How to Decide Which IPOs to Invest in?

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How to Decide Which IPOs to Invest in Are you ready to take on the stock market and invest in the next big thing? As an investor, you have the power to support innovative companies and potentially earn a significant return on your investment. But with so many initial public offerings hitting the market, deciding which ones to invest in can be overwhelming. Fear not; you can become a hero in IPO investing with the right knowledge and strategy. In this guide, we'll explore the key factors to consider when evaluating an initial public offerings investment opportunity, so you can make informed decisions and achieve your investment goals. Let's dive in!

Importance of Choosing the Right IPO to Invest in

Choosing the right IPO to invest in is important because it can significantly impact your returns and risk profile. Investing in an initial public offering means buying shares of a company going public for the first time, which can offer some benefits and challenges. Here are some reasons why choosing the right IPO is important:
  • An IPO is a great opportunity to capitalize on the country's economic development and new company entry. It allows you to profit from a company's early growth.
  • Selecting the correct IPO may prevent overpayment or loss. Underwriters, promoters, and brokers often overprice IPOs, causing investors to lose money.
  • Selecting the appropriate initial public offerings may diversify and lower risk. It exposes you to new sectors, industries, and markets not accessible in the secondary market. This diversifies your portfolio and lowers risk.
  • The appropriate initial public offerings may help you find long-term value producers. Companies with significant sales growth and yearly revenue perform better. Thus, IPOs with good fundamentals and development potential might help you find long-term winners and value creators.

Factors to Consider While Choosing Correct IPOs

Choosing the correct IPOs (Initial Public Offerings) can be challenging, especially if you are a beginner. However, by considering the following factors, you can make informed decisions and choose the right IPOs:

1. Research the Company

Researching the company is crucial in choosing the right IPOs for investment. Here are some key areas to focus on when researching a company:
  • Background Information about the Company 

This includes the history, vision, mission, goals, products, services, customers, markets, and company segments. This information is found on the company's website, press releases, media reports, and industry publications. You can also look for the company's strengths, weaknesses, opportunities, and threats (SWOT analysis) to assess its competitive position and potential.
  • Management Team and Their Track Record

The management team's experience, track record, and vision are critical factors that can impact a company's success. Research the backgrounds of the company's key executives, including their education, work history, and any notable achievements. Look for evidence of successful leadership and a strong track record of driving growth and profitability.
  • Financial Statements and Performance

Analyzing a company's financial statements is essential to understanding its financial health and performance. Look for information on revenue, profits, cash flow, and debt levels. Compare the company's financial performance to its peers and industry averages to understand how it stacks up. You can also look for the company's profitability, growth, efficiency, liquidity, solvency, and valuation metrics.
  • Industry Trends and Competition

Understanding the broader industry trends and the competitive landscape is important when evaluating an IPO. Look for information on market size, growth rates, and key drivers of the industry. Analyze the competitive landscape to understand the company's position relative to its peers and any potential threats or opportunities.

2. Evaluate the IPO Details

Evaluating every detail is very important when choosing the correct IPO for potential returns. When evaluating an IPO, it's important to consider the following details:
  • Offer Price and Valuation

The company's offer price and valuation can impact investors' potential returns. This is the price at which the company offers its shares to the public and its implied value based on the number of outstanding shares. You can find this information in the company's prospectus or financial websites. You can compare the offer price and valuation with similar companies in the same industry or sector or use valuation ratios, such as price-to-earnings (P/E), price-to-sales (P/S), or price-to-book (P/B) to assess if the IPO is overpriced or underpriced.
  • Use of Proceeds from the IPO

Before choosing an IPO, you should understand how the company plans to use the raised funds. You can evaluate if the use of proceeds is aligned with the company's growth strategy, competitive advantage, and shareholder value creation. You can also look for any red flags or warning signs, such as debt repayment, dividend payment, or acquisition of unrelated businesses.
  • Lock-Up Period and Insider Selling Restrictions

This is the period when the company's insiders, such as executives, board members, or early investors, are prohibited from selling their shares in the secondary market. You can estimate the impact of the lock-up period and insider selling restrictions on the supply and demand of the shares and the potential price movements after the lock-up period expires.
  • Underwriters and Their Reputation

Understanding the broader industry trends and the competitive landscape is important when evaluating an IPO. You can find this information in the company's prospectus or financial websites. You can check the reputation and track record of the underwriters by looking at their previous IPOs, success rate, market share, analyst ratings, or customer reviews. You can also look for conflicts of interest or incentives that may affect their objectivity or performance.

3. Consider Market Conditions

Market conditions can significantly impact an IPO's success, and it's important to consider them when choosing the right IPOs to invest in. Here are some key factors to consider:
  • Overall Market Trends and Conditions

The overall market trends and conditions can impact the success of the public offering of a company. Market conditions include the direction, momentum, volatility, and liquidity of the stock market as a whole and the specific industry or sector to which the initial public offering belongs. You can analyze how the market trends and conditions affect the demand and supply of the IPO shares and the potential price movements after the listing. You can also look for any opportunities or threats that may arise from the market trends and conditions.
  • Investor Sentiment Towards IPOs

Investor sentiment towards IPOs can also impact their success. If investors are bullish on IPOs, it may be easier for companies to attract investment. However, if investors are skeptical or cautious, it may be more challenging for companies to generate interest. You can also look for positive or negative feedback or reviews that may affect your decision.
  • Potential Risks and Uncertainties 

Considering the risks and uncertainties associated with the IPO and the broader market is important. You can assess how the potential risks and uncertainties affect the attractiveness and viability of the IPOs and the potential price movements after the listing. You can also look for contingency plans or risk management strategies that may mitigate or avoid potential risks and uncertainties.

4. Assess Your Investment Goals and Risk Tolerance

Assessing your investment goals and risk tolerance is the last important requirement in choosing the right IPOs. Here are some factors to consider:
  • Short-Term vs Long-Term Investment Goals

Consider whether your investment goal is short-term or long-term. If you're looking for quick gains, consider IPOs with high-growth potential. If you're looking for a more stable and long-term investment, focus on companies with a solid financial track record and a history of consistent growth.
  • Risk Tolerance and Diversification Strategy 

Consider your risk tolerance and diversification strategy when investing in IPOs. It can be riskier than other investments, so it's important to have a diversified portfolio that includes a mix of low-risk and high-risk investments. Determine how much of your portfolio you're willing to invest in IPOs and whether you're comfortable with the associated risks.
  • Fits Into Your Overall Investment Portfolio

Consider how the IPO fits into your overall investment portfolio. Evaluate whether the IPO aligns with your investment goals and whether it complements your existing investments. You can optimize your investment portfolio based on your investment goals, risk tolerance, and diversification strategy. Rebalancing your portfolio periodically can maintain your desired level of risk and return.

Upcoming  Initial Public Offerings List 

Upcoming IPOs
Parent Organization
Mamaearth Honasa Consumer Limited DRHP PDF
Go Digit Go Digit General Insurance Ltd DRHP PDF
GO FIRST GO Airlines (India) Ltd. DRHP PDF
Bajaj Energy  Bajaj Energy Ltd DRHP PDF
OYO Oravel Travels Ltd. DRHP PDF
Emcure Pharmaceuticals  Emcure Pharmaceuticals DRHP PDF

How Samco Helps in Choosing the Right IPOs?

Samco is an online broker that offers various services such as trading, investing, mutual funds, etc. If you have a Demat account with Samco, you can apply for initial public offerings through your online bank account using the ASBA facility. Samco helps in choosing the right IPOs by providing information and analysis on various aspects of the  public offerings, such as company background, financial performance, growth prospects, risks, valuation, etc. You can find the list of upcoming IPOs on Samco's website, along with their price range, bid start date, and draft red herring prospectus (DRHP). You can also read the reviews and ratings by Samco's experts to get an insight into the quality and potential of the IPOs.

Step-By-Step Process on How to Invest in Upcoming IPOs 

Investing in upcoming IPOs can be a great opportunity to get in on the ground floor of a potentially successful company. Here are the steps on how to invest in upcoming IPOs:
  • Pick a Brokerage

You need an online broker account to apply for initial public offerings. You can choose from various platforms. You can choose Samco to invest in upcoming IPOs. Ensure you have a Demat account and a UPI ID linked to your bank account.
  • Decide How Many Shares You Want

You can choose the number of shares you want to buy depending on your financial goals and the money you want to invest. Each public offering has a minimum lot size and a price range. You can check the details of upcoming IPOs on various websites or apps.
  • Execute Your Trade

Once you have decided on the IPO and the number of shares, you can place your bid online using your broker’s website or app. You need to enter your UPI ID and confirm the payment request from your bank. Your money will be blocked until the allotment process is completed.
  • Wait for the Allotment and Listing

After the IPO closes, the company will allot shares to the successful applicants based on various factors such as demand, category, etc. You can check the allotment status online using your PAN or application number. The shares will be credited to your demat account on the listing day if you get the allotment. You can then sell or hold them as per your preference.


Investing in IPOs can be a great way to support innovative companies and potentially earn a significant return on your investment. However, it's important to approach initial public offerings investing cautiously and do your due diligence before making investment decisions. By researching the company, considering market conditions, and assessing your investment goals and risk tolerance, you can make informed decisions and increase your chances of success. Always consult with a financial advisor, and never invest more than you can afford to lose. With the right knowledge and strategy, you can become a successful IPO investor and achieve your investment goals. Ready to start investing in the stock market and IPOs? Samco Securities, India's leading discount broker, can help you achieve your investment goals with its user-friendly platform and expert guidance. With Samco, you can trade in equities, derivatives, currencies, and commodities at the lowest brokerage rates and with no hidden charges. Plus, Samco offers a range of investment opportunities, so you can easily invest in the next big thing. Sign up with Samco today and take your first step toward becoming a successful investor.

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