Investing in IPO? Check these key factors before putting your money

 Nearly half of the 87 companies that were listed this year are trading below their issue prices. Let's delve into the green and red flags that investors must keep in mind before applying for an IPO

The IPO market is crammed with companies looking to raise funds. After Zomato, Paytm and Nykaa, bigwigs like Delhivery, Mobikwik, Adani Wilmar, Keventer Agro, LIC, PharmEasy, and Go Airlines are set to hit the market over the next six months. While 87 companies have already mopped up over Rs 72,000 crore so far in the calendar year 2021, which is a record in itself, the tally is expected to hit Rs 1 trillion by the end of this year. This is in contrast to just around Rs 18,500 crore raised in the corresponding 10 months last year. However, all is not well in the primary market.

An analysis by CARE Ratings shows that around 40 per cent of issues are trading below their prices while only 23 per cent are trading 100 per cent above their issue prices. Overall, around half have given returns of above 10 per cent so far.

Dig a bit deeper and you will see that the failure rate or proportion of issues that are quoting lower than the issue price, is the highest among the issues with offer sizes either more than Rs 1,000 crore or less than Rs 10 crore.

At the Rs, 1,000 crores plus level, 40 per cent of issues are quoting at a discount while 61 per cent of issues are trading lower than their issue price in the lowest range category. The Rs 500-1,000 crore category has the lowest failure rate of just 1 in 13. It is 27 percent for the Rs 100-500 group and 40 percent for the Rs 10-100 category.

So how can investors steer clear of weak public offers and pick the best ones?

Sameer Kaul, who is managing director and chief executive officer of TrustPlutus Wealth, said: