Applying for an IPO? Here are the things that you should keep in mind

After two successful Initial Public Offerings (IPO) this month by new-age IT firms Happiest Minds Technologies and Route Mobile, three more IPOs — those of CAMS, Chemcon and Angel Broking— have hit the market this week to raise an aggregate Rs 3,100 crore. These IPOs are coming at a time when the markets are flush with liquidity. The grey market premium suggests that all these offerings are slated to see a positive response from the investors. But investing in an IPO is not so easy. You have to compete with hundreds of thousands of investors to get a few shares allotted.
 

Many investors rush to apply for IPOs because there is a common belief that stock prices shoot up after the issuing company gets listed, and hence it presents a great opportunity to book quick profits. Sometimes you may decide to invest based on your friend's recommendation or simply out of fear of missing out. But, certainly, these are not the right reasons to invest.
 

Those who invest in an IPO are among the first to buy shares in the company after it goes public and hence there is a price discovery that is yet to happen. Investors often don't scrutinise the company's financial aspects, history, track record etc and therefore it becomes important for an investor to look at certain factors before getting into an IPO.