Simply Save | What should retail investors keep in mind when investing in IPOs?

Also read: Why mutual funds found investing in Nykaa's IPO fashionable despite stiff valuations

But, whether traditional or new-age business, a company launching its IPO does not have any track record of its behaviour towards minority shareholders. It is only after getting listed on stock exchanges, these companies open up their shareholding to public at large. 

Quite a few of the technology-driven e-commerce companies are still making losses, with some exceptions like Nykaa. While investors may not have all the historical data of a company, they can go through the company’s draft red herring prospectus (DRHP), where companies are required to disclose information like recent profit and loss statements, current shareholders, promoters, as well as any instance of past litigations.  

After the company gets listed, it needs to follow SEBI’s Listing Obligations and Disclosure Requirements (LODR), which require companies to disclose every corporate action regularly, be fair to minority shareholders, and also maintain good corporate governance practices.

In today’s Simply Save Podcast, Moneycontrol’s Jash Kriplani talks with G Chokkalingam, founder and managing director of Equinomics Research and Advisory, on how much of their savings retail investors should allocate to IPOs, how they should read the company’s DRHPs and use other sources of information to decide whether to buy or avoid an IPO.