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A Flood of IPOs in the Offering- Should One Invest?
Wed, 5 Oct Pre-Open

Every month a couple of big Initial Public Offerings (IPOs) are hitting the market. The latest in the offering was a mammoth Rs 60 billion Offer for Sale (OFS) by ICICI Prudential Life Insurance Company Ltd. Despite the issue size being huge, the offering got oversubscribed by 10.5 times. Such euphoria to invest in IPOs was seen back in the period from 2005 to 2008. Between 2005 and 2008, sectors such as energy, utilities, and real estate were in vogue for new listings.

Further, a long list of IPOs is scheduled to hit the markets in the coming months including the likes of Continental Warehousing, Avenue Supermarts, Genesis Colors, GR Infraprojects, Shankara BuildPro. So the all-important question is-should one invest in them?

Going by statistics, an article published in Livemint in January 2015 stated that two-thirds of the IPOs in the Indian market since 2008 were trading below their issue price at that time. This essentially means that market gave an opportunity to buy into some of these quality stocks even if one had not applied in these IPOs.

And one should always bear in mind that at the time of listing, much of the managements quality and performance is not known to the public. So instead of being the less knowledgeable buyer in an IPO, one could very well choose to buy a great business post listing, with the required information, at the best price. Hence, investors would be better off to invest in these offerings at a later date.

The IPO of Reliance Power in 2008 and SKS Microfinance in 2010, were the ultimate proof of how investors could lose their shirts even in the biggest and most talked about IPOs.

Coming back to the question of whether you should invest in the coming IPOs, we just made choosing the right IPO stock simpler for you.

While our general pessimism towards IPOs is well known, we do think a select few IPOs are fundamentally strong and leave some money on the table for investors.

Do check out our special report, The Handbook of IPO investing.

Besides providing a checklist to help you identify the right IPOs, it has a special focus on insurance IPOs and how to value them.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Mar 23, 2018 (Close)