India has witnessed a massive rise in the participation of retail investors in the initial public offerings (IPOs). With the country’s biggest initial public offering- LIC IPO- opening on May 4, the sentiments is running high among the retail investors. With about ₹20,557 crore, LIC IPO is going to be the biggest IPO in the country. So far, the amount mobilised from the IPO of Paytm in 2021 was the largest ever at ₹18,300 crore.
Manoj Dalmia, founder and director of Proficient Equities Limited listed out some common which retailers make when investing in IPO market.
Retailers often ignore valuation and go by news or recommendation when applying. Whether IPO or investing there should be a simple background check for the company in terms of business model, topline, bottom line and sustainability. Certain companies may be highly valued even though it is an Offer For Sale where the motive is to only sell shares of shareholders.
2) Quick Gains
IPO has recently seen making quick gains which have made many investors curious and made them invest in every IPO. This approach should be avoided, as and when the trend is bullish the IPO might list with good gains but may not survive in the long term. The same sentiment made people invest in Paytm for which they suffered huge losses.
IPO usually does not have much information except their DRHP, people should invest in IPOs with a clear understanding of the company’s background and the objectives of the IPO. Many investors ignore the information and simply go by tips. Usually, the information supplied by many brokers is positive if the company is a brand, there may be cases where the negatives are hidden, thus having a clear understanding of the information is very important.
LIC IPO price band
LIC has fixed the price band at ₹902-949 per equity share for the issue. The issue will open on May 4 and close on May 9. The shares are likely to be listed on May 17. Policyholders will get a discount of ₹60 per equity share, while the retail investors and eligible employees will get a discount of ₹45 per equity share.