With more and more people willing to grow their wealth by investing in the stock market, and the infusion of technological advancements in the industry, the Indian IPO market is growing exponentially. As per the data provided by Fortune India, in 2022, 51 firms raised around Rs. 38, 155 crores through initial public offerings till August. At the same time, Rs. 64,768 crores were raised last year within the same period.
Considering these outstanding numbers, the count of upcoming IPOs in India has surged significantly. As startups need to raise funds to expand their operations, more and more firms are now opting to launch their IPO. As most of these companies are startups and offering IPO for the very first time, therefore, little to no information about these companies is available. In such cases, retail investors find it hard to research the company. Fortunately, there is an expert approach for analysing a startup that intends to launch its IPO soon.
How To Research Startup IPO Without Any Historical Data?
It is obvious that there is no data related to a startup available that is just going to issue its initial public offerings. However, it doesn’t mean that you have no way to access company data or skip researching before investing in the company. A crucial document that all seasoned investors seek to read before investing in a company that is soon to launch its IPO is RHP (Red Herring Prospectus). This prospectus is a detailed document that companies must submit to SEBI to be able to launch their IPO. This valuable document includes information about a firm’s foundation, business model, primary investors, upcoming initial public offerings, promoters, financial status, strengths and flaws, and much more. It is prepared to provide a considerable amount of information so that investors can make a sensible and informed decision about investing in the company.
One can access the RHP of a company that has announced its IPO launch through the official website of SEBI. If you are interested in investing in a company that is soon to go public, you can utilise its RHP to assess a few crucial factors before making a decision.
X-Factors To Keep In Mind While Shortlisting Startup IPOs
Business Model
The RHP of a firm contains a section dedicated to explaining the firm’s business model. It will help you understand how the company will generate revenue and how effective its business model is.
Growth Scope In Industry
A company’s financial statement reflects the velocity of its growth as it contains information on the company’s assets, liabilities, profits, expenses, and more. It also displays how effectively a company manages its wealth. One can easily access a company’s financial statement through RHP. One can use the data provided in the firm’s financial statement to anticipate how the company will perform in the upcoming years.
Funding
RHP contains details about the sources from where the company raised funds, including its equity holders and primary investors. If seasoned investors or founders have invested in the company, that means the company is in safe hands and has the potential to make it big in the upcoming years. For instance - Reliance Retail is powered by Reliance Industries and has the financial back up a company needs to grow manifolds.
Management
Management is the heartline of any company, and the red herring prospectus of a company also keeps a record of people in the top management. If a company is managed by seasoned professionals having in-depth experience in the same industry the company is dealing with, that means the company will do better in the near future.
Product or service growth at the time of investment
Before investing in a company, investors must check how the product or service of the company is performing in the market, how it is distinct from the competitors and whether it has the potential to do well in the future.
What Is The Right Time To Buy Pre IPO Shares?
The suitable time to buy pre-IPO shares of a company depends on many factors. Some majors among them are listed below.
Check out the projected figures.
Based on previous numbers, stock market experts and companies release anticipated numbers (approximate) about the growth. If a company is expected to achieve good revenue in the upcoming time, it is sensible to invest in the company.
Reason to go public
Check out why the company you are interested in investing in is going public. If the firm is going public to raise funds so that it can expand its operations and scale, you can consider it to invest.
Check fluctuation in their market
If the fluctuation in the market is steady and a company’s shares are witnessing constant growth, you can choose to invest in it.
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If you wish to grow your wealth effectively and are looking for some of the most promising options to invest in, connect with Stockify. We are an online platform that provides filtered information about the best performing pre-IPO companies saving you from R&D. Our experts will assist you thoroughly in making smart decisions and better wealth management.
