Factors to be considered by the Investors

The number of stocks, which has remained inactive increased steadily over the past few years, irrespective of the overall market levels. Price rigging, in different usage of funds, vanishing companies, lack of transparency, the notion that equity is a cheap source of funds and the permitted free pricing of the issue was our leading to the prevailing primary market conditions. In this context, the investor has to be alert and careful in his investment. She has to analyse several factors. They are given below:

1. Promoters credibility: 

a) promoters past performance with reference to the companies promoted by them earlier.

b) the integrity of the promoters should be found out with enquiries and from financial magazines and newspapers.

c) their knowledge and experience in the related field.

2. Efficiency of the management: 

a) managing director's background and experience in the field.

b) the composition of the board of directors is to be studied to find out whether it is broad-based and professionals are included.

3. Project details: 

a) the credibility of the appraising institution or agency.

b) the stake of the appraising agency in the forthcoming issue.

c) availability of raw materials, government norms regarding it and tax concessions, if any.

4. Product: 

a) reliability of the demand and supply projections of the product.

b) competition faced in the market and competitive strategy for marketing.

c) If the product is export oriented, the tie up with the for collaborator or agency for the purchase of products.

5. Financial data: 

a) Accounting policies should be considered before investing by the investors.

b) revaluation of the assets is required if present.

c) analysis of the data related to capital, reserves, turnover, profit, dividend record and profitability ratio.

d) possibilities for achieving the financial projections as indicated by the appraising institution.

6. Litigation: pending litigation and their effect on the profitability of the company. Defaul in the payment of dues to the banks and Financial institutions.

7. Risk factors: ok for study of the general and specific risk factors should be carried out.

8. Auditor's report: A thorough reading of the auditor's report is needed especially with reference to accounts, qualifying remarks and changes in the Accounting policy. In the case of letter of offer the investors have to look for recent un-audited working reserves and of letter of offer.

9. Statutory clearance: investors should find out whether all the required statutory clearance has been obtained if not what is the current status. The clearances used to have a bearing on the completion of the project.

10. Investor service: Promptness in replying to the enquiry of allocation of shares, refund of money, annual reports, dividends and share transfer should be assessed with the help of past record.