Public Listed IPO (TCS)

Tata Consultancy Services (TCS) chairman N Chandrasekaran, at the 26th Annual General
Meeting (AGM), on Thursday, said that the company saw over 3,000% return on its investment
since the company's listing in 2004.
N Chandrasekaran said, "If you had invested in one TCS share at the issue price of ₹850 in the
IPO in 2004, the value of that investment today in a period of 17 years would be around Ra
28,000, a return of over 3000% on your investment."
BENEFITS OF INVESTING IN TCS
#1: Get in on the action early
By investing in a TCS IPO, you can enter the ‘ground floor of a company with high growth
potential. An IPO may be your window to rapid profit in a short time period. It may also help
grow your wealth in the long run. 
Suppose, you invest in a young company that sells disruptive technology. If it manages to sway
the market and rake in profits, you would gain from its success too.
#2: Meet long-term goals
TCS IPO investments are equity investments. So, they have the potential to bring in big returns
in the long term. The corpus earned can help you to fulfill long-term financial goals like
retirement or buying a house.
Besides, the Indian IPO market is growing. In 2017, the Indian stock market generated almost
$11 billion through IPOs.
#3: More price transparency
The price per security issued is mentioned in the TCS IPO order document. So, you have access
to the same information as bigger investors.
This would change in the post-IPO scenario. The share prices after the IPO would depend on
changing market rates and the stockbroker’s best price.
4: Buy cheap, earn big
The TCS IPO price is often the cheapest if you invest in a small company that has the potential
to grow big. That is because the company may offer a discounted rate. If you miss the IPO
window, investing in that promising company may be difficult because the stock price may
skyrocket.
You don’t believe it? Let’s taken Amazon’s example. When Amazon.com Inc. floated an IPO in
1997, each share was priced at $18. Had you invested $5,000 in Amazon’s IPO, your shares
would have been worth $2.5 million in April 2018 . [2]

LEGEND’S REGRET
Some IPOs go down in history, leaving even legends to regret giving it a miss.
Warren Buffett, arguably the greatest investor of recent times, is one such investor. Buffet
never invests in IPOs and is skeptical of tech companies. So, when Jeff Bezos floated the
Amazon IPO in 1997, Buffet let the offer pass. At the time, Amazon was an upcoming online
retailer dealing mostly in books.
Many other investors turned out to be wiser than Buffett — at least in this particular case.
The IPO’s success made Bezos, the owner of Amazon, richer than Buffett for a brief period in
terms of net worth.
But to give Buffett credit, he has admitted his faux pas.

SUCCESS AMID CRISIS

Visa International floated its IPO in 2008. The market was turbulent at the time, for the
recession was in full swing. Yet, despite the condition of the financial markets, the IPO did not
disappoint.
Visa mopped up $17.9 billion from the market. At the close of its first day on the market, the
Visa International stock was trading at $44. The next day, the closing price had risen to $66 — a
cool 50% jump in one day, and that too was when the times were tough!

HY DO SOME IPOS FAIL?

Promoters’ greed
During an IPO, the promoters sell off their shares to the public. The idea is to make as much
money as possible. There could be venture capitalists who had invested in the company in its
initial days. They would like to exit the venture by making hefty profits and then investing in
some other business. Sometimes, this greed could spoil the IPO’s chance of success.
(Read more: How underwriters sell their shares)
Questionable fundamentals
In the case of Reliance Power, the company wanted to raise money to fund five new power
projects. It was not about expanding the business. At the time, it had no operational business at
all. If a company floats an IPO without being honest about its fundamentals, there is a high
chance of failure.
Market Timing
The share pricing for Reliance Power was too high, ensuring that the promoters made enough
for themselves.  Unfortunately for investors, the listing happened when global markets were
beginning to slow down. The company cannot solely be held responsible for it, but the timing
does play a major role in an IPO’s success.
Valuation
The companies themselves are the best judges for determining their valuation. During an IPO,
the company’s top brass discusses the valuation with investment bankers. If the valuation is not
fair, retail and institutional investors will bear the maximum risk. This is why so many stocks
trade way below the issue price even when the markets are bullish.
X factor
Café Coffee Day, Monte Carlo, UFO Movies, and Adlabs also faced IPO failures. Interestingly,
none of these is an unsound company and it is not that their valuations were erratic. The
credentials of the promoters were quite well established and there was no dearth of reputation
or hype. Yet, something somewhere did not click. That is part of the inherent uncertainty of the
stock market.
The bottom line is that just as there is no sure-shot way for an IPO to succeed, there is no
guarantee that an IPO will not fail.

SO, WHAT SHOULD YOU WATCH OUT FOR WHILE DECIDING

ON AN IPO INVESTMENT?
Risk factor
No investment is free of risk. Even your fixed deposit in a public sector bank is not safe. So, if
you are investing in an IPO, be prepared to deal with some degree of risk. Keep in mind that the
company floating an IPO has so far been privately owned. It may have growth potential, but
that is no guarantee of future success in the sector within which it operates.
Risk appetite
How much risk can you take? If your initial answer is very little, think again. Assess your
financial situation, your liabilities, age, and other concerns. This will help you decide how much
risk you can afford to take.
Tip: One approach is to follow this thumb rule: Subtract your age from 100. The number you
get is the percentage of your investments that should go into equity. Keep your investment in
IPOs within this limit.
Reason for raising funds

Every investment bank publishes a prospectus for the IPO being floated. Go through the
prospectus with care. The prospectus will mention why the company is raising funds. If it is for
expansion, that is good news. Be careful if it is for paying off debt or purchasing shares from the
owners. It could be risky to invest in such a company. If a company cannot pay its debt without
raising funds from the public, it may not do well in the future, too.
Hard-selling by brokers
An IPO rarely comes directly to retail investors. If it is freely available, it probably means that
the institutional investors who were initially approached by the investment bank passed on the
opportunity. Take it as an indication of the company's financial health and prospects.
Available information

It is difficult to get much information about a company that is yet to be listed. So, it may be
tricky to find exactly where a particular company stands. Although the company’s IPO
prospectus gives out details about its assets, liabilities, overall financial situation, and growth
prospects, you should look for reports and analyses by third parties in newspapers, magazines,
journals, and online. Keep searching to find out details that the prospectus would never tell
you.
Lock-up period
Find out about the lock-up period, if any. Existing investors in the company may not be able to
sell their shares before the mandatory lock-up period ends. So, it may be difficult for you to
gauge whether the stock these investors hold has as much value for them as the IPO price. It
could be that once the lock-up period ends, these investors would dump their shares in the
market. This may cause the price to plummet. So, it may be wise to put off investing in the
company till the lock-up period is over.
The initial excitement
The Facebook IPO is an interesting case in point. In 2012, Facebook announced its IPO with
much pomp. The price shot up significantly right after the market opened. But the initial
excitement did not last long. The stock traded just above the IPO price at the closing of the first
day. And the stock value fell for nine of the next 13 days. So, it may be wise to let the market
settle before reaching for your wallet.
Small is tricky
Small companies often churn out fantastic returns. But such companies can also go bust. So,
extra caution is advisable when investing in a small company. But if term of larger company
some time they fail but won’t collapse.

CONCLUSION
TCS IPOs don’t just help private businesses. They can help your investment grow too. TCS IPOs
can be a great way to make quick profits as well as earn over the long term.
IPOs have woven a tapestry of riches tales in the last few years alone, ranging from Amazon to
General Motors and DLF back home.
But there’s a cautionary tale too. Not all IPOs strike gold. So, be cautious, do your research and
avoid getting caught in the IPO frenzy. The world of IPOs can be exciting, much like driving a
supercar. But you need to know to pull the brakes and control the steering wheel.

Consolidate Financial Analysis

Now we can analyze the that YOY growth rate is going well in comparison to the other IPO. Due to covid-
19, there are some issues happening in YOY growth rate but not in profit.
If you are an investor looking for stable returns by investing in strong and large companies from
the financial market then, 8% to 12% is a good CAGR percentage for you. For those investors
who are willing to invest in moderate to high-risk companies, they would expect 15% to 25% is
a good percentage for them.