Rich IPO valuations: Track post-listing performance before investing

Better price points, aligned to fundamentals, tend to emerge once the initial hype fades

The Securities and Exchange Board of India (Sebi) whole-time member Kamlesh Chandra Varshney recently expressed concern over inflated initial public offering (IPO) valuations and underlined the need for stronger guardrails to protect minority shareholders. Retail investors, on their part, must conduct careful due diligence to assess whether an IPO is reasonably priced.

 

“IPOs are riskier than already listed stocks because of information asymmetry and limited disclosures,” says Pranav Haldea, managing director, Prime Database Group.

 

Negative consequences

 

Overvalued IPOs often deliver weak post-listing returns. “Market enthusiasm fades and