A SYSTEM TO PROVIDE CHECKLIST FOR RETAIL INDIVIDUAL INVESTOR BEFORE INVESTING IN INDIAN IPO MARKET

Abstract

The present invention relates to a system that provides a checklist for retail individual investor before investing in Indian IPO market to foster economic growth and to meet SDGs. The system provides a checklist that an investor must thoroughly analyze and evaluate before making any investment decision, comprising the following key factors: Size of Firm, Age of Firm, EIC Framework, Skills and Abilities of Company Auditor, Regulatory Norms, Government Policies, Brokerage Services, Image/Presence of Venture Capital, Underwriter Reputation, Affiliation of Group, Organisational Legitimacy, Corporate Philanthropy, Corporate Governance, Attention of Media, Herding Bias, Size, Structure, Quality and Independence of Board of Directors, Lockup Period, Goodwill and Heterogeneity of Top Management, Prestige of Investment Banker, Grading of IPO, Firm’s Leverage & Earning Potential, High Level of Institutional Demand, Promoter’s Holding, Issue Size, CEO Equity. The enhanced participation would foster the economic growth of the nation to be in line with Vision Viksit Bharat by 2047 and to meet Sustainable Development Goals as decided to align by 2030. In the recent times the participation of retail investors (as one of the categories of investors) has been increased for markets still the % is less while observing the population of India simultaneously and comparing with other developed economies.

Specification

Description:Field of the Invention
The present invention relates to the financial technology, economy and investment advisory, more particular to a system that provides a checklist for retail individual investor before investing in Indian IPO market to foster economic growth and to meet SDGs.
Background of the Invention
According to SEBI "Retail Individual Investors are those investors who are investing up to Rs. 2,00,000 in IPO market". The retail investors are having enough challenges to understand before investing their hard-earned money into the markets. In 2023, 46 IPOs collectively raised Rs 41,095.36 Crore and the outlook for future is positive as India is on track to become a $5 trillion economy by 2025, the Sustainable Development Goals (SDGs) by 2030, and Viksit Bharat by 2047. For these visionary aspects the sentiments for retail investors have to remain positive as to attract them for financial products.
In the recent times retail investors in India are largely contributing and surpassing foreign investment in Indian markets. There were the times where Indian stock markets were completely dominated by Foreign Institutional Investors. Earlier, the investors were conservative by nature and used to save their money with banking system, over the period of time young generations are getting fascinated with stock market and are shifting their interest in risky assets and diversifying their portfolios. Retail investors are now trading 52% of daily transactions in Indian markets. Investors registered with NSE have increased threefold times from March 2020 to present. The number of Demat accounts have been increased post COVID excessively from 36 million in 2020 to 160 million in June 2024 (Ksheerasagar, 2024). This also asserts that the Indian investors are channelizing their funds into financial markets. The shift in investor behavior is backed with various factors such as alternative source of income, advancement in technology, seamless digital infrastructure with mobiles in everyone's hand, increasing awareness regarding financial inclusion, social media awareness etc. (The Hindu, 2024).
With such a transformation of investors coming to stock market and not choosing traditional banking products the challenge is whether retail investors are investing their earning blood and sweat with full wisdom or just following the crowd, whether they are doing their own analysis or are influenced by hype. These investors are passionate to get listing gains but not going through with the financials or valuation of the companies. In short run, it can be fruitful for their portfolio but for sustainable profits they need to think for other parameters too and then take decision with full cognition. Therefore, retail investors must adopt a holistic approach and consider all factors before investing in an IPO to foster economic growth and to meet SDGs.
Stock markets have always been observed as barometer to observe the financial health of any country. The participation of retail investors helps in building the strong economy as it aids in formation of capital, attracting investors by providing liquidity, provides economic diversification and facilitates more equitable economic growth. The participation of retail investor was measured by Veluvali, 2019 taking subscription in the particular category of IPO, size of investment and number of application received for the same. (Kumar and Balamurugan, 2020) stated that IPO attracts investor's sentiment if corporate image is good and market attractiveness.
The Sustainable Development Goals (SDGs) are adopted by all members of United Nations, and all are set to achieve 17 mentioned goals by 2030. One of the inclusive aims is to ensure economic growth. This can be achieved by attracting retail investors participation towards market, though in recent times the % of investors has been increased but considering the population of India it is very less as compared to the investors participate in developed economy such as United States of America and China.
The National Strategy for Financial Inclusion (2019-2024) prepared by Central Bank of the Country i.e. Reserve Bank of India emphasizes upon financial inclusion which drives economic growth and sustainable development. This has been drafted by taking inputs form other regulatory bodies such as Securities Exchange Board of India (SEBI), Pension Fund Regulatory and Development Authority of India (PFRDA), Insurance Regulatory Development Authority of India (IRDAI). The inclusion also includes participation of retail investors in economic activities which is backed with creating demand for financial products and providing services at the same time. Stock market investment is one of the prominent avenues of present time which are attracting investors, specifically retail investors are showing their interest in IPO.
With such a huge flow of information, the fledgling investors are not able to select the securities with rationality. Figure 2 and 3 shows the no of IPOs launched year wise and the amount raised.
This shows that investors are constantly reflecting their inclination for securities market for which they are required to be learned. The investors not having knowledge and functional of financial markets suffer with huge losses in their portfolios. The new investors which are coming to market without knowledge and experience and aggressively trading they would end up meeting losses and it ultimately hits the volatility of market. This leads to unsound valuation of the company and creates bubble. SEBI is worried about the same as one of the report shows that 7 out of 10 investors in cash market make losses (Agarwal, 2024).
This motivates to prepare retail investors for doing proper analysis before investing in IPOs. There are number of things which investors have to keep in mind so that it would help them in making profits.
Objects
• To provide the checklist for retail individual investors before investing in an IPO.
• To establish a comprehensive procedure which ensure consistency in selecting stock in IPO.
• To provide an easy-to-follow procedure before investing hard earned money into markets.
• To provide liquidity into the financial markets by attracting retail investors rationally into the market to foster economic growth.
• To enhance participation of retail investors with holistic analysis of markets to meet Sustainable Development Goals (SDGs).
Summary
Aligning with achieving Sustainable Development Goals (SDGs) by 2030 and Vision Viksit Bharat by 2047, Indian stock market is playing a prominent role. In the last few years, the investors in stock market are increasing but still the percentage of India's population is just 3% participating in stock market. Whereas the population of the countries like USA, UK, China is 55%, 33% and 13% respectively participating in the stock market (Khandelwal, 2023). There is much scope in the context of India as compared to other developed countries. The question arises whether this participation increase simultaneously be achieved with investment with full wisdom.
In accordance with the present invention, the system provide a system that provides a checklist for retail individual investor before investing in Indian IPO market to foster economic growth and to meet SDGs. The system provides a checklist that an investor must thoroughly analyze and evaluate before making any investment decision, comprising the following key factors: Size of Firm, Age of Firm, EIC Framework, Skills and Abilities of Company Auditor, Regulatory Norms, Government Policies, Brokerage Services, Image/Presence of Venture Capital, Underwriter Reputation, Affiliation of Group, Organisational Legitimacy, Corporate Philanthropy, Corporate Governance, Attention of Media, Herding Bias, Size, Structure, Quality and Independence of Board of Directors, Lockup Period, Goodwill and Heterogeneity of Top Management, Prestige of Investment Banker, Grading of IPO, Firm's Leverage & Earning Potential, High Level of Institutional Demand, Promoter's Holding, Issue Size, CEO Equity.
Drawings
Figure 1: Checklist for Retail Individual Investor before Investing in Indian IPO Market to Foster Economic Growth and to Meet SDGs
Figure 2 No of IPOs
Figure 3 Amount Raised by IPOs in India (in Rs)
Detailed Description of the Invention
The following description includes the preferred best mode of one embodiment of the present invention. It will be clear from this description of the invention that the invention is not limited to these illustrated embodiments but that the invention also includes a variety of modifications and embodiments thereto. Therefore, the present description should be seen as illustrative and not limiting. While the invention is susceptible to various modifications and alternative constructions, it should be understood, that there is no intention to limit the invention to the specific form disclosed, but, on the contrary, the invention is to cover all modifications, alternative constructions, and equivalents falling within the spirit and scope of the invention as defined in the claims.
In any embodiment described herein, the open-ended terms "comprising," "comprises," and the like (which are synonymous with "including," "having" and "characterized by") may be replaced by the respective partially closed phrases "consisting essentially of," consists essentially of," and the like or the respective closed phrases "consisting of," "consists of, the like. As used herein, the singular forms "a", "an", and "the" designate both the singular and the plural, unless expressly stated to designate the singular only.
The checklist outlines the prominent factors which a retail individual investor must thoroughly analyse and evaluate before making any investment decision in IPO market. This will highlight the process which will help in fostering economic growth and in meeting SDGs which would be achieved by creating healthy ecosystem for retail individual investors in the market. The participation of retail investors has to increase in the context of India as the % of India's population investing in stock market is very less. The specified factors or determinants which investors has to go through are Size of Firm, Age of Firm, EIC Framework, Skills and Abilities of Company Auditor, Regulatory Norms, Government Policies, Brokerage Services, Image/Presence of Venture Capital, Underwriter Reputation , Affiliation of Group, Organisational Legitimacy, Corporate Philanthropy , Corporate Governance , Attention of Media, Herding Bias, Size, Structure, Quality and Independence of Board of Directors, Lockup Period, Goodwill and Heterogeneity of Top Management, Prestige of Investment Banker, Grading of IPO, Firm's Leverage & Earning Potential, High Level of Institutional Demand, Promoter's Holding, Issue Size, CEO Equity.
Understanding of all these factors is crucial for investors as it includes both quantitative and qualitative aspects. Investor has to explore all these variables for a specific IPO in which one is willing to invest and safeguard and protect self interest by avoiding the risk in the IPO. This ecosystem of informed environment would be supported by Regulatory Body i.e. Securities Exchange Board of India (SEBI) and its practices for the rules and regulations made for protecting the interest of investors.
Further, the sound investment environment would support in economic prosperity as retail participation in IPO market would help in infusing capital into system, will facilitate liquidity into the market, would enable more transparency, enhance global image, driver for channelizing savings into investment, provide sense of security in emergent or tough times, increase confidence of investor, develop the infrastructure and ultimately increase the revenue of Government for growth of nation.
Extensively it will aid in organizing and achieving United Nations' Sustainable Development Goals such as:
• SDG-1 No Poverty: The increasing retail investor participation will increase the financial literacy which in turn will reduce the poverty and improve standard of living.
• SDG-3 Good Health & Well Being: The alternative source of income would psychologically give satisfaction to investors which would help in balancing state of mind.
• SDG-5 Gender Equality: The participation of men and women both in financial decision making is increasing so as retail investor participation gender wise. It will smoothen equality and give financial awareness and independence to both counterparts.
• SDG-8 Decent Work & Economic Growth: The infusion of money into the market would ultimately contribute in economic growth.
• SDG-9 Industry, Innovation & Infrastructure: The companies which are coming with IPO of respective sectors would develop ecosystem of India with reference to industry initiatives, innovation and development of infrastructure.
• SDG-10 Reduced Inequality: The stock market provides equal opportunities to masses and facilitates access to financial services resulting in good inclusion practices.
• SDG-11 Sustainable Cities & Communities: The retail investors can invest in green or sustainable projects which are more focused towards renewable energy that will assist in creating smart and innovative cities and communities.
• SDG-17 Partnership for the Goals: The participation of retail investors can be transformed to the next level by providing solution at global level collaborating or partnering with other public or private institutions. The knowledge sharing process would help in understanding the dynamics of the market and in creating money over money.
Therefore, the process would help in increasing participation of retail individual investors in India for IPOs and further by following norms and regulations mandated by SEBI, it will help in economic growth and in achieving Sustainable Development Goals (SDGs).
Advantages of the present invention system are as follows:
• 360 Degree Evaluation before Investing: This invention will guide retail individual investors to check certain parameters before investing in IPO markets. The upcoming IPO must be evaluated on various parameters; this will help investors to make informed decisions.
• Increasing Knowledge & Awareness: This will enhance the knowledge and awareness of retail investors as they must undergo the study for each parameter to understand first and then invest their hard-earned money. There are various technical jargons which an investor has to understand of financial markets, to name a few Underwriters Reputation, Quality of Auditors, Issue Size, Age of Firm, Organizational Legitimacy, Corporate Philanthropy, Corporate Governance Practices etc. The technicalities of surrounding environment one has to undergo before investing.
• Provide Framework to Investors and Government: This will provide a framework to investors and support Government in their agenda by fostering economic growth. The economic growth is backed with infusion of money into the system. IPOs is one of the ways wherein retail investor participation is increasing in the recent times. The household savings are diverting from traditional banking products to stock market either in cash market or derivatives. This will facilitate framework to investors, Government and other stakeholders in fostering economic growth.
• Increasing Contribution and Participation of Retail Individual Investors in Meeting SDGs: This will help in attracting investors in rational way and in meeting Sustainable Development Goals (SDGs). These SDGs are made for ensuring better future for coming generations which is backed with policies and procedures which are aligned with economic prosperity. The increase in retail investor base would surely help in meeting SDGs.

, Claims:1. A system for providing a checklist for retail individual investor before investing in Indian IPO market, comprising the following points:
Size of Firm, Age of Firm, EIC Framework, Skills and Abilities of Company Auditor, Regulatory Norms, Government Policies, Brokerage Services, Image/Presence of Venture Capital, Underwriter Reputation , Affiliation of Group, Organisational Legitimacy, Corporate Philanthropy , Corporate Governance , Attention of Media, Herding Bias, Size, Structure, Quality and Independence of Board of Directors, Lockup Period, Goodwill and Heterogeneity of Top Management, Prestige of Investment Banker, Grading of IPO, Firm's Leverage & Earning Potential, High Level of Institutional Demand, Promoter's Holding, Issue Size, CEO Equity.
2. The system for providing a checklist for retail individual investor before investing in Indian IPO market as claimed in the claim 1, wherein the points of checklist includes both quantitative and qualitative aspects.
3. The system for providing a checklist for retail individual investor before investing in Indian IPO market as claimed in the claim 1, wherein system help in infusing capital into system, will facilitate liquidity into the market, would enable more transparency, enhance global image, driver for channelizing savings into investment, provide sense of security in emergent or tough times, increase confidence of investor, develop the infrastructure and ultimately increase the revenue of Government for growth of nation.
4. The system for providing a checklist for retail individual investor before investing in Indian IPO market as claimed in the claim 1, wherein system help in attracting investors in rational way and in meeting Sustainable Development Goals (SDGs).
5. The system for providing a checklist for retail individual investor before investing in Indian IPO market as claimed in the claim 1, wherein system provide a framework to investors and support Government in their agenda by fostering economic growth.

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