The quest for financial security in life makes everyone ponder the means. Many of you might think that the more you earn, the better you will end up in terms of wealth. Money indeed begets money. If you are not well-endowed with family wealth, creating a surplus sufficient for retirement is a significant effort. A lot also depends on your ability to learn. Initial public offerings attract a lot of people to sit up and take notice of the opportunity due to the publicity around them.
It is a common practice to apply when companies come up with initial public offerings. Some borrow and invest, too. It's no surprise, then, that the year 2024-25 was a blockbuster year for the primary market, which includes IPOs, follow-on offers, and offers for sale by existing shareholders. About 105 issues saw a record Rs 2,11,151 crore raised by companies or selling shareholders, according to Prime Database, a research agency.
The next few months in 2025-26 will see some large companies offering shares to investors. These include two large non-banking finance companies, such as Tata Capital and HDB Financials, as well as a fintech company like Pine Labs. While you may always want to get a slice of high-growth companies, it is also time for you to enrich yourself with knowledge.
The draft red herring prospectus, filed with regulators such as the Securities and Exchange Board of India or stock exchanges, provides insight into the business environment of these companies. You can get a sense of the growth opportunity for the company you wish to become a part-owner of.
The IPO offer document has numerous risk factors listed as mandated by regulations. The company's managements are not allowed to make any forward-looking statements. You need to assess their past performance and read about their journey to profitability to gauge the sincerity of their operation. Despite such restrictions, the IPO filings will help you get the big picture. Companies often hire reputable research firms to give them industry analysis.
The growth momentum in the financial services sector in India is unprecedented, and non-banking finance companies are at the forefront of financial inclusion. The NBFC sector has grown to loan assets under management to Rs 48,00,000 crore in 2024-25, from just Rs 2,00,000 crore in 2000-01, according to the HDB Financials offer document. While commercial banks account for three-fourths of the loans, their share is rising consistently. They are playing a larger role in financial inclusion. While loans from non-banking financial companies are expensive, they take the risk of lending to people with relatively low credit scores. Retail loans and business loans, which are prevalent in both rural and urban areas, dominate their loan book.
The draft offer document of Pine Labs, a large FinTech company, reveals that the total market opportunity in India measured in terms of total payment value is expected to grow to Rs 280 lakh crore by 2028-29 from Rs 91 lakh crore in 2023-24 and Rs 19 lakh crore in 2018-19. A key driver for the rapid growth in digital payments is attributed to rising income and spending. The document offers some valuable insights into the FinTech world.
What does it mean to you
If you are new to the world of investing and seeking suitable opportunities, you need to conduct some research. Reading the draft prospectus that companies heading into an IPO file is just the first step. You can gain a comprehensive understanding of the company's business environment, as well as specific details about its financial performance to date, in preparation for your investment decision. Knowledge is an essential tool for your investment journey, and such documents can help you assess the risk and reward profile of your investment.