Understanding IPOs and Why Investors Rush to Apply A Complete Guide for Beginners

In Nepal and worldwide, one trend has become extremely common — people rushing to apply for every IPO. Platforms get overloaded, investors apply from multiple family accounts, and social media gets flooded with IPO discussions.

But what makes IPOs so attractive?
Why do so many people feel that IPOs are the “easiest way” to make money?

This blog explains everything in simple, beginner-friendly language — how IPOs work, why people rush into them, how to analyze them, and the smartest ways to benefit from them.

1. What Is an IPO? (Simple Explanation)

IPO (Initial Public Offering) means:

A private company becomes public and sells its shares to general investors for the first time.

Why companies launch IPOs:

To raise money
To expand business
To reduce debt
To increase public participation
To list on NEPSE and grow value

When a company goes public, you get the chance to become one of its shareholders from Day 1.

2. Why IPOs Are So Popular Among Investors

Here are the major reasons behind the massive IPO craze:

A. Low Risk Compared to Secondary Market

Most IPOs are offered at a base price (Rs. 100).
Even if the company does average, your downside is limited.

Loss probability is low.
This attracts beginners.

B. High Chances of Profit on Listing Day

In Nepal, IPOs often list at:

2x
3x
Sometimes even 5x

Even if you get:

Only 10 units → profit
Only 20 units → profit

This “listing gain” mentality drives huge crowds into IPOs.

C. Low Investment Requirement

You can apply for Rs. 1,000 only (10 units).

This makes IPOs accessible to:

Students
Housewives
Beginners
Low-income earners
Anyone wanting safe returns

Low capital + low risk = perfect beginner investment.

D. Easy to Apply via MeroShare

With digital IPO application (ASBA + MeroShare):

No long queues
No paperwork
2-minute online process
Multiple demat accounts possible in a family

Convenience increases participation.

E. Fear of Missing Out (FOMO)

Everyone around is applying:
Friends, family, colleagues, social media influencers.

People feel:
“Everyone is applying — I should too.”

FOMO becomes a strong psychological driver.

3. Benefits of Investing in IPOs

✔ Low entry price

✔ High listing gain potential

✔ Low risk for beginners

✔ Can become long-term multibaggers

✔ Helps diversify your portfolio

✔ Opportunity to invest early in good companies

Good IPOs can create long-term wealth.

4. But IPOs Are NOT Always Safe — Here’s the Truth

While IPOs are popular, not all are good.

Risks include:

❌ Weak financials
❌ Overpriced issue
❌ No clear future growth
❌ High debt
❌ Poor management
❌ Manipulated hype

Not every IPO is a gem.
Many list strong but fall sharply later.

You must analyze before applying.

5. How to Analyze an IPO Before Investing

Here’s a simple checklist to evaluate any IPO:

A. Company Background

Check:

Establishment date
History
Parent company
Management experience

Older, stable companies = safer.

B. Earnings and Profit Growth

Look at:

Revenue trend
Net profit trend
Consistency

Growing earnings = stronger IPO.

C. Industry Strength

Some industries naturally perform better:

Hydropower
Insurance
Banking
Manufacturing
Technology

If the sector is booming, IPO has better potential.

D. Valuation (Very Important)

Check:

Is the IPO price fair (Rs. 100)?
Or premium pricing (Rs. 200–300)?
Is valuation justified?

Compare with peer companies.

E. Management and Corporate Governance

Trusted management = safer future.

F. Project Pipeline

If the company has strong:

New projects
Expansion plans
Future contracts

… its long-term potential increases.

G. Credit Rating

IPO credit rating (ICRA/NIC Ratings):

A or A+ = strong
B or below = caution

Credit rating shows financial health.

6. Who Should Apply for IPOs?

IPO investing is ideal for:

✔ Beginners

✔ Low-risk investors

✔ Long-term investors

✔ Youth with small capital

✔ Family investors

✔ Diversification seekers

It’s low-risk, regulated, and beginner-friendly.

7. Strategy to Increase Chances of Allotment

Because demand is huge, allotment is luck-based.
But you can improve your chances:

✔ Apply from all eligible family accounts

✔ Apply early

✔ Maintain balance in your bank account

✔ Target smaller IPOs (less crowd)

✔ Target sector IPOs with higher probability

This improves your allotment odds.

8. Should You Hold or Sell After Allotment?

This depends on the company type:

✔ SELL IMMEDIATELY (Listing Gain) If:

No strong fundamentals
No long-term potential
Weak sector
Overpriced IPO
Too much hype

✔ HOLD LONG-TERM If:

Strong fundamentals
Sector with high growth
Company expands operations
Management is trustworthy
Consistent earnings growth

These IPOs can become multi-year wealth creators.

9. IPO vs FPO — What’s the Difference?

IPO:

First time company offers shares → higher excitement.

FPO:

Already-listed company issues more shares → usually less hype.

IPOs are more popular because they are cheaper and attract higher listing gains.

10. Common Mistakes People Make

Avoid these:

❌ Applying without research
❌ Blindly following hype
❌ Believing every IPO gives high returns
❌ Investing big amounts in premium-priced IPOs
❌ Expecting guaranteed allotment

Smart investors apply with logic, not emotion.

Conclusion Why IPOs Are a Great Opportunity — If You Choose Wisely

IPOs provide huge opportunities for:

Beginners
Students
Low-income earners
Long-term investors
Wealth builders

They are simple, safe, and affordable.

But not all IPOs are good.
To succeed, you must:
✔ Analyze the company
✔ Check financial health
✔ Understand pricing
✔ Evaluate sector strength
✔ Decide hold vs sell wisely

Choose right → you grow wealth.
Choose blindly → you take unnecessary risk.

Smart selection + patience = successful IPO investing.