11 IPO’s to hit the market, are you ready to take a leap?

People planning to invest money in primary market would have a number of choices to book their savings this month, as about a dozen of companies are expected to bring out their IPOs in September.

If you are planning to take a leap into the IPO market, here are some important things which you would have to keep in mind.
1. The promoter’s background: This is by far the most important element. However good the product, technology or market, it is the promoters who run the company. Find out about their track record, their other interests, and performance of other group companies in order to keep yourself well informed.

2. The company's balance sheet: If you want to be an investor, it's time to start reading and understanding a balance sheet. Pay attention to the topline and the bottomline, major variances; but most importantly, consider carefully the extraordinary items and notes to accounts.

3. Risk factors: Though risk factors are not very clearly spelt out, a careful reading would still give enough information of the downsides. Try to do an impact analysis of the critical risk factors.

4. Shareholding pattern: It is important to know who the major shareholders of the company are and what their shareholding pattern will be after the issue.

5. Value, not price or par: An offering at the face value of Rs 10 is not necessarily cheap. The 'par value' system often gives you the impression that no premium is being charged.

6. Compliance record and litigations: Find out whether group companies have been diligent in filing their returns to various bodies such as the stock exchanges and registrar of companies.
 The prospectus will disclose all major litigation cases filed against the company's directors and promoters, as well as against group companies. Avoid companies that are deeply mired in litigations.

7. Underwriters and investment bankers: Underwriters add to the issue's strength. An underwritten issue today does not denote weakness requiring an underwriting support, it shows that there are intermediaries who after assessing the risks have decided to back the issue.
 Also, before investing in an issue, look at the names of its investment bankers and check out their past track record.

Source : Rediff