HDB Financial Services IPO: The pre-IPO market, as soon as thought of a privileged path to assured returns, has demonstrated its unstable nature by means of HDB Financial Services’ latest pricing revelation.The firm’s IPO value band of Rs 740 represents a major 40% discount from its latest unlisted market worth of Rs 1,225. Earlier investors who acquired shares at Rs 1,550 within the earlier yr now face a considerable 52% devaluation earlier than the official market itemizing, in line with an ET report.With quite a few IPOs within the pipeline, it is essential to grasp that not each unlisted inventory represents distinctive worth.An analogous situation unfolded with Swiggy’s pre-IPO buying and selling, the place shares beforehand valued at Rs 500 within the unlisted market previous to the November IPO have declined to roughly Rs 400.Risks of unlisted shares“I don’t understand this fascination for pre-IPO stocks. You can’t buy companies at any price just because they are getting listed,” says Anand Ok Rathi, Co-founder of MIRA Money. “Many smart investors who have better access to information are ready to unlock value by offloading shares even before the IPO hits the street,” he told ET.Rathi offers a stark assessment based on his experience: “The unlisted area is filled with liquidity traps and opaque pricing. There’s a publish-itemizing lock-in of six months, and the costs at which retail investors enter are sometimes obnoxious.”HDB shares were trading at approximately Rs 600 two years prior, as he noted. “But retail investors do not need to wait. They rush in proper earlier than the IPO, lured by the phantasm of simple itemizing features. Greed does the speaking,” he was quoted as saying.Prior to the IPO, the freezing of worker holdings restricted provide, inflicting costs to surge within the unlisted market. However, the announcement of the IPO value subsequently deflated these speculative valuations.“In unlisted stocks, people like the charm and pomp factor. It’s sexy to talk about owning a stock which isn’t available on the exchange,” Rathi said.Nevertheless, some investors achieved constructive outcomes. “Several investors had entered HDB in the Rs 200–400 range five or six years ago. They’re still sitting on healthy gains,” in line with Krishna Patwari, Founder & Managing Director of Wealth Wisdom India Pvt. Ltd. (WWIPL.com). “Retail investors often buy pre-IPO because the chances of IPO allotment are low and you only get a few shares. Pre-IPO gives you quantity, but comes with risks,” Patwari was quoted as saying.The primary concern lies in valuation assessment. “If you’re buying for the long run, unlisted shares aren’t an issue. But you should know what you’re paying for. Valuations matter. And hype round an IPO can blind folks,” Patwari warned.According to Patwari, a strategic approach involves investing 4-5 years prior to the IPO, when organisations indicate their listing plans through annual reports, AGMs or staff communications. “Once the IPO hype kicks in, it may be a 50:50 recreation.”He highlights positive outcomes in companies such as Tata Technologies, BSE, ICICI Prudential, Nazara and Barbeque Nation where post-listing returns have been substantial.Expressing concern about the unlisted stocks enthusiasm, Edelweiss Mutual Fund MD and CEO Radhika Gupta described it as misrepresented excitement. “A superbly good asset class which was meant for early stage investing for excessive danger takers is now marketed as the following sliced bread,” she stated in her tweet addressing the matter.“Public, non-public, or in between, there’s a actuality of valuations and monetary gravity,” she additional famous.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)