In recent months, a common pattern has emerged in India’s capital markets — pre-IPO valuation mismatches. Investors in the unlisted space are realizing that the price they pay for shares before an IPO doesn't always translate into gains when the IPO hits the market.
Let’s break down what’s happening and what retail investors and HNIs should understand before buying unlisted shares close to IPO.
Pre-IPO valuation issue occurs when shares of a company are trading at a much higher price in the unlisted market compared to their final IPO price band.
This gap can lead to losses or missed expectations for investors who bought in early, assuming a hefty premium.
Months before NSDL filed its IPO, the buzz was strong.
In the unlisted market, shares traded between ₹900 to ₹1000.
But the expected IPO price band was around ₹750-₹800.
Despite this, many investors kept buying because NSDL is a "brand".
Lesson: Brand loyalty can blur rational thinking. Valuation still matters.
Private equity and VCs had transacted Bluestone shares in the unlisted market at a valuation of ₹11,000 Cr.
IPO media reports expected a similar valuation in public issue.
But when the IPO came close, valuation dropped to ₹8000 Cr.
Why this mismatch?
Because of Anchor Investors.
Anchor investors are institutional investors who invest in the IPO before it opens to the public. They get a portion of the QIB quota (Qualified Institutional Buyers), usually 60% of it.
For example:
If IPO size = ₹1000 Cr
QIB portion = ₹500 Cr
Anchor share = ₹300 Cr
Out of this, half is locked in for 1 month, and the rest for 90 days.
Because of the lock-in period, anchor investors demand:
Fair valuation
Growth visibility
Upside potential
So, even if a company expects a higher valuation, if anchor investors aren’t convinced, the IPO pricing is adjusted downward.
Once a company files its DRHP and gets SEBI approval, a lot of attention builds up. This hype often causes the unlisted share price to spike just before the IPO.
But when the IPO price comes out lower, it creates a valuation trap for recent buyers.
If you want to invest in unlisted shares:
Do it 1-2 years in advance, when there is low noise and realistic pricing.
Avoid buying 2-3 months before IPO, unless you're confident of the anchor-led pricing.
Unlisted investing is all about:
Patience
Timing
Valuation discipline
Valuation should never be based on hype. Brands, social media buzz, and DRHP news can push investors into irrational buying. Always remember:
"IPO pricing is not set by emotion. It's set by valuation models and anchor demand."
As more companies prepare for IPO in 2025, use this framework to evaluate any unlisted opportunity.
