accounts: Sometimes people apply for an IPO through their multiple demat accounts linked to the same PAN, believing that their chances of allotment will increase. it is not true. You should apply from only one demat account as other duplicate applications will not be entertained.

According to the report of Prime Database, a total of 40 Indian companies raised around Rs 5 lakh in 2022. 59,412 crore through the mainboard of the IPO – which is almost half of the amount raised 1,18,723 crore in 2021 with 63 IPOs. The IPO market was at an all-time high in 2021.

In addition, the data showed that overall public equity fundraising also declined by 55% 90,995 crore to Rs. 2,02,048 crore in 2021.

On the main board IPO in 2022, last year’s largest public offering, which is also the largest Indian IPO ever in history, will be that of state-owned Life Insurance Company of India (LIC). This was followed by the IPO of Delhivery and Adani Group’s FMCG player Adani Wilmar. 5,235 crore) and 3,600 crores respectively.

Pranav Haldia, managing director, Prime Database Group, said in a note, “17 of the 40 IPOs, or nearly half, came in the last 2 months of the year alone, reflecting the volatile conditions prevailing through most of the year.” Not conducive to IPO activity.”

For 2023, Prime Database revealed that the pipeline remains strong. 54 companies propose to raise huge amount 84,000 crore currently holding SEBI approval. Looking to raise about 33 other companies 57,000 crore awaiting SEBI approval. There are 8 NATCs out of these 87 companies that are looking to raise broadly 29,000 crores.

According to Haldia, the momentum seen in the last 2 months of 2022 is likely to continue, at least for smaller-sized IPOs. However, it may take some time before we see sizable deals, especially in light of the lack of sustained interest from FPIs.

Disclaimer: The views and recommendations given above are of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.