Introduction
Every few months, headlines scream:
"XYZ Company IPO subscribed 200 times!"
"ABC Limited lists with 100% gains!"
IPO — or Initial Public Offering — sounds exciting.
But how do you, as a smart investor, figure out which IPOs are worth your money?
Let’s break it down, with real examples from Indian stock market history.
What is an IPO?
An IPO is when a private company sells its shares to the public for the first time, allowing anyone (like you and me) to become a part-owner.
Post-IPO, the company gets listed on stock exchanges (NSE/BSE) and can trade publicly.
Why Companies Launch IPOs
- Raise Capital:
For expansion, debt repayment, R&D, etc.
- Give Exit to Early Investors:
Venture capitalists, private equity funds cash out.
- Enhance Brand Visibility:
Listed companies enjoy more trust and credibility.
Example:
When Zomato launched its IPO in 2021, it raised around ₹9,000 crore to fund growth and give exits to investors like Info Edge.
Types of IPO Investors
- Retail Individual Investors (RIIs):
Small investors applying for less than ₹2 lakh.
- Qualified Institutional Buyers (QIBs):
Mutual funds, banks, foreign investors.
- Non-Institutional Investors (NIIs):
HNIs applying for more than ₹2 lakh.
How to Analyze an IPO: 7 Golden Rules
1. Understand the Business Model
Is it scalable, sustainable, profitable?
2. Study the Financials
Look at revenue, profits, debt levels for the last 3 years.
3. Reason for IPO
Is it for genuine expansion or just exit for investors?
4. Valuation Check
Compare with listed peers.
Example:
- Zomato's IPO was richly valued despite being loss-making.
- IRCTC was reasonably priced during its IPO.
5. Promoter Quality
Reputable promoters = better governance.
6. Subscription Levels
If QIBs show strong interest, it’s a positive sign.
7. Grey Market Premium (GMP) (Optional)
The unofficial market gives a hint of listing expectations, but don't rely solely on it.
Real-World Case Studies
IRCTC (2019):
IPO price: ₹320
Listing price: ₹644 (almost 100% gain)
Reason: Strong monopoly business + low valuation + investor trust.
Paytm (2021):
IPO price: ₹2,150
Listing price: ₹1,950 (and fell further)
Reason: Extremely high valuation + losses + market skepticism.
Should You Always Apply for IPOs?
No.
Not every IPO is a guaranteed success.
Applying blindly to all IPOs can hurt your capital.
Focus on businesses you understand and where fundamentals are solid.
How to Apply for IPOs in India
- Through your broker’s online platform (e.g., Zerodha, Upstox, Angel One)
- Using ASBA (Application Supported by Blocked Amount) via net banking
- UPI-based application via broker apps
Tip:
Always apply early during the IPO window to avoid UPI payment glitches!
Pro Tip: Strategy for Small Investors
✅ Apply in the Retail Category
✅ Don’t oversubscribe (Apply for 1 lot)
✅ If allotted, hold patiently unless valuations are crazy high
Example:
Many retail investors who held IRCTC stock after IPO made multi-fold gains, compared to those who sold immediately.
Conclusion
IPOs can be golden wealth-creating opportunities if chosen wisely.
Don’t get carried away by hype.
Understand the company, analyze the risks, and make informed decisions.
A few well-chosen IPOs can turbocharge your portfolio.
But a few bad IPOs chosen blindly can also set you back by years.
Choose carefully — because in investing, what you avoid is often more important than what you buy.
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