Investment In IPO: Keep these Things in Mind before Investing in IPO

After the second wave of Corona, a big jump has been seen in the IPO market. Many big companies are bringing their IPO this year. This year many big companies are bringing their IPO. If you are planning to invest money in IPO, then you must keep these things in mind.

Red hearing prospectus

  • Before investing money in IPO, definitely check the draft red herring prospectus.
  • The company files a draft red herring prospectus (DRHP) with SEBI before raising funds by selling shares.
  • This shows where the company will use the funds raised.
  • It also gives information about the potential risk to the investors.

Use of funds

  • It is important to know where and how the company is going to use the money raised from the IPO.
  • The company is good for the investor who says that the money is used to partly repay the debt and increase the business or for general corporate purposes.

Understand the business of the company

Source: Google/ Image Credit: The Financial express
  • Before investing money in IPO, definitely understand the business of the company.
  • Invest in the same company whose business is doing well in the market.
  • Do not invest in a company whose business is not doing well.
  • Analyze the business potential of the company.
  • The company should have a good business model.
  • The strength and strategy of the company can be ascertained from DRHP.
  • Find out how the company has performed over the years. How much profit or loss has the company made.
  • If the company’s profits and income have increased, then definitely invest.

Get information about people associated with the company

  • Before investing, definitely get information about the promoters and management team of the company.
  • Promoters and management of the company are responsible for taking the company forward. They play an important role in all the work of the company.

Be clear about investing

  • Decide whether you are investing in IPO for listing gain or a long-term investment.
  • The listing gain depends on the mood of the market.
  • Long-term investment depends on the growth and work of the company.

Read More: CBDT grants further relaxation in e-filing of Income Tax Forms to August 15

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