IPO and Investments in India – Reality Check

Investment is important for the development of any country and indeed sector. There are two kinds of investments domestic and foreign investment. Investments, however, are crucial for new innovations in the pursuit of greater customer satisfaction and brighter financial rewards. So, if you are planning to set up a new business, you should know what the foreign investors think when they plan to invest.

Indian primary market in particular is the core focus of the investors. There are many reasons for foreign investors to be interested in investing in India for example – the high population which is equal to higher number of customers.This article will help you understand that as a startup what and how you should think when it comes to investment.

So here we go…..

Today’s headline read: Retail investors has a sharp eye on primary market.

According to some reliable sources, the Indian marker is experiencing record growth which continues to be primarily in the stock market and positive sentiments of the market are currently quite favorable for the primary market. For this reason, at least seven companies, including Lodha Developers and HDFC Mutual Fund, are expected to knock the capital market by next month’s initial public offering (IPO). These IPOs are expected to raise capital of more than Rs 14,000 crore. According to merchant banking sources, if there are good sentiments in the market, the IPO season takes place from July to September and they say many more IPOs will knock before the September 30th.

Why IPOs are important?

Okay, sorry to interrupt you but here I would to take a moment and explain to you what IPOs are important, IPOs as defined are initial public offerings. Companies issues IPOs to raise funds for something brilliant that they have planned for the future. In a layman language, IPO is a gambling. You invest, wait for the result and either you lose or you win, But the company or gambler losses not really much, In this case, companies like Lodha Developers and HDFC Mutual Fund are planning to launch IPOs as the market is favorable and they may be able to raise amazing funds, For a start up this means you will have to wait for the market conditions to turn favorable in order to raise good funds. This is crucial for you as a company to learn. Now, let us move on to the next important part.

The outcomes of today’s headline: Secondary Market Becomes Expensive

Experts say that the interest of foreign portfolio investors (FPIs) has risen sharply in the primary market, and they feel that the valuation in the secondary market has been quite high. Therefore, they are investing more money in Instruments like Primary Issues i.e. IPOs to take advantage of India Growth Story. Significantly, the FPI has so far invested 17,612 crore in the primary market in FY 2018-19. At the same time, they have withdrawn 23,392 crore from the market. At this time Domestic Funds are also in good position and retail investors, even considering the nature of the stock market, are in the mood to stay long in the market.  But, SP Tulsyan says that the primary market is now at the secondary market level in the case of valuation. As far as the new IPO is coming up, the main reasons are the sentiments and after the second March audit result, companies will have to bring IPO before September 30. Now the IPOs have come good in the past and those who are coming are also good candidates. If retail investors find the price band right, then they can take a call of 8-12 months.

Bingo, if you are a good company you will be expected to launch IPOs and in case you decide not to, you will still have peer pressure to do so. So, this is one amazing real-life case study to understand how and why investments are important and how IPOs can be big game changers. 

Puneet Kaushal is a young entrepreneur. He has studied MBA in retail marketing. He is one enthusiast looking for opportunities to learn, grow and excel in everything that is business.

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