Is Investing in IPO profitable

I have been investing in IPO for the last 6 months and got around 4 of them, in that 3 of them are profitable whereas one is on loss. Though in my case the loss is very minimal as compared to the gain which I got. But let's see if investing in IPO is always profitable or not.

PC: Pixabay.com

Before knowing about it let's find out what exactly is IPO. Just like a token sale in the Crypto world, IPO is all about a stock sale. An IPO is an Initial Public Offering is an offer of new shares by a private company to the public for the first time. In simple words, a private company is becoming public, i.e. the ownership changes from private to the masses.

In my case, I follow https://www.chittorgarh.com/ to get all the details about the IPO, past and future ones.

PC: chittorgarh.com

In 2021 alone, we had 40 companies that have done the IPO, which means 40 companies went from private to public. In that, some of the companies share price almost went 5X whereas for some it was in negative. Let's take the extreme ones.

Laxmi Organic Industries Limited

Issue Price: Rs 130
Current Price: Rs 569.7
Gain/Loss: +338.23%

Suryoday Small Finance Bank Ltd

Issue Price: Rs 305
Current Price: Rs 215.25
Gain/Loss: -29.43%

As you can see we have taken two extremes where one has given almost 5 times returns whereas the other one has given negative returns.

Let's take an average:

Total IPO in 2021: 40
Profitable IPO: 32
Average Profit: 66.80%
Average Loss: 13.31%

Information Reference: https://www.chittorgarh.com/ipo/ipo_perf_tracker.asp?year=2021

As you can see the average profit is way better than the average loss. Now the question is how to know if the company will be in profit or loss. That is where your knowledge of Companies will come into the picture. We have to see if the company is in profit, do they have any debt or not or are they relevant in the future or not.

So it's not always that the company that is doing an IPO will always give positive returns as we have seen in the above paragraph, but if the company is good it can give unexpected returns. Not in 2021, but there are a lot of IPO's who have given up to 5X or more like IRCTC, Happiest Minds etc. That means for most of the part investing in IPO is always profitable, but again it's not always that it will be profitable.

As we know investing in equity is always profitable if you are invested in the long term, the same goes for IPO too. If the company is good and profitable and has a good business model, it's always profitable to invest in IPO. As I said earlier. I have been investing in IPO for the last 6 months and will be investing in the future too. For me, I don't get the IPO shares allotted always because it's always a lottery system, but I was lucky 4 times in that 3 of them is actually giving me profit 30% whereas one is giving me loss of 10%.

Posted Using LeoFinance ^Beta