Deven Choksey's IPO playbook: Spot valuations, read DRHPs, assess risks

At the Smart Arena segment of the Business Standard BFSI Insight Summit 2026, Deven Choksey advised retail investors to check an IPO's size, business model, financials & risk factors before investing

With initial public offerings (IPOs) drawing strong investor interest, Deven Choksey, MD, DRChoksey FinServ outlined a framework for retail investors to assess new issues, advising them to look beyond listing gains and understand the businesses they are investing in.

 

Speaking at the Smart Arena segment of the Business Standard BFSI Insight Summit 2026, Choksey said investors today have access to detailed offer documents but often lack the time to study them. Draft red herring prospectuses (DRHPs) and red herring prospectuses (RHPs), which can run into hundreds of pages, provide information that investors should use before applying for an IPO.

 

“Today, this generation is extremely lucky; they have got the entire document in place. At times, I think it ranges between 400 to 800 pages,” he said.

 

 

Choksey acknowledged that some investors approach IPOs primarily as trading opportunities, tracking grey market premiums and seeking listing gains. He cited figures suggesting that IPO traders earned average gains of around 17 per cent, while companies that raised less than ₹1,000 crore recorded gains of around 19-20 per cent.

 

“Frankly speaking, I think people trade IPO as well, and this is their business,” he said, adding that some investors allocate a portion of their portfolios specifically to IPO trading.

 

However, for investors looking to evaluate an IPO beyond its listing-day performance, Choksey identified four key areas to examine.

 

Four things to check before investing in an IPO

 

• IPO size: Investors should first understand the size of the offering.
• Business model: The next step is to establish what the company does and understand how its business operates.
• Financial performance: Investors should examine how the company has performed financially.
• Risk factors: The offer document’s risk disclosures can help identify potential red flags that warrant closer attention.

 

“These are some of the crucial pieces of information that you look into,” Choksey said, adding that studying these areas could bring investors “one step closer to understanding the subject and probably apply for the IPOs.”

 

He also suggested examining additional details, including the size of the addressable market and the nature of the industry in which the company operates.

 

Use AI to speed up research, but ask the right questions

 

Choksey said artificial intelligence tools can help investors navigate lengthy offer documents and filter relevant information, but technology should support rather than replace their own understanding.

 

In his view, investors can obtain better results by first understanding a company’s business and then using AI to investigate specific aspects of it.

 

“AI can speed up the process. AI can help you. Technology can help you with filtering of the information. But what to ask is definitely more inquisitiveness, more intuitiveness, more amount of reading that you are doing on the subject,” he said.

 

He added that investors who have already studied a company’s business are better placed to ask meaningful questions and interpret the responses generated by AI.

 

“In my viewpoint, I think this is fundamentally important. You need to interact with the subject when the AI gives you the advantage of processing information faster,” Choksey said.

 

OFS deserves extra scrutiny, particularly when financial investors exit

 

Choksey also highlighted the importance of distinguishing between a fresh issue of shares and an offer for sale (OFS), in which existing shareholders sell their holdings.

 

He said that, out of 104 IPOs during the year up to the time of the session, around 32 included an OFS. Of the more than ₹1.5 trillion raised through IPOs and OFS combined, approximately 60 per cent came through offers for sale.

 

He distinguished between promoters monetising their holdings and financial investors, such as private equity investors, exiting their investments through an IPO.

 

“Those financial investors who entered into the company at a private equity stage, when they funded the company in series rounds, they are the ones who normally would like to take the exit at the time of IPO. That’s an exit mechanism for them,” he said.

 

The key concern, he explained, arises when financial investors exit at valuations that leave new investors paying a high price for the business.

 

“Wherever the financial investors have taken exit, they have stretched the valuation to the highest levels,” Choksey said.

 

He noted that investors entering such issues could be exposed to significant losses if the valuation fails to hold after listing. Referring to IPOs over the previous five years, he said investors in five companies that had raised substantial amounts through OFS had collectively seen wealth erosion of around ₹95,000 crore to ₹1 lakh crore after their listings.

 

“When the financial investor exits at that point of time, the new investor who enters through the IPO process will have to be extraordinarily watchful about the valuation that they are paying,” he said.

 

Choksey also cautioned against the fear of missing out (FOMO) that can arise when an IPO attracts substantial publicity.

 

“Unfortunately, during this particular process, the hype is created so much, and I’m referring to media hype as well. The common investor would have a FOMO effect,” he said.

 

He clarified that promoter stake sales are not necessarily a negative signal, but urged investors to be especially careful when financial investors exit at stretched valuations.

 

“Promoters monetizing the stake is still not bad, but financial investors monetizing the stake, and at such point of time, I think the valuations are stretched. You as an investor, you definitely require yourself to be more watchful about this situation,” he said.

 

Compare the business, not just the valuation

 

Choksey said there is no universal rule for deciding whether to invest in an IPO or buy an already-listed competitor. The decision depends on the nature of the business, its distinctive strengths and the valuation at which it is offered.

 

“Every single company which comes into the market has some USP to talk about, some uniqueness to talk about as far as their business model is concerned,” he said.

 

Investors should first identify what differentiates the new company from its listed peers and determine how it should be classified within its sector.

 

“If you identify, then probably I think your path becomes a little bit more clearer about the selection process, whether to buy an existing listed one or to buy the new one,” he said.

 

For Choksey, the central principle is to understand what a company does, what makes its business distinctive and whether its valuation is justified before committing money to an IPO. Rather than relying solely on listing prospects or market excitement, investors should use the information available in offer documents to make a more informed assessment of the business.