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Knowing the purpose of an IPO is an important step because it gives you an idea how the current issue money of the IPO would get utilized and how the company would grow.
Read the IPO prospectus carefully before investing your money and get an understanding of the objectives toward going for an IPO and the risks associated.
Along with the current prospectus, it is important to consider how the future prospectus of the company looks like. Try to get an understanding of the competition that faces the company and its sector. This will give you a rough idea about potential disruptors and other key aspects such as downward pricing pressures and so on.
Compare to know whether the issue is under priced or over-priced. If an investor is paying a higher price than peers, the price may drop after the company lists on the exchanges. So, weigh all your pros and cons and accordingly formulate a strategy.
The companies that have plans to launch an IPO are rated by various rating agencies. Ratings are indicators that help you make up your mind on whether you want to invest your money or not. For example, IPOs with 3+ ratings indicate ‘good’ fundamentals. So, you can go ahead and invest.