IPOs are a company’s debut, wherein they open their doors to public investors to raise funds for growth. Indian companies collectively brought home ₹1.18 lakh crore in IPOs for 2021.
A big increase of 200% over the last year. Out of these 63 IPOs, 55 featured solid listing gains ranging from 10% to an impressive 270%. IPOs mean more for investors than just numbers; they represent the chance to get in early and ride the wave of opportunity, potentially reaping significant rewards as the company grows in the market.
An Open Door to Expansion
A private business can raise equity capital by offering shares to the public through an IPO. This benefits the company because it grows, decreases debt liability, and gets more attention. For investors, an IPO provides an opportunity to invest in companies with promise at an early stage.
For example, while Zomato raised ₹9,375 crore in 2021, its IPO rose 65% on its listing day. Similarly, the ₹5,352 crore Nykaa IPO delivered a 96% return within months, depending on how IPOs create wealth for early investors.
The Risks Behind the Rewards
Ipo may excite you, but it also has risks associated with it. Sometimes, when hype takes over reality, companies get overvalued. Additionally, market fluctuations might play spoiler and convert possible gains into losses.
| IPO Example | Fund Raised | Debut Day Performance | Current Status |
| Paytm (2021) | 18,300 Crore | -27% | -67% (Nov 2023) |
| Zomato (2021) | 9,375 Crore | +53% | -12% (as of Nov 2023) |
These types of fluctuations show that while some IPOs soar, others decline, making it crucial to analyse financials, debt levels, and market conditions before investing.
How Can You take part in an IPO?
To invest in IPOs, you need to take care of certain things. Here are a few lists to follow:
- A Demat Account: Open an account with a registered broker.
- Sufficient Funds: Ensure you have enough liquidity.
- Research: Study the company’s financials and growth prospects.
- Application: Apply through your broker or banking apps.
In 2021 alone, 70% of the IPO applications came via UPI-based payment systems, reflecting how convenient and easy digital platforms can make things. If funds are low, loans act as a swift way of taking advantage of promising IPOs.
Pros and Cons of IPO
| Pros | Cons |
| Early access to high-growth companies | High risk due to market fluctuations |
| Potential for significant listing gains | Overvaluation may lead to losses |
| Portfolio diversification opportunities | Lack of liquidity in certain cases |
| Boosts confidence in emerging sectors | Requires detailed research to succeed |
Conclusion
IPOs can be great for huge returns, but it demands careful research and risk management. Studying a company’s fundamentals and getting into the market environment, using instruments such as loans when necessary, can help you work towards maximizing your chances for success. Whether creating wealth or portfolio diversification, IPOs continue to shape the dynamics of the stock market by providing a first step for any potential investor.
Frequently Asked Questions
Q. What is IPO?
An IPO is when a private company sells shares to the public to raise funds.
Q. How to apply for an IPO?
You can apply through a Demat account using your broker or banking app.
Q. Are IPOs risk-free investments?
No, IPOs carry risks due to market volatility and company overvaluation.
Q. Can I use loans to invest in IPOs?
Yes, loans can provide the required funds to participate in promising IPOs.