Daijiworld Media Network- Mumbai

Mumbai, Jun 26: The once-glamorous pre-IPO market is drawing scrutiny after HDB Financial Services announced a price band of Rs 740 for its upcoming public offering—a staggering 40% drop from its recent valuation of Rs 1,225 in the unlisted market. For those who entered last year at Rs 1,550 per share, the bitter reality is a pre-listing markdown of nearly 52%.

The revelation has left many retail investors reeling, highlighting the inherent risks in the unlisted securities space—a market often portrayed as a golden ticket to early gains. However, the case of HDB has shattered that illusion.

Experts have now begun sounding the alarm. Anand K Rathi, Co-founder of MIRA Money, minced no words while evaluating the craze for pre-IPO shares. “People can’t buy companies at any price just because they’re getting listed,” he said. With opaque pricing, restricted liquidity, and a post-IPO lock-in period, Rathi believes many retail investors walk into what he calls "liquidity traps."

Just two years ago, HDB shares were trading at around Rs 600. But speculation, driven by restricted employee share availability, artificially pushed prices up before reality caught up. “The unlisted market thrives on charm and exclusivity. It’s fashionable to own shares that aren't yet traded,” Rathi added, warning against chasing hype without homework.

While many have burned their fingers, long-term investors who got in during the Rs 200–400 range years ago continue to hold strong gains. Krishna Patwari, Managing Director of Wealth Wisdom India, emphasized that investing in unlisted shares isn’t inherently bad—provided it’s done well before the hype begins. “Buy four or five years before an IPO, not a few months prior,” he advised.

The issue, experts stress, lies not in the product but in the misplaced perception. Radhika Gupta, CEO of Edelweiss Mutual Fund, took to social media to express concern. “What was meant for early-stage, high-risk investing is now being sold as the next sliced bread,” she tweeted, warning of "financial gravity" that eventually grounds speculative valuations.

While the public markets buzz with IPO excitement, HDB's case stands as a cautionary tale—a reminder that in investing, timing and valuation are everything. The glitter of the unlisted market, it appears, is not always gold.