Why so many IPOs together

Look at the company’s financial health, growth prospects and market position before deciding which of all the IPOs floated this season is/are viable

Surajit Dasgupta
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Why so many IPOs

Why so many IPOs

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In an unprecedented rush, 56 companies are gearing up to raise over Rs 90,000 crore through IPOs and FPOs after getting the green signal from the Security and Exchanges Board of India (Sebi). This move is set to invigorate the market and provide investors with numerous opportunities.



What is an IPO? What is an FPO?
An IPO is a company's first time offer of shares to the public. An FPO is the company, which is already public, offering additional shares to its investors.



This is not just a random surge; it's a well-calculated move driven by various factors, including market conditions and investor appetite.

The current market conditions are quite favourable for these companies. With investor sentiment on a high and liquidity in the market, it’s an opportune time for businesses to go public or raise additional funds.

The big names offering IPOs this season cover various sectors — from the finance sector to the technology sector, reflecting the diverse investment opportunities available.

Opportunities and risks with too many IPOs

Historically, such a rush in IPOs and FPOs has often led to market movements. This is a time to probe the market, research thoroughly and make informed decisions. But remember, the influx of new stocks can be a trap.

  1. Too many IPOs can spread investor funds thin; this would reduce the capital each company can raise
  2. With many companies vying for funds, some may be forced to lower their IPO prices to attract investors, which may lead to undervaluation
  3. A large number of offerings may include weaker companies
  4. a.    If several high-profile IPOs underperform, it can dampen overall market sentiment or

    b.    An overenthusiastic market response can create a speculative bubble, which may eventually burst
  5. An influx of IPOs can strain market liquidity
  6. A surge in IPOs may attract greater regulatory scrutiny. This would increase compliance costs and delays
  7. Finally, if economic conditions change unfavourably, many newly public companies may struggle to meet investor expectations

So, look at the company’s financial health, growth prospects and market position before deciding.