Why investing in IPOs is risky and how you can make a safe market bet

Investors must exercise greater due diligence compared to secondary market investing

Forty-six companies have raised Rs 41,095 crore via initial public offerings (IPOs) this year. Another 161 small and medium enterprises (SMEs) have raised Rs 4,084 crore. The pipeline is strong. About 33 companies have approval to raise Rs 33,390 crore, while 35 are awaiting approval to raise Rs 37,750 crore, according to PRIME Database.
 

“Primary market activity always follows secondary market buoyancy with a lag of two-three months. Once the secondary market recovered from its March lows, primary market activity also picked up from June-July onwards,” says Pranav Haldea, managing director, PRIME Database.
 

Multiple risks
 

Investors run multiple risks when