Why IPOs seem to arrive in waves
If you track the primary market even casually, you'll notice a pattern: long stretches of quiet, followed by a sudden rush of companies filing papers and opening subscriptions within weeks of each other. This isn't a coincidence. Several structural reasons push companies toward the same narrow windows.
First, a SEBI approval (the observation letter on a draft red herring prospectus) is valid for only 12 months. Companies that filed their draft papers a year ago and haven't yet launched are under pressure to hit the market before that approval lapses, or they'll have to refile with updated financials. Second, companies prefer to list when broader market sentiment is upbeat — nobody wants to price an issue during a selloff. When indices are strong for a few consecutive months, a backlog of ready issuers all try to squeeze through the same favourable window before it closes. Third, many companies want to close their listing before their financial results go "stale" — SEBI rules require reasonably recent audited numbers in the prospectus, so there's a practical shelf life to the paperwork already filed.
The result is what investors call an "IPO rush" — a period where five, ten, sometimes fifteen companies open for subscription within a month. For retail investors, this is both an opportunity and a trap. More choice sounds good, but it also means your attention and capital get spread thin, and hype around the "hot" issue often crowds out proper evaluation of the others.
The temptation to apply for everything
When multiple issues are open simultaneously, a common retail instinct is to apply for all of them in small lots, treating it like a lottery — hoping at least one gives a listing pop. This isn't necessarily irrational for very small amounts, but it has real costs. Your application money gets blocked (via ASBA) for several days per issue, reducing your liquidity and the interest your bank balance could otherwise earn. If you're applying across five issues in the same week, that's a meaningful chunk of your funds frozen at once with no guarantee of allotment, since oversubscribed retail categories are allotted by lottery anyway.
A more disciplined approach is to treat each IPO as you would any other investment decision — by reading the prospectus summary, not just the grey market premium chatter.
A simple checklist before you apply
You don't need to read all 400 pages of a red herring prospectus. But five things are worth checking in the summary sections before you commit money:
- What is the money actually for? Prospectuses list "objects of the issue." If a large chunk is for debt repayment or to give existing investors an exit (offer for sale), rather than funding growth, that's a different risk profile than a pure growth-capital raise.
- Is the business profitable, and if not, when might it be? Several recent listings have been pre-profit companies betting on scale. That's fine if you understand and accept the risk — it's a problem if you're buying purely because "everyone is applying."
- Who is selling, and how much of their stake? Promoters or private equity investors selling a large portion of their holding in the IPO itself (rather than the company raising fresh capital) can be a signal worth weighing, though not always a red flag on its own.
- What's the price-to-earnings multiple compared to listed peers? If a company is asking for a valuation well above comparable listed businesses in the same sector, you should have a clear reason to accept that premium.
- What does the anchor investor list look like? Quality, long-term institutional names taking meaningful anchor allocations is generally a healthier sign than a thin or last-minute anchor book.
Listing gains vs long-term holding — different games
It helps to be honest with yourself about which game you're playing. Applying for listing-day gains is essentially a short-term trading bet on subscription-driven demand and sentiment — it has little to do with the company's five-year prospects. There's nothing wrong with this approach for a small, defined portion of your capital, as long as you're prepared to sell on listing day regardless of price and not get anchored to a number in your head.
Investing for the long term is a completely different exercise. It means you're comfortable holding the stock through ordinary market volatility because you believe in the business, its management, and its competitive position — the same diligence you'd apply to any stock already trading on the exchange. Many retail investors blur these two goals, applying with listing-gain money but then holding out of inertia when the stock lists flat or negative, turning a planned quick trade into an unplanned long-term (and often regretful) holding.
Sizing your IPO exposure sensibly
A reasonable rule of thumb is to cap total money tied up in IPO applications, at any given time, to a small fraction of your liquid investable surplus — many advisors suggest not more than 5-10%. This keeps you from having emergency funds or near-term goal money locked in ASBA blocks during a busy IPO season. It also forces a kind of natural discipline: if you can only apply to two or three issues at a time, you're pushed to actually rank them by quality rather than applying to everything indiscriminately.
It's also worth remembering that retail investors are typically allotted from a separate, smaller quota, and in heavily oversubscribed issues, the odds of allotment can be quite low regardless of how much you apply for (since allotment is often done via lottery in fixed lots). Applying at the cut-off price in a single application, rather than splitting across multiple small ones, is usually the correct approach for maximising your allotment odds within your chosen exposure.
The bottom line
A wave of IPOs hitting the market together says more about SEBI approval timelines and market sentiment than it does about the individual quality of each company. Don't let the crowd's excitement substitute for your own five-minute check of the prospectus basics. Decide upfront whether you're trading for a listing pop or investing for the long haul, size your total IPO exposure sensibly, and you'll navigate the next rush with a clearer head than most.
