IPOs- A Journey of Dreams, Risks, and Realities
Written by Rakshita Bucha Jain
In India, an Initial Public Offering (IPO) is not just a financial event, it’s a story of ambition, risk, and hope. It’s also a deeply emotional rollercoaster, filled with uncertainty, market hype, and, at times, disappointment.
Let’s dive into the human side of IPOs in India, exploring what really goes on behind the scenes.
The Indian Entrepreneur’s Dream: From Private Struggle to Public Success
Picture a young entrepreneur in India. They start a company from scratch, often with nothing but an idea, a small team, and a ton of determination. For years, they work tirelessly building, growing, and securing rounds of funding from venture capitalists and angel investors. When these founders finally decide to take their company public, it’s not just a financial decision, it’s deeply personal.
The IPO represents validation for all their hard work, a moment when the broader public will decide whether they believe in the vision these entrepreneurs have built. But going public is also a huge risk. This transition from private to public often means giving up control, opening up the company’s books for scrutiny, and subjecting themselves to the relentless pressures of the stock market.
Take the example of Zomato. In 2021, when the food delivery giant launched its IPO, it was a coming-of-age moment for the Indian startup ecosystem. Zomato IPO was met with massive enthusiasm, especially from retail investors who wanted a piece of the action.
The Investor’s Temptation: The Thrill of Getting In Early
For Indian retail investors, IPOs are a chance to be part of something special. There’s an emotional pull, the allure of being an early investor in a company that could become the next titan of Indian industry.
India has a long history of retail investors getting excited about IPOs, from the legendary Reliance Industries IPO in 1977 to more recent ones like HDFC Life, IRCTC, and SBI Cards. For many middle-class Indians, an IPO feels like a once-in-a-lifetime chance to invest in a growing company at the beginning of its journey, potentially making big gains.
When IRCTC (Indian Railway Catering and Tourism Corporation) went public in 2019, the excitement was palpable. Here was a company deeply embedded in the Indian way of life, managing railways, booking services, and catering for millions of passengers every day. Investors felt a personal connection to IRCTC, which led to overwhelming demand for its shares. When the stock price surged on the day of listing, investors felt vindicated in their belief that they had made the right choice.
But not every IPO is a guaranteed success. Consider the case of Paytm, which launched one of the most highly anticipated IPOs in Indian history in 2021. There was tremendous excitement around Paytm, with many seeing it as a leader in India’s fintech revolution. However, despite the hype, Paytm’s IPO turned out to be a disappointment. The emotional toll of seeing such a hyped-up IPO stumble was hard to ignore, especially for retail investors who had placed their trust and savings in the company’s future.
The IPO Day: Anticipation and Anxiety
The day an IPO hits the market is like a festival for investors. There’s a buzz in the air as investors eagerly check their trading apps or call their brokers to see how the stock is performing. In India, this is especially true for retail investors, many of whom are first-time market participants.
But it’s not always a smooth ride. While some IPOs see massive first-day gains, others struggle to meet expectations. When Burger King India went public in 2020, for example, the stock price shot up by nearly 130% on the day of listing, leaving investors thrilled. Those who had subscribed to the IPO felt a rush of joy and validation as they watched their investment grow in value.
On the other hand, Yes Bank, which launched its follow-on public offering (FPO) in 2020, was a stark contrast. After a series of financial troubles, the FPO was aimed at raising capital for the bank. While there was interest in the offering, the stock price struggled post-listing, and many investors were left disappointed.
The Aftermath: The Real Test Begins
The IPO day is just the beginning what happens next is a long-term test of the company’s ability to perform in the public market. Indian investors have seen this play out many times.
For companies like TCS, which went public in 2004, the IPO was the start of a journey that would see it become one of India’s most valuable companies. Those who invested in TCS during its IPO have seen extraordinary returns over the years, proving that patience can pay off in a big way. Similarly, Infosys one of India’s IT giants had a relatively modest IPO in 1993, but over the decades, it has become one of the most rewarding investments for those who held onto its shares.
However, not all companies live up to their IPO promise. The IPO of Reliance Power in 2008 is a cautionary tale for Indian investors. When the company launched its IPO, it was one of the most highly anticipated offerings in Indian history. Investors rushed to subscribe, but once the stock started trading, it quickly lost value, leaving many with significant losses. Reliance Power’s IPO serves as a reminder that the hype around an IPO doesn’t always translate into long-term success.
Lessons for Indian Investors: It’s More Than Just a Market Event
The key lesson for investors is that IPOs are not a guaranteed path to riches. While some IPOs soar, others stumble, and it’s crucial to approach each offering with a clear head and a long-term perspective. In a country like India, where retail investors are increasingly participating in the stock market, the emotional highs and lows of IPO investing are becoming more common.
Whether you’re an entrepreneur preparing to take your company public or an investor eager to buy into the next big thing, IPOs in India are a reminder that the financial markets are not just about numbers—they’re about stories, risks, and human emotions. The thrill of an IPO is real, but so is the need for patience, research, and, most importantly, emotional resilience.