The art of investing in a float flood

It is raining public offerings "" as public issues are being called now. And they are all available for subscription at the same time.

Does that make your investment job all the more difficult? Is choosing the issue/s to subscribe to becoming increasingly difficult? Are you sceptical about getting allotment due to disappointments earlier?

Well, these are common issues today and the answers may be difficult to find, but there are still somethings you can do to make Lady Luck smile. These include:

THE BUDGET: First, of course, look at your budget. If you have sufficient disposable money then probably you can invest in more than one issue.

But if you are constrained for funds it is best to put all your eggs in one basket, though the old saying advises otherwise.

Before commencing make sure that you have a demat account. All banks offer demat services these days where your shares are held in electronic form. We are assuming that you already have a savings bank account in place so we need not go into that.

THE PRICES: With your budget finalised, look at the prices. In the current instance one company is as good as another and all of them have brilliant prospects.

Higher priced issues are not likely to be as oversubscribed as smaller ones nor would too many retail investors put their money here. So your chances of allotment are higher as there is a 25 per cent (at least) reservation for retail investors.

THE FUNDING ROUTE: Going back a little to that funding thing: These days banks and non-banking finance companies (NBFCs) are willing to extend loans to investors for these public offers.

While in most cases it would be useful to take advantage of such finance, in the present instance one would be well advised not to do it. For one, the shares of most of the companies that are in float mode are already listed.

There are few upsides to their share prices. In fact, the shares have already been beaten down in the run up to the listing with profit booking that's been happening.

Of course, if you are holding on to the stocks for the long term, then there should be no issues, but then you would be better off buying it in the secondary market at lower prices.

Still, one should weigh the pros and cons of getting finance, especially the cost associated with it and what you will make out of it.

So you have the funding and you have identified the shares you want to subscribe to. Before we forget, get hold of the prospectus or the offer document and go through it carefully.

If you do not have the necessary expertise, get someone to explain the figures to you. The offer document is available with the lead managers to the issue, the company or on the Securities and Exchange Board of India website (www.sebi.gov.in).

HOW TO APPLY: Now you have to identify how you are going to apply. Plenty of forms are available so if you have a regular broker you just have to fill in the form and give it to him.

In case you do not have a broker you can still fill in the form and deposit it with certain designated banks where these forms are accepted.

On the other hand, if you are an Internet-savvy person and have joined up with an online brokerage you just have to allocate your funds and subscribe by just clicking.

THE PRICE BAND You will have noticed that most of these offerings have a floor price or a price band. The floor price is the minimum acceptable price "" if you bid any lower your bid will be disqualified. And the price band gives you a range at within which you can place your bid.

Retail investors (those investing up to Rs 50,000) are encouraged to bid at the cut-off price which is the lowest acceptable price. Bidding for these issues is called book-building, where the final price is 'discovered'.

The various bids received with the quantities bid for are collared together and merchant bankers and the company arrive at a price "" 'discover' "" which is the most representative. This is the price at which the shares will be allotted to investors.

THE ALLOTMENT: So you have subscribed to the shares and waiting to know whether you have got allotment or not. If the offer is oversubscribed by just a few times, the chances of your getting allotment is high.

But if the oversubscription is by more than 15 or 20 times, the chances of getting allotment decreases since Sebi uses a lottery system as well as a proportionate allotment formula of 1:10. Investors are advised to make a number of application through their various family members in order to increase the chances of allotment.

Once your name is among the allotees, you are through and you just have to wait for the formalities. Once the shares are in your demat account you can do with it as you wish.

On the other hand if the lottery has not favoured you, wait for the refund of your application money, wait for the next offering and begin the whole process again.

Here's wishing you very lucky investing!