Ways to Evaluate Upcoming IPOs in Volatile Market

The Indian IPO market is expected to remain buoyant in the coming months. However, with the recent sharp correction seen in the mid-cap and small-cap stocks, has made the investors worry about the upcoming IPOs in the market. In the last year, most of the companies came up with the IPO that were of high rated quality, barring the few ones, but we still believe that the quality IPOs will generate the interest among the investors.

The 2018 IPOs like Apollo Microsystem, Amber Enterprise, Galaxy Surfactants, Sandhar Technologies created quite a buzz but failed to retain the investor interests for one reason or other. So, the question arises should you invest in the upcoming IPOs or pick up the stocks from the secondary market? Well, let’s evaluate.

Given that IPO’s offer a mixed bag of emotions for the retail investor, it is important to understand how to approach the same.

List of Current & Upcoming IPOs

Name of the Company	Open	Close
IndoStar Capital Finance Limited	9 May	11 May
Five Core Electronics Limited	9 May	11 May
Innovators Facade Systems Limited	14 May	16 May
Sirca Paints India Limited	16 May	22 May

Ways to Evaluate Upcoming IPOs

Look for established companies

The investors should apply only for the established companies with good valuations, prospects and fundamentals. Though there are several IPO’s that may lure you by quoting significantly lower prices, but it is not a good idea to invest in such IPOs.  Here’s what the market expert, Ostwal, has to say about the upcoming IPOs.

“Investors should not buy into a counter just because its price has crashed. They need to see the company’s prospects, valuation, etc.”

Check financial data

Today, a lot of information about the companies including their financial data, annual reports, media articles, red herring prospectus, etc. is available on their public domain. However, the investor needs to combine all the factors and check whether it is a viable investment alternative or not. Sometimes a combination of factors including over valuation make the IPO popular and once the corrections are made the stock lose their sheen.

Don’t get swayed by the market sentiments

The market sentiments may enhance the value of the stock and then let it dip to the lower level, the same happened in the case of Amber Enterprise. The company raised up-to Rs 179 crore IPO from the anchor investors at a price band of Rs 859 piece. The issue was subscribed by 165 times. This was the time when the market was in a full swing and this led to the success of the IPO, but now the stock is down by 6.65%, standing at Rs 1,162.

IPO that lost their sheen	Where it stand now
ICICI security with an issue price of Rs 520	Now it is down by 29%
Hindustan Aeronautics Ltd	Is down by 10%
Bharat Dynamics IPO with an issue price of Rs 428	Is down by 16%
Galaxy Surfactants	Is down by 15%

Rating Agency

The rating agencies can help you to evaluate the IPO’s in a better manner. Recently, NBFC major Indostar raised 1,844 crore IPO with a reason to expand its business.  The rating agency CRISIL has rated well in its loan books for FY 2018-19 (due to the weakened corporate demand for loans and rise of the retail lending). Hence, this IPO is worth investing.

Evaluate Track record

Even the blue- chip companies may face a dilemma, so don’t invest blindly. Recently, HDFC Asset Management Company’s proposed IPO was put in abeyance for the past violations that it committed. Though the company has filed the papers with SEBI seeking approval to float its IPO, but the permission has not been granted yet.

Understand the economic scenario

The recent impetus by the government in the power sector has created a strong background for ReNew Power IPO. The company has already filed draft red herring prospectus with SEBI but the results are yet to be seen.

Conclusion

As against the popular opinion, the IPO market is witnessing a blockbuster season, so the investors need to factor all these points in mind before investing.