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Ten Things to Check Before Investing in Paytm IPO

01 Nov 2021 0 COMMENT

Introduction


Investing in any asset is a necessary process. And learning as much as you can about an investment is the first crucial step. The same applies if you are considering investing in the Paytm IPO.

What is IPO?


Initial Public Offerings (IPO) is where a private company becomes a public company by selling its shares of capital stock to the general public.

Who is Paytm?


Noida-based financial services company Paytm is set to launch its IPO this year with an issue size of ₹16,600 crore. This technology company specializes in digital payment systems, e-commerce, and finance. From mobile recharges and utility bill payments to event booking and travel, it is a popular application used in every street of India.

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While Paytm IPO investment is in the spotlight among many investors now, here are a few things for you to check before investing in an IPO:

Read the DRHP


When a company intends to raise money from the public by selling shares of the company, a Draft Red Herring Prospectus is filed with Sebi. The prospectus included company fundamentals, uses of cash raised, possible risks for investors, etc.

Reasons behind raising funds


As an investor, it is essential to understand how your money will be managed. It is imperative to check how the company intends to spend the money raised through IPO. If a company aims to repay part of its debt, expand the business, and improve corporate functions, it proves that the funds will be in proper use.

Company Valuation


Investors should keep a tab on the valuation of the company, its financial ratios as well as if the offer price of the company is undervalued or overvalued during the time of investment

Strengths and Weaknesses


Investors should read about the company's performance in its sector and analyze its position from various sources and strategies. An investor's SWOT analysis will help bring out essential strengths and weaknesses of companies, which will predict the performance of your money in the financial market.

Business Model


An investor should understand the nature of the company's business and its capacity to take on new opportunities in the market. It shows the magnitude of growth and returns a company can handle.

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Company Management


It is essential to know who the backbone of the company is. The Board of directors, managers, promoters, etc., all play a crucial role in steering the business ahead. It also gives an idea about the company's working culture.

Company's health


Going through past financial records of the company and analyzing its consistency with earning profits and making losses will give the investor a fair understanding of the company's financial health.

Scope of Investment


As an investor, it is essential to decide whether you want to participate short-term or long-term because short-term strategies depend on current market situations. In contrast, long-term earning methods depend on company fundamentals.

Competition


Investors must read the prospectus and analyze the company's peers. Then, compare the company's business financials, fundamentals, and valuations the investor is looking at with its equals in the market.

Market Potential


An investor should be aware of the company's advantages and opportunities in its operating sector and its threats.

Conclusion


Finding companies with the most potential requires a great deal of research and analysis. While successful companies often take the route of going public, investors should find the most potential to earn handsome rewards.

Additional Read: How to choose the best Demat Account

Disclaimer
ICICI Securities Ltd.( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470.  Please note, IPO related services are not Exchange traded products and I-Sec is acting as a distributor to solicit these products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.