Investing in Initial Public Offerings (IPOs) is an exciting way to become a part-owner of companies as they go public. It’s a crucial moment for businesses looking to raise funds and investors seeking opportunities in promising ventures. In 2024, the IPO market in India experienced significant growth, with new records set in terms of the number of listings and capital raised. This guide will walk you through investing in IPOs, using real-world examples and insights into upcoming opportunities in 2025.
Understanding IPOs and Why They Matter
An IPO represents the first time a private company offers its shares to the public. This milestone allows businesses to raise funds for expansion, pay off debts, or meet other strategic goals. IPOs present a chance for investors to invest in potentially high-growth companies early.
In India, the IPO market has been thriving. 2024 saw 91 IPOs raising over ₹1.6 trillion collectively, surpassing all previous records. These numbers reflect the growing confidence in the Indian economy and the appetite of retail and institutional investors to participate in public offerings.
Preparing to Invest in IPOs
Before you can start investing in IPOs, you need to have certain essentials in place:
Open a Demat Account
It is mandatory to hold shares electronically in a Demat account. Opening one is straightforward, requiring essential documents like a PAN card, Aadhaar, and address proof. With HDFC SKY, you can open Demat account in minutes.
Get a Trading Account
A trading account lets you place buy and sell orders on the stock exchange. Most brokers offer combined Demat and trading accounts for convenience.
Link Your Bank Account
Your bank account should be linked to your demat and trading accounts to facilitate fund transfers for IPO applications. Ensure that your bank supports ASBA (Applications Supported by Blocked Amount), a SEBI-mandated system in which funds remain blocked until share allotment.
Research IPOs
It’s essential to stay updated on upcoming and ongoing IPOs. Reliable platforms like the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and financial news outlets provide timely information about new offerings.
How to Apply for an IPO
Applying for an IPO is systematic, but beginners should approach it diligently.
- Choose the Right IPO: Analyse the company’s fundamentals, including financial health, growth potential, and industry outlook. In 2024, companies like Tata Technologies and SBFC Finance received overwhelming responses from investors due to their strong business models and growth prospects.
- Use Online Platforms: Most brokers and banks offer online platforms for IPO applications. Using the ASBA facility through your bank’s net banking portal is one of the most popular methods. Alternatively, you can use UPI-based applications provided by brokers.
- Submit Your Application: Enter the bid price and quantity, ensuring you stay within the company’s specified price band. Confirm the application and block the required funds in your bank account.
The Allotment and Listing Process
After applying, you’ll have to wait for the allotment. This process depends on the demand for the IPO. In cases of oversubscription—when the demand exceeds the number of shares offered—allocation is done via a lottery system for retail investors.
If shares are allotted, they will be credited to your Demat account. The company’s shares begin trading on stock exchanges like NSE or BSE on the listing date. Depending on your investment strategy and market conditions, you can choose to hold the shares or sell them.
Success Stories from 2024
These current IPOs in India scripted the biggest success stories:
- Hyundai IPO: One of India’s largest carmakers, Hyundai’s IPO was the largest of all time, valued at ₹27,870 crores.
- Swiggy IPO: Online food delivery giant Swiggy’s IPO, valued at ₹11,327 crore, performed well despite cautious market sentiments. With quick commerce growing rapidly, Swiggy looks to capitalise on Instamart.
Looking Ahead: IPOs to Watch in 2025
The IPO pipeline for 2025 looks promising, with companies from diverse sectors gearing up to go public:
- JSW Cement: Backed by the JSW Group, the IPO is expected to raise ₹20 billion through fresh issues and an offer for sale. This will allow the company to fund capacity expansion and enhance operational capabilities.
- Ather Energy: A leader in the electric vehicle (EV) space, Ather Energy’s IPO will likely draw attention from investors keen on tapping into India’s burgeoning EV market.
- Reliance Jio IPO: Expected to be one of the biggest offerings in recent history, the IPO of Reliance Jio, India’s largest telecom company, will be closely watched by retail and institutional investors alike.
Tips for Beginners to Invest in IPOs
Investing in IPOs can be rewarding, but it requires careful planning and research:
- Stay Updated: Regularly monitor IPO announcements, market news, and trends in the stock market today. Financial news platforms and apps can help you stay informed.
- Diversify Your Investments: Avoid investing all your funds in a single IPO, Instead, diversify across sectors and industries.
- Analyse the Company’s Prospectus: The Draft Red Herring Prospectus (DRHP) contains vital information about the company, including its financials, risks, and growth plans. Make it a habit to review these documents before investing.
- Invest with a Long-Term Perspective: While IPOs can provide quick returns, especially in substantial listing gains, holding quality stocks for the long term often yields better results.
Conclusion
Investing in IPOs is an excellent way for beginners to enter the stock market and build wealth. With the proper preparation, research, and strategy, you can make informed decisions and capitalise on market opportunities. As the Indian economy grows, the IPO market offers a window to participate in the journey of some of the most promising companies.
With several high-profile IPOs on the horizon in 2025, now is the time to gear up, open a Demat account, and explore opportunities in the dynamic world of IPO investments. By staying informed and adopting a disciplined approach, you can turn your IPO investments into a stepping stone toward financial success.
