IPO Investment Guide: How to Invest in Upcoming IPOs?

An IPO (Initial Public Offering) is a form of equity financing in which a private company offers its shares to the public for the first time, becoming a publicly traded company. In this process, the business owners give up a portion of their ownership in exchange for capital. This equity capital is used for purposes such as business expansion, launching new projects, or repaying debts. Public investors who purchase shares in the IPO have an early opportunity to invest at a lower price, potentially earning handsome returns. However, it’s important to understand that IPO investments come with both risks and rewards.

Let’s understand how to invest in an IPO with minimal risk. 

Types of Initial Public Offering

The different types of IPO are:

• Fixed Price Offering

In a fixed-price offering, the company sets a predetermined price for its shares before the IPO process begins. This price remains fixed throughout the offering, allowing investors to apply according to their needs and budgets. 

• Book Building Offering

Book-building Offerings are more dynamic than fixed-price offerings, as the final price is based on demand. In this type, the company sets a price range within which the investors can bid. The lower limit is called the “ floor price,” and the upper is the “cap price.” 

How Does an IPO Work?

All investors, including institutional and retail investors, buy shares and participate in the IPO. Trading occurs in the primary, secondary, and grey markets. 

The primary market, often called the ‘new issue market,’ is where investors buy newly issued securities. The secondary market is where investors buy and sell shares after the Initial Public Offering, with existing shareholders trading their shares on a stock exchange. The grey market is a parallel market where investors can place bids before the IPO starts. This typically happens when demand is high, and the IPO trade cannot be settled until actual trading begins.

Step-by-Step Guide to Invest in an IPO

If you are wondering how to invest in an IPO, follow the detailed steps below to navigate the process and make informed decisions.0

Step 1:  Research  

Before investing, research the business thoroughly and refer to the Draft Red Herring Prospectus (DRHP) issued by the company. This document includes details about the company’s financial health, business model, prospects, etc. 

Step 2: Open a Demat Account 

Investors should set up a Demat account, which is available through banks, brokers, and online platforms. KYC compliance is mandatory for these accounts.

Step 3: Other Accounts 

Apart from a Demat account, the investor must also have a bank and trading account.

Step 4: Apply Online 

Investors can apply for an IPO online through two primary methods. 

• ASBA (Application Supported by Blocked Amount): Here, the amount is blocked in the bank account until the IPO shares are allotted. 
• UPI Applications:  Use your UPI ID on the application form, which is simple and quick.

Step 5: Choose Application Category 

Applicants should choose one of the application categories: retail investors (applying for up to two lakh rupees) or non-retail investors (applying for above two lakh Rupees). The procedure is the same, but the allotment process and available shares may vary. 

Step 6: Understand the IPO Allotment Process 

If the IPO is oversubscribed, the allotment will be done through a lottery system. Once the shares are allotted, they will be credited to the Demat account.

Step 7: Monitor Stock Listing Date 

Once the allotment is complete, the shares will be listed on the stock exchange. The market determines the price when the shares start trading publicly. 

Top Upcoming IPOs to Watch (23rd–27th June 2025)

1. Kalpataru Ltd IPO
2. HDB Financial Services Ltd IPO
3. Globe Civil Projects Ltd IPO
4. Ellenbarrie Industrial Gases Ltd IPO
5. Suntech Infra Solutions Ltd IPO

Investing in IPOs: Is it a Good Idea?

If you make informed decisions, IPO investments are a great way to achieve higher returns.  They provide access to shares of promising new companies at a lower price, giving investors a chance to capitalise on growth potential. Additionally, IPO investments help diversify an investor’s portfolio by allowing them to invest in emerging sectors.

However, despite the numerous advantages, IPO investments also come with their drawbacks. The newly listed public companies are volatile, and investing in their shares is considered high-risk. Also, the returns from IPOs are mixed.

Pros

• IPO shares come with a lock-in period, which ensures investors hold on to the shares for a certain amount of time. This restriction helps maintain market stability and prevents large sell-offs that could lead to significant price volatility.
• IPOs offer good returns if the company performs well after the listing.
• Investors get an early investment opportunity and access to lower prices.

Cons

• IPOs are risky investments, especially when the company is new and raw.
• The information in the prospectus can be limited, and the investor may not get a complete picture of the company.
• The performance of IPOs can be unpredictable, and market conditions may also affect the performance.

IPO Investment Tips

Here are some IPO investment tips to help you maximise your returns.

• Analyse your investment needs and decide whether to go for short-term gains or long-term growth.
• Research well and understand the company’s financial health, prospects, and possible risks.
• Do not fall for media hype and advertisements by the market speculators.
• Be clear about the bidding process and the difference between fixed price and book-building IPOs.
• Check the allotment process and clearly understand how the shares are allocated.
• Be prepared for fluctuations as IPO stocks are volatile.
• Be informed on taxation as the profits from IPOs attract capital gains tax. 

Upcoming IPOs in India

You may check the following upcoming IPOs in India and discover investment opportunities with growth potential.

Final Thoughts

A company’s decision to go public is a giant step, and its IPO helps to raise capital and fuel the company’s growth. For investors, an IPO is a valuable way to get substantial profits with research and smart investment decisions. However, an IPO investment does not guarantee success, and the investor has to wait to reap the benefits. 

If you’re ready to reap the benefits of IPO investments, why wait? Begin your investment journey with Torus Digital today!