Research before Investing in IPO

 Research before Investing in IPO

Before investing in IPOs, make sure you are familiar with their growth prospects and associated risk

It is wise for investors to take enough precautions while investing in IPOs as at times such investment could be riskier than assumed.

Here are 5 precautionary measures one should undertake while putting in money in IPOs

1. Carefully read the DHRP of the company

The Draft Red Herring Prospectus (DRHP) of a new entity offers a detailed insight into the company that is coming with an IPO. It provides critical information that can help you understand the business better.

2. Know the Promoters

Promoters are the driving force of the company. The growth of the company largely depends upon the promoter's ability to make the right decisions.

3. Know about the Risk Factors

Risk factors mentioned in DRHP must be given attention. It is better to avoid investing in IPOs if it does not match your risk appetite.

4. Objective of Capital Raised

It must be taken into account where the funds raised by the company are to be used. The investor should be more careful if the company is burdened with debt.

5. Know about the Company's business

It is important to know about the company. Its market share, expansion plans, supply chain need to be taken into account

It is important to assess your risk appetite before investing. It is better to avoid investing in every IPO if it looks too risky. An informed investor reaps the benefits better than one who is not.