IPO Investing Tips for a Beginner for Best Returns

A new company or an existing one does not have any share listed on the stock exchange and then it decides to invite public to buy their shares it is known as an IPO or Initial Public Offering. The money that is gained from the share sale is then used in buying of new machinery, land, repay loans if any. Later the individuals who have bought the shares get rewarded in form of dividends. The individuals can also opt for selling the shares when the prices are favorable.

Since this article is specifically for beginners it is necessary that you understand the difference between a listed company and an unlisted company.

Listed company:

A company that is listed on different stock exchanges in India or outside India and their shares are traded on stock exchanges. Additionally, these companies have an agreement with stock exchanges to follow the given guidelines. These guidelines are provided in the listing agreement of every exchange.

Unlisted company:

A company that may be a private or public limited and its shares are not available to general public for trading. These companies are not listed on stock exchanges. One may have to be well versed with tricks of trading before choosing to Buy Unlisted Shares in India.

Since you are a beginner here are few set of considerations to make think of before investing in a company,

Background check of the company:

1. Are there any criminal activities associated with the company in the past?
2. Has the company ever defaulted in the past?
3. Find out if there are any legal complaints against the company or its promoters

Past performance of the company:

1. The number of years that the company has been into this business
2. Has the company grown in the past few years or has had a downfall
3. The size the company and the number of people associated with it

Financial status of the company:

1. Take look at the change in the accounting policies of the company
2. In case you find any bloated profits you need to beware of it

Things you need to know about pre IPO’s:

1. Pre IPO’s shares in India are in demand and the biggest gains came after companies went into public
2. It is not simple to buy and sell as many of the privately held companies set limitation in selling their shares
3. Since privately held companies generally wait for a long time for it to go public most of them get frustrated and sell IPO’s
4. Since the private companies keep most of it as a secret the fees in arranging transactions can be little more than a guess
5. Since there has been an increase in the area of concern specifically with investment advisors who say that they are raising money to buy a pre-IPO share, however, don’t buy them in actual Thus there has been an increase in the regulations around pre-IPO.

With the news of the IT department mentioning that the income from the transfer of unlisted shares with being categorized as capital gains irrespective of the holding period there has been a rise in people who buy unlisted shares in India. One has to be sure as the IT department is yet to provide any clarifications on the same.

Read above article useful information & knowledge for you.