Here are some practical and professional tips for investing in IPO (Initial Public Offering) companies, especially useful for retail and long-term investors

Study the Company’s Fundamentals

Before investing, analyze:

  • Revenue and Profit Growth: Consistent performance over the last 3–5 years.
  • Debt Levels: High debt indicates higher risk.
  • Cash Flow: Positive and stable cash flow reflects business health.
  • Return Ratios: Check ROE, ROCE, and EPS trends.

Use financial analysis reports (like from Eievu Financial Analysis Pvt Ltd) to assess whether the company is fundamentally strong or weak.

Understand the IPO Valuation

  • Compare the IPO Price (Cap Price) with Peer Companies’ Market Valuation (P/E, P/B, EV/EBITDA).
  • Avoid IPOs that are overpriced compared to industry standards.
  • Watch out for aggressive valuations during bull markets.

Check the Purpose of IPO Proceeds

  • If the company is raising funds for repaying debt, working capital, or expansion, that’s positive.
  • Be cautious if a large portion is going to promoters’ offer-for-sale (OFS) — it means promoters are exiting, not investing.

Review the Promoters and Management

  • Look for experienced, transparent, and compliant management.
  • Avoid companies with frequent legal disputes, governance issues, or opaque related-party transactions.

Analyze Sector Performance

  • Invest in IPOs from growing and resilient sectors (e.g., technology, renewable energy, healthcare).
  • Avoid sectors under regulatory pressure or cyclical downturns.

Watch the Subscription Data

  • Track QIB (Qualified Institutional Buyer) and HNI (High Net Worth Individual) subscriptions.
    • Strong QIB participation = institutional confidence.
    • Heavy retail oversubscription = speculative interest.

Don’t Chase Hype

  • Avoid IPOs just because of social media or YouTube buzz.
  • Focus on value, not popularity. Many hyped IPOs fall below issue price after listing.

Consider Listing Gains vs. Long-Term Investment

  • If you’re looking for listing gains, focus on short-term demand and sentiment.
  • For long-term investment, focus on fundamentals, business model, and growth potential.

Read the Red Herring Prospectus (RHP)

  • The RHP contains vital information on risks, promoters, financials, and use of proceeds.
  • Even a brief review of the Risk Factors and Financial Statements sections can protect you from major mistakes.

Use AI-Based Financial Analysis Tools

Platforms like Eievu Financial Analysis or EagleEyeView.ai help investors identify:

  • Undervalued and fundamentally healthy companies
  • Overvalued or weak companies
    This can safeguard investors from capital erosion post-listing.