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IPO Watch: IPOs: The Way to Wealth?

Historically, IPOs have generated huge interest among Indian investors.

Historically, IPOs have generated huge interest among Indian investors. There's a general perception that stocks list at premiums and therefore are considered to be the quickest way to earn money in the stock markets. Some recent IPOs have done well with investors making handsome gains on listing. In this edition, we look at some of the prominent IPOs that hit the markets since 2005. We try to monitor and re-evaluate how the holdings of an investor who was allotted shares in an IPO have fared. Consider an investor who began creating his portfolio by investing selectively in IPOs in January 2005. If he had applied for, and was allotted the minimum number of shares in 15 of the prominent IPOs that hit the market during the year, he would have invested Rs 96,805 to create his portfolio. Had he continued to hold his shares, the portfolio would be worth Rs 163,892.60 as on May 09, 2006 - a return of over 68 per cent. Even after incurring heavy losses during the recent crash, he would have earned close to 21 per cent.

...But Before You Invest
Objective of the issue - how the company would use the proceeds from the issue? Will the objective of the company benefit shareholders in the long run?

What is the sector the company is operating in? What are the growth prospects of the company compared with the sector?

Compare the earnings per share (EPS) and price-to-earnings ratio (PE) of the company to its peers in the same sector.

Look at the growth in sales and net profit of the company over a period and compare it with the peers. Is the issue pricing justified to the company's growth and earning?

Read the offer document carefully.