The Good, Bad, and Ugly of India's Pre-IPO Investing

Investing in the pre-IPO market is risky, as poor entry valuation, exit timing can lead to losses

- Smit Jhaveri

Until recently, you couldn't track it on your trading app. No real-time charts, no market-wide consensus. Yet, the stock was quietly doubling in value. We're talking about National Stock Exchange's (NSE) pre-IPO shares—the crown jewel of India's booming pre-IPO segment. The recent surge in NSE's price has reignited interest in India's fast-evolving alternate investment space. But that's just the surface. Beneath lies a deeper, complex, and risky world of pre-IPO investing.

The Good: Over the past three years, India has seen over 200 mainboard IPOs and over 530 SME IPOs in India. In anticipation of listing-day gains, a majority of IPOs saw significant oversubscription from retail investors. With allotment chances dipping, some retail investors turned to the pre-IPO segment to get in early and chase post-listing wealth. These shares typically carry a six-month lock-in from listing. Historically, the strategy has paid off, with marquee names, like the BSE and Avenue Supermarts, delivering stellar returns.