India's IPO market has seen extraordinary activity in recent years — record fundraising, retail subscription multiples in the hundreds, and a cultural frenzy around listing-day profits. The reality behind the hype is more sobering: studies consistently show that a majority of Indian IPOs underperform the Nifty 50 over a 1-year period from their listing price. Listing gains are real but often concentrated in a few high-quality issues; the median IPO is a mediocre investment.
Why IPOs are often bad long-term investments
Companies choose when to go public. They typically choose to list when market conditions are favorable — meaning valuations are high. The seller (promoter, PE fund) has an information advantage over the buyer (you). The IPO price is set to maximize proceeds for the company and existing shareholders, not to give retail investors a bargain. By definition, you are buying when insiders are selling.
How to evaluate an IPO
Read the DRHP (Draft Red Herring Prospectus): Available on SEBI's website and the lead manager's site. The risk factors section is especially important — companies are legally required to disclose material risks. If the risks section reads like a novel, take it seriously.
Valuation vs listed peers: Compare the IPO's P/E, P/S, or EV/EBITDA multiple against similar companies already listed on NSE/BSE. If the IPO is priced at a premium to established, profitable peers, the justification needs to be bulletproof.
Financial quality: Revenue growth over 3 years, EBITDA margins, free cash flow conversion, and net debt. A company burning cash at listing with no visible path to profitability is a speculation, not an investment.
Promoter track record and stake post-IPO: Promoters retaining 50%+ stake post-IPO have skin in the game. Promoters selling most of their stake at IPO (Offer for Sale component) are primarily using the market as an exit route.
The listing day trade vs long-term hold decision
For oversubscribed IPOs with strong fundamentals, applying and exiting on listing day when there is a meaningful premium is a legitimate, low-risk strategy — especially in a bull market. For IPOs you genuinely want to hold long-term, consider buying in the secondary market 3–6 months after listing when the lockup period ends for anchor investors and supply increases.
UPI-based application process
Apply via ASBA (Application Supported by Blocked Amount) through your bank's app or a broker platform. The IPO application blocks the funds in your savings account without debiting them — you continue earning interest until allotment. No allotment means full refund, credited within 6 working days.