BEFORE MAKING AN INVESTMENT IN APPLYING IN ANY IPO (INITIAL PUBLIC OFFER ) , FOR A SMART INVESTOR ITS MANDATORY RATHER THAN CUSTOMARY TO CONSIDER AND JUDGE THE FOLLOWING POINTS:--
Is this an IPO or an FPO?
In IPOs, initial public offers, company decides the price band and the collective secondary market discovers the true price post-listing .
In FPOs, follow on public offers, the price is already discovered; gains/losses can only be marginal; no new information for the market to analyze.
Is this a fixed-price or a book-building issue?
The methodology, classes of investors and issue pricing are totally different.
There is no book or price discovery in a fixed-price issue.
There are no reservations for FIIs/HNIs in a fixed-price issue; 50% of the issue is reserved for small investors (in book building, it is 35%).
Fixed-price issues are typically small.
Is this a good promoter?
If the promoter is okay, almost all other factors will automatically get taken care of.
If there is any foreign collaboration of repute, it helps.
Experience in the same business/industry of the promotr is also a prime factor which guides the future of the company.