5 Big Ipo Investment Blunders To Avoid

By Author: Vinay Pale
Total Articles: 11
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Over 100 Indian companies have issued their IPOs in the last few years. While the trend is likely to continue this year, it is essential to know the common mistakes to avoid. If you are interested in upcoming IPOs, check out the list of typical IPO investing blunders below.

● Not understanding the company's business model: Warren Buffet has once said, 'never invest in a business you can't understand.' It applies to all investors, including those interested in IPOs. So make sure you understand the business model and fundamentals before investing.
● Falling for the brand: Often, investors invest blindly in big company names without understanding their fundamentals. But a big brand isn't always a guarantee of big returns.
● Trying to time the market: Trying to time the market is a common mistake that investors make often. It is futile and almost impossible to time the market. Investors leave the market when the price falls, but equity investment usually takes a long time to deliver returns.
● Failing to diversify: Concentrating your investment into one asset class increases portfolio risk. ...
... If you plan to invest in IPOs, it's essential to diversify your portfolio into a broad spectrum like pharma, finance, tech, and infra to lower risks.
● Ignoring the valuation and pricing of the offer: Valuation represents the company's worth. Investors use numerous techniques based on business management, the composition of the capital, future earning prospects, the value of its assets, the number of shares in IPO, and potential growth rate to decide its value. They would look at critical metrics like Return on equity (ROE), Price to earnings (P/E) ratio, and price to book ratio before investing.
● Not paying attention to the prospectus: For IPOs, a prospectus is a critical document containing all information on the upcoming IPO. You mustn't ever skip reading it before applying.
● Investing with emotion: Often, investors, commit the worst investment by being driven by fear and greed. It is worth remembering that stock market returns vary broadly in the short and long term. So, always look at the bigger picture and ignore short term turbulence.

Upcoming IPOs

2022 has a long list of upcoming IPOs featuring companies from various industries.

Aether Industries IPO: Aether Industries IPO will open from May 24 to May 26, 2022. The IPO of Rs 808.04 crore will have new issues and offer for sale equities.

Go Airlines IPO: Domestic aviation company Go Airlines has received approval to float an IPO of Rs 3600 crore. The issue is scheduled for FY23.

Arohan Financial Services IPO: Arohan Financial Services is India's leading NBFC- MFI. The IPO size of Rs 1750 will contain new shares worth Rs 850 crore. The remaining shares are OFS equities.

MobiKwik IPO: MobiKwik is a Buy Now Pay Later (BNPL) and mobile wallet provider. They are planning to launch an IPO of Rs 1900 crore.

Wrapping up

Thoughtful, systematic research is the way to invest in IPO. Strong demand for the company shares during the IPO will lead to a higher price of shares and value. While investing in IPOs, scepticism is a positive attitude. It is better to tread the path with caution than to lose your money on a bad investment.