Typically IPO are considered safe bet for retail investors.
1) You always apply at cut-off (which means you do not have to spend a lot of time doing research about what the allotment price is)
2) There is a 35% reservations (yes Indians love reservations)…
3) You can expect some listing gains.
But recently I have started questioning my investments
1) A good issue gets oversubscribed 30-40 times .. and very good ones even more.
2) Your capital gets blocked for 20 days (almost a 550/- interest lost on a 1L application)
3) If by mistake you apply in a bad IPO, you will not only get 100% allotment, but it will also list below the issue price.
4) If by stroke of luck you get an allotment, it would be of 6-7K worth… Now this is so small a piece of pie for me to track.. so either I need to shell out an additional 20-25k to make it sizable or get rid of the allotment on the very first day 🙁 Hence defeating the very purpose of application.
For the past 1 year, i used to keep 1L aside for IPO applications. But since I got 1L straight refund for my last couple consecutive applications I am thinking of revisiting this strategy. From now on I won’t be investing in IPOs unless it is a mega issue.
What has been your experience with IPO?
5 replies on “IPO”
Hi dear,
Well i never tried my hands in IPOs…So cant comment but have heard that most of the IPOs have been over subscribed now..
Good luck to you..
🙂 Wait for a mutual fund which invests only in IPO’s and your track record of refunds may get better including reservation for MF’s which ensure your pie.
cheers
mohan!
6 months ago one such fund was released.. and if i am not wrong.. that fund was a under-performer..
The only ipo i took was pnb. Later on the value of the markets went very high. I was bearish, so i did not invest in any ipo coz i thought it would be cheaper after some time to buy the shares from the secondary market.
i was tracking at the IPO of Vishal Retails. http://nseindia.com/content/ipo/ipo_current_vrl.htm
on first glance… it shows that retail segment got over subscribed 50 times.. while Institutional investors showed a lukewarm interest…
however if I see the Bid prices… you will notice that only 5% of MF investment is at the upper band while almost all of the retail investors applied at cutoff (upper price band of 270)… hence effectively on 1 in every 50 bids of a retail gets converted to share… compared to 1 in every 4 of a mutual fund… then when I add the fact that mutual funds do not have an upper ceiling and they pay most of the money only after allotment… i feel the rules for IPO are very biased.