IPO investment is generally considered the first step towards investing in the stock market. However, you have to understand the process of how to invest in an IPO.
Here, there is a need to adopt a particular rule or guide so that there is no unnecessary mistake or problem?
Therefore, in this article today, let our readers discuss the process of how to invest in an IPO.
In this article, we will cover some aspects of how to invest in an IPO such as how you can proceed with IPO Investing, etc.
What are the online and offline methods for such investment and such important things that you should always remember.
We all know that the year 2018 and 2019 have been very good for the Indian stock market. The main reason for this is the launch of multiple IPOs.
However, SBI Cards ka IPO came in early 2020, but after that the corona epidemic stopped for a while on the new IPO launch. But now as the outbreak of the epidemic is decreasing, new IPOs have also started coming to the market.
Therefore, in this detailed review today, we will understand how to invest in an IPO and some important aspects that you need to take care of while investing your hard earned money in any upcoming IPO.
In addition, we will explain the entire process by telling each step one how to invest in an IPO. Hopefully by the end of the article, you will be able to understand and know this process.
If you are planning to invest (how to invest in IPO) then you can look for LIC IPO or others in the list, Angel Broking IPO, Burger King IPO and also know about Burger King IPO allocation status .
Important things in IPO investment
However, if you are excited about how to invest or do any of the upcoming IPOs, you should take care of some basic rules to secure your capital.
How to invest in an IPO – Rule # 1
Do research on your own, as best you can.
Don’t invest in an IPO just because your relative or friend is saying so. You will also have to do research at your level. This may include:
- Get to know the listed company through financial means made public. The available data will be limited and mostly biased as it is issued by the company and not by any third-party auditor.Nevertheless, what you get will tell you the performance of the company over the years. Metrics like PE ratio, EPS, NAV definitely help in increasing that share.
- Go to Google, type the company name and go to the “News” tab. Here you will be able to see the latest media release of this company with details as to why it has been in the news in the first place.You can check the news from last 6 months to 1 year and get a decent view on its position in the market.
- Watch video reviews, check out the stock market blog to see what industry experts have to say about a specific company and its IPO to get different views across the spectrum.
- Read the prospectus issued by the company before their IPO is listed on the stock market. Over time, you will get to know what to look for and what is important to you in making decisions.
This will give a very good summary of research at an objective level.
How to invest in an IPO – Rule # 2
Check company valuation
Most readers may find it very technical how to invest in an IPO. But really, it is not difficult!
Even if you know how to calculate basic level, you will get a good IDIA about it.
Now, when a company opens a new issue, it states the number of shares disclosed, the currency size of the IPO, the equity stake as well and so on.
Now, suppose that a company ABC is looking to raise Rs 150 crore and is giving 5% of its equity value in the process. With this idea, 100% stake in the company is going to be worth ₹ 3000 crores, right?
Now, when examining and comparing their respective financial performance over the past few years, compare this valuation with the valuation of their peers (valuing competing companies) in the same industry.
This simple exercise will help you give a 100% objective idea of whether a company evaluates well when the IPO is listed.
There is a possibility that they are over-valuing themselves and in that case, the stock price of the stock may fall in the long term (keeping all other factors constant).
Remember, if a company is going public to raise funds, it is not necessary that the company is financially strong.
How to invest in an IPO – Rule # 3
You must have a demat account!
Make sure your demat account is active as it is required to apply for an IPO. Trading account is something that you will not need to allocate an IPO, but a demat account is 100% required. After some time you will need a trading account when you decide to sell those shares in the stock market.
When you open your demat account, make sure you open it with a major stockbroker that matches your needs.
You can also get suggestions for stock brokers from our backend team if necessary.
So, here they are, the basic rules that have to be followed before investing in an IPO. In the comments section below you can choose to know or tell us your thoughts or any other rules.
Going forward, let’s talk quickly about the process of how to make an IPO investment.
Steps for how to invest in an IPO
How to invest in an IPO – You can adopt both offline and online methods. Over time, apparently, people have turned to the online method of IPO investment.
However, some investors still prefer to access offline.
We will explain both the procedures in this passage for your understanding. Here are some basic steps in the process of investing in an IPO. But first, let’s check it out:
Are you eligible for an IPO investment?
To apply for an IPO investment, you have to:
- Be an Indian
- Become an adult (18 years of age or older).
- Must have a valid PAN card issued by Income Tax Department.
- An active demat account (as mentioned above).
- Must have a valid bank account.
- Now you make sure that you have met all these basic criteria so that you do not get stuck in investing in your IPO later.
How to apply for offline investment in IPO?
As mentioned above, there is still a set of investor base that prefers to invest in IPOs offline. Obviously, this process is a bit difficult so your time and effort in the IPO application process is slightly more.
To apply for an IPO offline, you must:
- Contact the local sub-broker or agent with whom you have opened your account.
- Request that agent for the IPO application form (free cost).
- Fill the form with all your personal details, demat account information, IPO bidding process details.
- Attach the associated bid check with the IPO application form.
- Submit the form
- You have to make sure that all the details you have entered are completely valid. If any detail is wrong, then how to invest in your IPO will be rejected from the application.
If you want to apply for how to invest in an IPO, then you need a demat account for this.
Enter your details here and we will arrange a free call back.
Founder & CEO| Fox Investor – Financial Blog Portal & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Dr. Viibhor Agarwal has a Ph.D. in IPR, start-ups, and corporate law, as well as an MBA in finance from NMIMS Mumbai, and achieved numerous certifications in corporate law. He is a practicing corporate lawyer and the founder of two business verticals. He has advised over 2000 businesses, 5000 students, and 400 new start-ups all over India and other countries like Dubai, London, the USA, and Qatar. Dr. Viibhor Agarwal assists people with business expansion and branding, regardless of size, as well as business setup, financial literacy, start-up guidance, licensing, tax planning, and other legal compliance issues. Dr. Viibhor Agarwal’s goal is to provide complete financial and business literacy to all businessmen who want to start new businesses and grow existing businesses and to those students who want to open their start-ups. In each video, Dr. Viibhor Agarwal not only explains the method of the solution but also advises subscribers on practical tips learned from and faced by clients handled by Dr. Viibhor Agarwal daily. This blog portal provides you with an easy and clear solution to your business problem, allowing you to take your business to the next level.