Welcome to Learn Vern.
My name is Yash, here we have come to learn What is a stock market?.
As we have completed learning about primary markets, IPO.
So, today we are going to discuss an important topic, which is, if you and I, people like us, want to invest in an IPO, what are the benefits for them?
Ok! So let's start with today's session.
We have studied some basic things about the stock market, as to What it is?
It is a place where you can invest, we have learnt about that, also I have even explained to you about Why you should do Investment.
There are different assets to investment, such as Fixed Deposit, Mutual fund, Savings account, Real Estate. These are some of the places, but we prefer actually only in stock market.
Why should you prefer the stock market? We have discussed, then we have also looked at whenever a company comes into the stock market, there are certain criteria which it goes through, there are its own motives, that also we have discussed.
We also studied about the different types of market, in Capital we and secondary, then Debt Market, Derivative Market, so we acquired some basic information.
We had started with a primary market, where I told you that they do fundraising, meaning it is really simple, that they want to withdraw money from the public or from anywhere else.
Maybe because they want to expand or reduce their debts.
We don't know at the start, why the company is coming, for that only we have to study the DRHP which comes in the IPO.
Draft Red Herring Prospectus,in that it mentions A to Z information, as to What are their motives, from how long the company is established?What are the future goals of that company? Who are the promoters of the company?
How much Debt, the company has currently?
What are the future goals of the company?
So, we are normally a retail public, so what do we want, What are things we should take care of?What are the things you should know about before investing any money in The IPO… so we will cover all these topics.
So, today we will begin with the topic, "IPO as Retail investors".
So, first why should you invest in an IPO?
Here it is written, that "You enter a high risk reward in a company".
So, this I have already told you and very well explained to you earlier also, that in IPO s or any market investment, if there is risk there is no problem, but you should always see if the reward is favourable.
Same thing applies.
That you know that the model or the business model of the company is very nice, it is long term, and the company will very effectively grow in that, in front of its competitors, its market weightage is really very strong, management of the company is very nice.
So, reward is very nice, so along with that risk will always be associated, because it can always happen that any other company will emerge as a competition.
So, risk, reward, and ratio should always match. That you have to see!
I will give you an example, as to How risk reward ratio can match in IPO, and How you can generate profit, you should have the complete idea of the business model.
You should understand one example, that IT companies, that is information Technology, in that one major player is Infosys, it's IPO came in late nineties or early nineties, that time that IPO was undersubscribed, people didn't had interest in the company, so IPO was almost in the position to fail, now why did the public had interest in it, because that time internet was newly invented, so people thought internet has come today tomorrow there will be no usage of it, but look at that time and today's time, you cannot exit without internet, if you have to watch news, movies, whatever you have to do you are always connected through the internet, you are working somewhere, there also you have internet connection, in government offices we have punching system which is also connected to a database, so they always need some major IT companies, who can provide this system of securities.
So, if you haven't understood that time but anyone from your family, like your father, grandfather, who would have invested that time in Infosys, and bought an IPO, you can imagine How Much you would have gained profit from that, Why?
Because we couldn't have imagined the business model that time, but you know it today.
You should always understand the innovations, as to What can be the future requirements, that will become the necessity without which your life would not proceed ahead.
Best, example that has happened in recent time is Internet, then it was invented, but we will discuss about its usage, before 2015, 2016, how much you were using the Internet, approximately around 1 GB, 2 GB, in that a major player like JIO came in, he made free internet for everyone, made people addictive towards his product.
And slowly slowly it started to destroy the market of its competitors, So if you are able to do this process you have already become a major player, consumer will definitely come towards you.
So like this in future any company that comes with an IPO into the market, try and understand its business model. And even if a certain company who doesn’t even bring its IPO but comes into the market and you find its business model nice, you can also keep an eye on to these companies as well, To see meaning you have to know the work of that company. So these things you should always know about an IPO always. If the business model is good then the company will perform better only.
Our next point is about listing gains, About an issue size , where an IPO is launch for 200 rupees, you know that the companies business model is good and it’s grey market price, let me first tell you about the grey market price what it is?
It is an unofficial bidding, where people do buying and selling unofficially, they feel that we like the business model and its prices should be beyond 200 that means till 400, 500 like that,So this is known as grey market price. So whenever you are putting your money in an IPO you should always know about its grey market price.Whenever the grey market price is close to 20, 30, 50% then it's good for you.So you cannot take risks for 5 to 10% if you know that the reward is good enough Around 30 to 40 percent then you can rest assure yourself that I’m ready to take risk for the reward.
So, let's see where we can check all these things.
Second, you should know about the subscription status .
Which subscription status?
We have previously seen about three types of investors,
First like us Retail Investors, but a part from us, there are two more,
One is HNI,
The Other is QIB
So, we should be knowing how much is the total investment of these two, how many times more have they invested for the IPO,
So, what should we do is? Just Normally write the name of the company at Google and see its subscription status.
How you can do that I will explain here.
Recently a companies big player, we always keep saying, that lets do Paytm, everywhere,
So, recently they launched it, so we will check its subscription.
Paytm IPO subscription status.
Here, you will see that the first link of chittorgarh will open, open this, and as you will scroll down, you will see, here QIB, it's time subscription was 2.79,
HNI s were 0.24,
Retailers were 1.66
Meaning the subscription didn't go well.
People were saying that it is a loss making company,
But, currently there is loss, but in future there can be fundamental growth for them.
Because, at all places online payment is started to be used,
So, everywhere you are doing online payment, so you know that it's a major player, and it can also try to shift in crypto,also can try to shift in equity, meaning it can also undergo trading also,
So, might be that now people are not understanding it's business model, but in future it can be growing.
Let's move ahead,
Now we will discuss the IPO that has been recently launched. What was that IPO?
It was by the name Paras Defence,
We went through that same website, and here we saw that 927 times HNI s had invested, 169 times QIB s had invested, and the participation of retailers was 112 times, meaning the level of IPO subscription was quite high.
So, it's simple that an IPO will open only in a good way.
I will give you one more best example, which will make it easy, there is a monopoly company, which all of you know, that is IRCTC, when IRCTC launched its IPO, we will see it's subscription also.
So, see here also it is 354 times, meaning people were ready to give 4 to 5 times more than it was required.
They knew that this company was very strong, as its future goals will always be good.
That is the reason people were interested in investing the money that time.
So, whenever you also do some investment.
It's ok, even if you do not read the DRHP, at least you can go through this subscription status and find out.
What will happen?
You will get to know, that these QIB, and HNI these big players when they invest money, they do not just do it like this only, as they have big firms and research analyst, meaning those who understand the business model with different angles and perspective, so they will do a complete research and then only will agree for investment.
So, you have to look at these things.
Now, it's not like IPO opens at 1 st, so you will purchase on that date itself, you should see at the last 1, 2 and 3rd day, so on the 3 Rd day after 2 or 3 o clock you should see, so if the subscription is good by that time, then you can surely agree to invest, otherwise I will also not go for the IPO.
So, this much you understood as to as a retail investors when you should not invest in IPO,
So, let's move ahead,
And see as to What are things that you should have for IPO investment?
First, you have to put a minimum investment in the IPO, that means, I had earlier also told you, that a minimum 15 thousand rupees of investment you can do in the IPO.
At one time how many can be purchased? Around 13 lots can be purchased at a time.
That is up till 1 lakh 95 thousand of investment one person can do on one pan card.
If you think the IPOs business model is quite nice, then you are also thinking that you will not be allotted the IPO, but you desperately want it, then What can you do?
You can do it from different pan card.
Meaning you can do it from your account, your mother, father, and other family members, through them also you apply for the IPO, and do investment, this will increase the probability of IPO allotment.
So, these are some of the basic things, which a retail investor should understand about while investing in an IPO and take care about.
If you have any doubts or queries,then you can post that in the comment section, and in this way your questions will reach us, and your comment will reach the other learners, the result of which, it will help in creating discussion of queries and solutions.
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