investkarr

the past year and a half have been marked by several indian companies going public, that is, offering their shares to the public for the first time, hence an initial public offering. essentially, the ownership structure transitions from private to public and then gets listed on a stock exchange where its shares can be traded freely. ipos have the potential to generate stellar returns, but they also have risks involved which are often overlooked. understanding the due process of an ipo and the risks associated are paramount to be able to generate wealth by investing in ipos. from an undersubscribed infosys ipo in 1993 to several heavily oversubscribed ipos in 2021, to the largest indian ipo – paytm, the indian ipo space has matured. this year has also been the coming of age for tech companies, finally able to list on indian stock exchanges, allowing indian investors to participate in the growth of some of their favourite tech start-ups like zomato, nykaa, paytm to name a few. however, just as the ipo is the beginning of a new phase for a company (because a company does not go public to raise money just once), similarly listing is the beginning of the journey for a public market investor. many investors apply for ipos for listing gains after obsessively tracking grey market premiums and subscription levels on day 1. however, the point of an ipo is not just listing gains but to catch the company early in the next phase of its growth cycle, creating wealth together. ipos often have two parts to the issue: offer for sale (ofs) by existing investors, including promoters, strategic partners or financial investors like pe/ vc or hedge funds. the fresh issue is money directly infused into the company, helping it fund its growth and expansion or reduce debt, whereas the ofs portion gives an exit to current investors. while many critics give the justification “if the company is so good, why are existing investors selling their stake?” it is hardly ever as