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What are Pre IPO Stocks
Pre-IPO investing refers to the investment you make before the company goes public. These include equity shares of a company that is not listed on BSE/NSE, these shares are traded over the counter (OTC), and they are often called OTC securities. These companies can be companies which are privately held, formerly public companies taken private in management buyouts, public companies which are not yet listed on a recognized stock exchange etc.
These companies often enjoy a healthy growth rate and have industry-leading future prospects. These unlisted shares, especially at pre-IPO stage, provide an excellent investment opportunity mainly focusing on long-term wealth creation. The returns can potentially beat returns by listed equities. As a pre-IPO investor, you will be a prominent stakeholder in the company’s growth story and may win a significant amount when the company eventually lists.
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step 1
A deal is proposed between Preipotips and buyer either on WhatsApp or email.
step 2
Buyer provides their client master copy (CML of Demat)for transfer of shares, PAN card copy, Aadhar card copy and cancelled cheque. The deal gets confirmed once the documents provided are in order.
step 3
Buyer transfers deal amount to our HDFC bank account and shares details of remitter name, bank account number, bank name and UTR no. for the amount transferred to us.
step 4
We shall initiate transfer the shares to buyers demat account within 24 hours of receipt of funds and issue a contract note accordingly.
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FAQs
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Sources of Pre-IPO Stocks?
PRE-IPO stocks are mainly sourced through promoters themselves, Private Equity (PE) firms and Venture Capitalists(VCs) or ESOPs (Employee stock ownership Plan)being sold by employees. PE and VC funds are strategic investors in a company who make time bound investments and at times look for a suitable exit opportunity at reasonable valuations. Promoters may also sell their stake partially to meet out capital requirements and similarly employees also sell their stocks received under ESOP to a third party.
Benefits of Pre-IPO Investing?
The first and biggest reason for pre-IPO investing is the GAINS it can generate. Pre-IPO investments can lead to tremendous returns for investors. Valuations of Private or unlisted stocks can rise multi-fold before formal listing if chosen wisely.
Which companies are available in Pre-IPO Market?
here are several unlisted Companies which have been performing really well and are available in PreIPO market across Sectors. To name a few – Companies like Anand Rathi Wealth(Wealth Management), Barbeque –Nation Hospitality (Restaurant) , Bira Beer( Alcoholic Beverages), Bharat Hotels(Hotels) , Capital Small Finance Bank ( SFBank), Carrier AirConditioning (Air-conditioning Cons Durables), Cochin International Airport (Airport), Chennai Super Kings(Entertainment), Fino Pay-tech payments bank (Payments bank), Hero Fincorp (NBFC), HDB Financial Services(NBFC), HDFC Securities(Stock Broking), Kurlon Ltd(Furniture’s), Lotto India (Confectionary), Mohan Meakins (Alcoholic Beverages), Philips Lighting India (Lighting Fixtures), National Stock Exchange(Stock Exchange), Paytm(ECommerce), Care Health Insurance (Gen Insurance, formerly Religare health), Reliance Retail(Retail), SMC Global(Stock Broking), Studds Accessories(Auto parts), Suryoday Small Finance Bank(Small Finance Bank), Tata Technologies( Engineering, R&D;), Utkarsh Microfinance(Small Finance Bank), UTI AMC(AMC) etc are available as on 1st September 2020.
Is it Risky to Invest in Pre-IPO?
Absolutely. Every Investment be it listed Shares or Mutual Funds has some form of risk associated with it. The investment world works on a simple principle of risk-reward. Higher risk offers a better possibility of earning higher returns and vice versa. Pre-IPO carry the same risk as the listed ones. Additionally Investor should clearly understand that : Liquidity of unlisted stocks is less however better than Real Estate Investments. Secondly, Unlisted stocks can be traded freely before IPO however there is a lock-In period of 1 year Post IPO. Thirdly, Information and other Financial data for Unlisted stocks is not as readily available as for Listed Stocks. Finally, IPO of an unlisted stock may take a longer time than expected and gains may not be as per expectations or may even lead to a Capital loss. Thus one should only invest with a longer horizon of atleast 3-4 years to reap the benefis. Investors should clearly understand the risks involved and invest basis their Investment objective, Risk Appetite, financial resources, Knowledge & experience in unlisted space and with a long horizon only . Also one should diversify his/her investments between different companies operating in different sectors and exposure to unlisted stocks should be limited to 10% of one’s Net Worth as a thumb rule.
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