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Benefits of IPO for Investors in India : Why Should You Invest in an IPO?

Benefits of IPO for Investors in India

IPO for Investor

IPOs don’t just assist private businesses. They can assist your investment to grow too.
It means, IPOs can be a great way to make speedy profits as well as earn over the long term. IPOs have few successful stories starting like Amazon, General Motors, DLF, etc.
However, there’s a cautionary tale too. Not all IPOs performed well.
Therefore, be cautious, do your research first and avoid getting caught in the IPO frenzy.
The more you scroll down, the more you’d understand how investing in an Initial public offering can boost your portfolio, how your wealth can grow if due diligence is done.
Therefore, let’s first understand what are the benefits of IPO for Investors.

Benefits of IPO for Investor

Let’s take a look at the major benefits of IPO for Investors.

Documentation
The price per security issued is clearly mentioned in the IPO order document.
Therefore, you have access to the same details as bigger investors.
This would change in the post-IPO scenario. The share prices after the IPO would depend on changing market rates and the best price that the stockbroker can offer.

Probability of high returns
If the company has the potential to grow, purchasing shares in an IPO can be an advantage for you. Main basics of the company mean that it has a good prospect of growing bigger. This can be advantageous to you as well. You stand a chance to earn good returns in terms of long prospects.

Advantage of the first step
Generally, when reputed companies announce an IPO. Then Ones get a chance to buy the company’s shares at a much lower price. This is because once the company’s shares hit the secondary market, the share price may go up sharply.

The aspect of long term target
An initial public offering investment is equity investments. Therefore, they have the potential to bring in big returns in the long term. The corpus earned can assist you to fulfil long term goals like retirement or purchasing a home or child marriage, etc. Apart from that, the IPO in India’s market is growing. In 2017-18, the Indian stock market generated almost $11 billion through IPOs.

The aspect of Listing gains
When a company gets listed on the stock market (BSE/NSE),
It may be traded at a price that is either higher or lower than the allotment price.
When the opening price is higher than the allotment price, it is called listing gains.

The Bottom Line

Normally, investors expect an Initial Public Offering (IPO) to perform well on the listing due to factors such as market demand and positive bias.
But, this doesn’t always happen. It is probably possible for a stock price to drop by the end of the first trading day too.

In another hand, listing gains may not actually result in good returns for the investor in the long-term project.
Therefore, if you are a trader interested in quick returns, it may be suitable.
However, for long-term investors, it is most important to identify a company that can offer high returns 5-10 years down the line.

There is no investment is free of risk.
Even your FD in a public sector bank is not absolutely safe.
Therefore, if you are investing in an IPO, be prepared to deal with some degree of risk.
Keep in mind that the company floating an IPO has so far been privately owned.
It may have a potential for growth, however that is no guarantee of future success in the area within which it operates.

The conclusion is that just as there is no sure-shot path for an IPO to succeed, there is no guarantee that an IPO will not fail.

Also Read IPOs Definition | Types of IPOs | Fixed Price vs Book Building | Investors Types | Eligibility 2021

Next Read: Undersubscribed IPO - What Happens if the IPO is Undersubscribed? »

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