What are the Parameters to Evaluate before Investing in IPOs?

Investing is more of an opportunity over the risk it carries along. So, if you have been considering the investment in an IPO, you are at the right place. But, just like any other decision you would make – this decision needs a huge load of considerations to make. So, you will have to think about a lot of things before you jump in headfirst. If you are thinking about a lot of things at the same time, don’t worry about it – you are at the right place.

For starters, you need to begin with you and your financial goals, then the selection of the best Initial Public Offering for you. What should you be considering? Here are some of the top factors that you need to know.

Parameters to Evaluate before you Start Investing in an IPO

  1. What’s your Goal?

Your Goal makes up the first bit of your choice. So, before you can get started – make sure you know yourself and the financial goals you want to attain. When you choose to invest in the share market, you will have so much more to pick from. You can select the IPO based on how much you can invest and how much returns you are expecting. There are so many IPOs opening up each day, and you can never limit your choices. So – the very first thing you need to do before investing in an IPO is to analyze your goals.

  1. How Much and How Long to Want to Invest?

You might be thinking of investing in the LIC IPO – since it is the biggest IPO in India, or because you foresee the future to be bright with it. But when you look at IPOs to invest in, you cannot just look at companies that have already hit fame or the companies you know. Your investment depends on how much and your time horizon of investment.

  1. Do you Know the Business of the IPO

You have to remember that you will be investing in the business, not the company. How well you know the business will help you know how well it will perform in the long run.

  1. Understand the Objective

Every company goes public for a cause, right? So, you need to understand the objective for the company going public. This is more like knowing what your money is being used for. Knowing the objective of raising funds always lets you know how the money will work and also analyze how your returns would be.

  1. Look at the Promotion

The promoters are also kind of the most important functionary in the company. The promotor with the management influences the company’s business prospects. While you check the profile of the promotor, look at their track record. You need to check whether the company has been subject to any legal cases or not. If the promotor’s profile is clean – you have an additional reason to invest in this initial public offering.

  1. There are Risks – So, Just be Aware

Did you know that investing in the stock market brings some amount of risk to your finances? Also, given the broad range of companies across industries and the experience of every company – understanding the risks associated with every business is an important step before starting to invest. The market situation right now, the number of competitors and the quality of the product or service would all play a role here. You can find company-specific risks that could be found in the prospectus and needs to be considered, too, before making an investment.

  1. Knowing the Leader

It is a general rule that the lead manager and the broker bring quality companies to the general public. The company that is floated by a reputable broker gives you an added comfort that there is robust due diligence that was conducted by the brokers.

This is a wrap – these are some of the factors that you would have to consider before you invest in an Initial Public Offering.

  1. The History of the Company

The history of the company and the financials are a big deal when you want to invest in the IPO. Now that the company is just going public – there is so much more you need to know about how it worked in the past.

It is always a good idea to invest in an IPO – do you know why? For all of the reasons that are mentioned below.

The Benefits of Investing in an IPO

  • Disciplined Management

Since the company goes public now, the management prioritizes the profits over anything else in the company. The main goal to be attained when a company goes public will be to gain the profits only. This will ensure that you get the returns you are looking forward to.

  • There are Better Sales

Now that the company has gone public, there is better brand building and enhanced consumerism – which, in turn, leads to better sales in the long run. This is indirectly good for your investment in the company.

  • There is an Added Perspective

It is only when a company goes public that the company gets the outside perspective. This leads to better management and strategies.


These factors are just the tip of the huge iceberg – and there are so many things you would have to do before you start investing in an IPO. But you can start off here – and do the needful before you make this big decision.

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