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In the world of investing, few events generate as much excitement as an Initial Public Offering (IPO). The media hypes IPO investing, influencers push it, and grey market premiums soar. It feels like a golden opportunity; an exclusive chance to get in early before a company’s stock skyrockets.
But behind the glossy headlines and the frenzy of retail investors lies a harsh reality: many IPOs today are not wealth-creation vehicles for new investors; they’re exit strategies for insiders.
From Swiggy’s and Ola Electric’s post-listing drops to Hyundai’s below-offer debut and Venture Global’s steep correction, the message is clear:
👉 Hype ≠ Value
Let’s break down the myths, the mechanics, and the money trail that most investors overlook.
Prefer a visual breakdown of the IPO hype and hidden risks? Watch our quick explainer video on IPO vs Reality below. It unpacks everything retail investors must know before jumping into IPO investing.
IPOs are often marketed as golden tickets to early-stage riches. But in truth, most companies going public today are not scrappy startups; they’re mature businesses whose early investors are looking to cash out.
Take Swiggy and Ola Electric, for instance. Both companies were darlings of the startup ecosystem, with massive user bases and sky-high valuations. But when they hit the public markets, the story changed. Swiggy’s post-listing performance was underwhelming, and Ola Electric’s stock saw a sharp correction after debut. Hyundai’s IPO, despite being one of the most anticipated listings, opened below its offer price, leaving many retail investors in the red.
Venture Global, another hyped listing, saw a steep drop in valuation shortly after going public.
One of the most misunderstood aspects of IPOs is the Offer for Sale (OFS). In an OFS, existing shareholders; often early investors, promoters, or private equity funds, sell their shares to the public. No new capital is infused into the company. It’s simply a change of hands.
Take EaseMyTrip’s IPO in March 2021. The entire ₹510 crore issue was an OFS. Not a single rupee went into the company’s operations, growth, or innovation. Retail investors were essentially buying out early stakeholders who were cashing in on their gains.
And this isn’t an isolated case. In 2024 alone, ₹74,883 crore out of ₹1.22 lakh crore raised via IPOs came from OFS, accounting for over 61% of total IPO proceeds. Companies like Hyundai Motor India, Bharti Hexacom, and Medi Assist Healthcare launched IPOs that were 100% OFS.
So, while the media hypes the “fundraising,” the reality is that many IPOs are just exit strategies for insiders.
Many retail investors rely on grey market premiums as a signal of IPO success. But these premiums are speculative, unregulated, and often manipulated. They reflect sentiment, not fundamentals. In the case of Reliance Power’s 2008 IPO, the grey market premium soared to 80% before listing. Investors believed they were buying into a future energy giant. The IPO was oversubscribed 70 times, attracting over 5 million bids.
But when the stock listed, it opened strong and then crashed within minutes, closing the day 17% below its issue price. Billions in market capitalization were wiped out, and many retail investors; especially those who had borrowed to invest, were left devastated or even worse stuck for years to come.
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Another overlooked risk is the lock-in period. Early investors and insiders are often restricted from selling their shares for a few months post-IPO. Once that period ends, they may rush to exit, flooding the market with supply and driving prices down.
Retail investors, who bought in at inflated prices, are left holding the bag.
Another red flag? Sky-high valuations.
Many IPOs are priced at price-to-earnings (P/E) multiples significantly higher than their listed peers. This means you’re paying more for every rupee of earnings compared to similar companies already trading in the market.
For example, several SME IPOs in 2025 were priced at P/E multiples of 30–50, while established players in the same sector traded at 15–20.
This premium pricing is often justified by “growth potential,” but in reality, it leaves little room for upside and a lot of room for disappointment.
Here’s something few investors realize: up to 10% of IPO proceeds can go toward marketing, legal, and administrative expenses.
This includes:
In a ₹1,000 crore IPO, that’s ₹100 crore spent before the company even gets to use the funds. And in the case of OFS, where no new funds are raised, these costs are still baked into the offer price, you’re paying for someone else’s exit and their marketing campaign.
The madness doesn’t stop at mainboard IPOs. The SME IPO space has become a hotbed of speculative frenzy.
Take the case of Resourceful Automobile, a Delhi-based Yamaha dealership with just 8 employees and 2 showrooms. In August 2024, it launched a ₹12 crore IPO. The result? It was oversubscribed 418 times, attracting bids worth a staggering ₹4,800 crore.
The company had negative cash flow, limited scale, and no unique moat. Yet, the grey market premium soared, and retail investors piled in, hoping for listing gains. This kind of irrational exuberance is eerily reminiscent of the dot-com bubble.
Just like the failed IPO of Reliance Power IPO, history has many such lessons, the dot-com crash of 2000 saw companies like Pets.com and Webvan go from billion-dollar valuations to bankruptcy in months. IPOs were treated as lottery tickets, and retail investors paid the price.
People these days are also running behind unlisted opportunities to make a quick buck at the time of listing. There are brokers in the market peddling shares of NSE, NSDL, Reliance Retail etc. at a sky high valuation. However, here’s the truth: the best investment opportunities often lie in the secondary market.
For every unlisted NSE out there, there is a listed BSE; for every NSDL out there, there is a CDSL. And companies like Infosys, TCS, and Asian Paints have created long-term wealth, not through flashy IPOs, but through consistent performance and reasonable valuations.
IPOs are not inherently bad. But they are not shortcuts to riches. They are complex financial events, often designed to benefit insiders more than retail investors.
Before you invest, ask:
Your money deserves more than a gamble on hype. Invest with clarity, not crowd psychology.
Disclaimer: This blog is intended for educational purposes only. The companies or stocks mentioned are provided as examples and do not constitute investment advice or recommendations. Directors, associates, or clients of CrispIdea may have a financial interest in the companies discussed.
Please conduct your own research or consult a qualified financial advisor before making any investment decisions. Investing in the stock market involves risks. Read all related documents carefully before investing. The views expressed are purely informational and should not be considered as financial advice.
Malay Shah is a Founder and a Principal Advisor at CrispIdea (www.crispidea.com/ai-first-wealth). He is a SEBI registered Investment Adviser with more than 24 years of work experience with professional services firms like EY, McKinsey, Alvarez & Marsal bringing in a wealth of knowledge about market trends, economic cycles, and investment strategies.
He is on a mission to democratize wealth for the ambitious professionals in India by bringing the best AI technology combined with powerful capabilities of large fund-houses and financial institutions to retail clients, ensuring capital protection, tax-optimized asset allocation, and market outperformance.
An Offer for Sale (OFS) is when existing shareholders, such as promoters, early investors, or private equity funds; sell their shares to the public. Unlike a fresh issue, no new money enters the company. It’s simply a transfer of ownership, often allowing insiders to cash out.
Compare the IPO’s price-to-earnings (P/E) ratio with similar companies already trading in the market. If the IPO is priced at a significantly higher multiple, it may be overvalued. Also, check whether the company has consistent profits or is relying on future projections.
Several reasons:
Lock-in period expiry: Early investors may exit after their restricted period ends, increasing supply.
Hype-driven pricing: Many IPOs are priced aggressively, leaving little room for upside.
Market conditions: Broader market trends can impact newly listed stocks.
Yes. SME IPOs often have low liquidity, limited financial history, and speculative pricing. Some companies with tiny operations (like a two-showroom dealership) have seen massive oversubscriptions, driven by hype rather than fundamentals.
Not always. In the secondary market, you can analyze a company’s track record, earnings, and valuation before investing. IPOs, on the other hand, often rely on future projections and hype, making them riskier.
