InvestorQ : What are the types of IPOs that I should invest in so that I can get profits on listing? Should I look at grey market premiums?
Priyanka N made post

What are the types of IPOs that I should invest in so that I can get profits on listing? Should I look at grey market premiums?

Answer
user profile image
Neelam Naik answered.
3 weeks ago


At the outset, let me tell you that the grey market is an unofficial market and it is not any price indicator. It is just a measure of market sentiments and it reflects public sentiments so things in the grey market can change fast. Use it as an approximation not as a guide.

How do you judge the success of an IPO? One way is to look at oversubscription, which explains the demand in the market. The proof of the pudding lies in the eating so what you really want is post listing performance. That is what you must focus on.

One trend is that IPOs must have futuristic ideas and that is evident in the recent IPOs. IPO investors are shunning financial players due to the inconsistencies in their models. Angel IPO QIB portion did not even get 100% while other IPOs like UTI AMC got tepid response.

Look at some comparisons. Chemcon did so much better than CAMS. UTI AMC got 2.3X subscription while Mazagon Docks got 157X. It also mattered that Mazagon was reasonably priced at a P/E ratio of just 6X despite an order book of Rs.50,000 crore. Look for such compelling stories in IPOs.

In 2017, retail investors rushed into PSU insurance stocks and badly burnt their fingers. These stocks are at a fraction of their IPO price with limited growth visibility. Now, focus on companies with a futuristic narrative and reasonable valuations; like Mazagon.