Do not suffer loss by investing in IPO, so know these 5 things

Investment Tips: This year many big companies are bringing their IPO. After the second wave of Corona, a big jump has been seen in the IPO market. If you are planning to invest money in IPO, then you should first gather some important information.

Understand the business of the company

  • 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. What is the profit or loss made by the company? Investments can be made if the company’s profits and earnings have increased.

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 in taking the company forward. They play an important role in all the work of the company.

red herring 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.

Be clear about investing

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

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