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5 tips for investing in IPO


An IPO, or Initial Public Offering, is an offer through which a private company sells a portion of its shares to the public for the first time on the stock exchange. Many among us love the IPO route to the Stock Market. Making profits by subscribing to an IPO is, however, not a walk in the park. But if you invest in the right IPO and have a well thought out strategy, you can generate good returns from your investments in IPOs.

Many companies have had impressive gains on the first day of the IPO but disappointed investors in the long run. Similarly, many companies did not make gains on the first day of the IPO but made strong returns in the long run. All investments come with risk, and you cannot expect to double the return by a stroke of work. 

It helps to choose IPOs that look beneficial over the long term. Here are some IPO investment tips to guide you:

IPO Investment Tips 

Check the company history

Before investing in the company IPO, always check their performance over the years. Look at the revenue trend and if there is a sudden increase, dig deeper into it. A 20% annual revenue growth shows that the company is doing well. However, if the development is lower, the company may be an under-performer, and it is better to avoid investing in IPO.

Additional Read: Can I apply for IPO without a demat account?

Choose a company with strong brokers

Remember that strong brokers help bring the right companies to the public. But be cautious when you pick companies that have similar brokerages. When it comes to small brokers, they have a small client base, and it becomes easier for you to invest in the pre-IPO shares. However, do the research well before investing.

Do a background check of promoters

This is an important step, and many investors miss out on it. Check the promoters' background before making an IPO investment. It helps to check whether the company has a history of defaulting payments to any banks. You can find all information about the promoters and the IPO companies online.

Read Also: How to track upcoming initial public offerings (IPOs)

Read the company IPO prospectus

Never make the mistake of skipping the prospectus. Read it thoroughly but do blindly believe it. You may not understand all the technical terms in the prospectus, but you get insight into the company's opportunities. It also provides details about how the company will use the money raised through the IPO. Always look for companies that plan to use the funds for research or market expansion instead of paying loans or buying Equity from private investors.

It is best to invest in companies with long-term expansion plans and keen on growing their presence.

Wait until the lock-in period

The lock-in period is the duration that the underwriters or the stockbrokers cannot sell their shares. It could range anywhere between three months to two years. If you see that the stockbrokers are holding on to their shares even after the lock-in period, it proves the company is strong, and the investment will grow.

Additional Read: How an initial public offering (IPO) is priced?


Follow these tips for investing in IPO. When you are well-informed and make the right decisions, you earn maximum benefits for the long term.


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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.

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