How to increase your chances of IPO allotment

 

Increasing your chances of getting an IPO allotment in India involves understanding the allotment process and following some key strategies. Here are some tips:

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1. Apply Through Multiple Demat Accounts

• Open multiple accounts: You can apply through the Demat accounts of family members (spouse, parents, siblings, etc.).
• One application per PAN: Ensure each application is linked to a different PAN, as multiple applications with the same PAN will be rejected.

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2. Bid for the Minimum Lot Size

• Retail quota: IPO allotments are done randomly within the retail investor quota, and every applicant who bids for the minimum lot size has an equal chance.
• Avoid higher bids: Bidding for more lots doesn’t guarantee allotment, as retail investors are allotted on a pro-rata basis if the IPO is oversubscribed.

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3. Apply in the Retail Investor Category

• Eligibility: If your investment amount is up to ₹2 lakhs, you can apply under the retail investor category, which has a specific quota.
• HNI (High Net-worth Individual) category: If you plan to invest more than ₹2 lakhs, you fall under the HNI category, which often has lower odds due to high oversubscription.

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4. Use UPI or ASBA for a Smooth Process

• ASBA (Applications Supported by Blocked Amount): Ensure you apply through ASBA via your bank or broker, as it blocks your funds rather than debiting them.
• UPI Mandate: If applying online, approve the UPI mandate quickly to ensure your application is processed.

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5. Choose the Right IPOs

• Oversubscription analysis: Look for IPOs with moderate oversubscription. Extremely oversubscribed IPOs may reduce your chances of allotment.
• Strong fundamentals: Focus on IPOs with strong fundamentals and demand in the market.

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6. Avoid Technical Rejections

• Double-check details: Ensure your PAN, Demat account number, and bank details are correctly entered.
• Sufficient funds: Ensure your account has sufficient funds to block the application amount.

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7. Apply Early

• Timing: Submit your IPO application on the first or second day of the issue period to avoid last-minute glitches.

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8. Apply Through Multiple Brokers

• Different intermediaries: Apply using different brokers or trading platforms to increase your chances, as technical rejections on one platform won’t affect other applications.

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9. Participate in Small & Mid-sized IPOs

• Higher chances: Smaller IPOs might have lower participation, increasing your chances of getting an allotment compared to large and popular ones.

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10. Check Grey Market Premium (GMP)

• Market sentiment: Look for IPOs with a moderate GMP. While high GMP IPOs attract more retail investors, they often result in oversubscription and lower allotment chances.

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By following these strategies, you can improve your odds, though it's essential to remember that IPO allotments are partly luck-based when demand is high.

Lamosaic India IPO analysis

 

The Lamosaic India IPO opened on November 21, 2024, and will close on November 26, 2024. It is priced at ₹200 per share with a minimum investment of 600 shares (₹120,000). The IPO aims to raise ₹61.20 crore through a fresh issue of shares, with no offer for sale component. It will list on the NSE Emerge platform, which is tailored for small and medium enterprises (SMEs)​

Key Details:

• Industry: Lamosaic India operates in the construction materials sector, focusing on products like laminates, plywood, and flush doors. The company primarily caters to real estate and infrastructure markets within Maharashtra. 
• Financial Performance: The company has shown significant growth, with revenue rising from ₹10.01 crore in FY22 to ₹55.65 crore in FY24. Net profit improved from ₹0.51 crore in FY22 to ₹8.22 crore in FY24​
• Return on Equity (RoE): It boasts an impressive RoE of 53.93% for FY24, reflecting strong profitability​

Strengths:

1. Specialized Market Niche: Focuses on decorative laminates and related products with a presence in the Maharashtra market.
2. Strong Financials: Consistent growth in revenue and profitability, with improving margins.

Risks:

1. High Valuation: With an FY24 Price-to-Earnings (P/E) ratio of around 24, the IPO appears slightly expensive compared to peers in the SME segment.
2. Limited Market Reach: Its operations are largely confined to Maharashtra, which could restrict future growth opportunities​

If you are considering investing, the IPO's success will depend on its ability to scale operations and sustain profitability. For retail investors, the 50% allocation in this SME IPO and listing on NSE Emerge are notable aspects.

Best books for learning IPO investing

 

 

Learning about IPO (Initial Public Offering) investing requires understanding fundamental investing principles, stock market dynamics, and specific nuances of IPOs. Here are some excellent books that can help you build expertise:

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1. General Investing Books (Including IPOs)

1. The Intelligent Investor by Benjamin Graham

   • A classic investing book that teaches value investing principles. While not specific to IPOs, it lays a strong foundation for analyzing stocks, including newly listed ones.

2. Common Stocks and Uncommon Profits by Philip Fisher

   • A must-read to understand growth investing, which is relevant when evaluating IPOs with high growth potential.

3. The Dhandho Investor by Mohnish Pabrai

   • A simplified approach to value investing with lessons applicable to assessing IPOs.

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2. IPO-Specific Books

1. IPO: A Global Guide by Philippe Espinasse

   • Offers detailed insights into IPO markets globally, including how companies go public and strategies for investors.

2. Initial Public Offerings: A Savy Investor's Guide by Ross Geddes

   • This book provides an investor-focused look at IPO processes, pricing, and valuation methods.

3. Investing in IPOs: A Practical Guide by Tom Taulli

   • Focuses specifically on the IPO process and tips for investors interested in participating in IPOs.

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3. India-Specific Investing Books (Including IPOs)

1. How to Avoid Loss and Earn Consistently in the Stock Market by Prasenjit Paul

   • Includes tips on evaluating Indian IPOs alongside fundamental stock investing strategies.

2. Dalal Street Investment Journal (DSIJ) (Magazine/Guide)

   • Not a book, but a leading Indian publication that frequently discusses IPO opportunities and strategies.

3. Value Investing and Behavioral Finance by Parag Parikh

   • While not IPO-specific, it provides insights into evaluating companies and market psychology, applicable to IPO investing.

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4. Advanced Investing Books

1. Investment Valuation: Tools and Techniques for Determining the Value of Any Asset by Aswath Damodaran

   • Essential for understanding valuation metrics, particularly for pre-revenue or high-growth IPO companies.

2. Security Analysis by Benjamin Graham and David Dodd

   • Offers a deep dive into financial analysis, crucial for analyzing IPOs and their prospectuses.

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Tips for Reading

• Start with general investing books if you're a beginner.
• Focus on IPO-specific books for strategies and case studies.
• Stay updated on Indian IPOs with blogs, financial news portals (e.g., Moneycontrol, Zerodha Varsity), and stock market journals.

Biggest IPO listing gains in India

 

In India, some IPOs have delivered extraordinary listing day gains. Among the most notable:

 

1. Sigachi Industries (2021): It recorded a listing day gain of approximately 270.4%, the highest on record. The stock debuted at ₹603.75 against its IPO price of ₹163.

2. Vibhor Steel Tubes (2024): This IPO achieved a 181% gain on its debut, listing at ₹442 compared to its issue price of ₹151.

3. Paras Defence and Space Technologies (2021): It posted a gain of 185% on listing day.

4. Latent View Analytics (2021): It had a listing day gain of 148%, reflecting robust investor interest.

5. BLS E-Services (2024): This IPO achieved a 126% listing day gain.

    

These gains are influenced by factors like market sentiment, over subscription rates, and the company's growth potential.

IPO analysis using gmp, kostak rate, subject to sauda

 

 

 

  

IPO analysis in India often involves interpreting market sentiments through indicators like Grey Market Premium (GMP), Kostak Rate, and Subject to Sauda. Here's what they signify and how to use them for analysis:

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1. Grey Market Premium (GMP)

GMP is the extra amount buyers are willing to pay in the grey market over the IPO price band.

• Interpretation:
  • High GMP indicates strong demand and optimism about the IPO.
  • Negative or low GMP suggests weak interest or potential losses post-listing.
• How to Use:
  • Compare GMP with the issue price.
  • Example: If the IPO price band is ₹500-₹550 and GMP is ₹100, the expected listing price is ₹650.

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2. Kostak Rate

The Kostak Rate is the premium an investor gets by selling the IPO application (before allotment) to another party.

• Interpretation:
  • High Kostak rates show high demand for securing allotments.
  • It provides a risk-free profit for retail investors.
• How to Use:
  • Example: If the Kostak rate is ₹1,000, selling a ₹15,000 application means ₹1,000 guaranteed, regardless of allotment.

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3. Subject to Sauda

Subject to Sauda is the amount a buyer is ready to pay for an IPO application only if shares are allotted.

• Interpretation:
  • High Subject to Sauda rates mean high probability of listing gains.
  • Used mainly in small or highly oversubscribed IPOs.
• How to Use:
  • Example: If the Subject to Sauda is ₹10,000 for one lot, and allotment happens, you earn ₹10,000 in addition to the shares.

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How to Combine These Indicators

• For a Strong IPO:
  • High GMP, High Kostak Rate, and High Subject to Sauda indicate positive market sentiment and good listing prospects.
• Risk Assessment:
  • Negative GMP or low Kostak rates warn of weak demand. Be cautious about subscribing.
• Focus on Fundamentals:
  • While these indicators reflect market demand, always analyze company fundamentals, valuations, and long-term growth potential.

NTPC Green IPO Analysis

 

The NTPC Green Energy IPO is set to open for subscription on November 19, 2024, and close on November 22, 2024. The price band is ₹102-108 per share, and the lot size is 138 shares. The IPO aims to raise ₹10,000 crore, primarily to fund its renewable energy projects and reduce debt​

Financial and Growth Highlights:

• Portfolio: As of September 2024, NTPC Green Energy had an operational capacity of 3.3 GW and plans to expand this to 6 GW by FY25 and 19 GW by FY27.
• Revenue Growth: The company's revenue grew by over 1,000% between FY23 and FY24, and profit after tax increased by 101.32%​
• Valuation: At the upper price band, the IPO is priced at a post-issue EV/EBITDA multiple of approximately 35.3x FY25 estimates, suggesting aggressive pricing​
  
  
  
  

GMP (Grey Market Premium):

As of November 17, 2024, the GMP for the IPO is ₹1, suggesting a negligible premium over the upper price band of ₹108. This translates to an estimated listing price of ₹109, indicating limited upside potential for short-term gains​

Investor Considerations:

• Positives: Strong backing by NTPC, robust growth potential in renewable energy, and focus on clean energy solutions.
• Concerns: High valuations and a low GMP may deter investors looking for short-term listing gains. However, long-term investors may consider the IPO given the company's growth trajectory in renewable energy​.

The IPO is a better fit for long-term investors who believe in the renewable energy sector's growth rather than those seeking immediate returns.