FOMO Fueling Pre-IPO Rush: Investors Scramble for Early Stakes in Top Companies Like Lenskart & Physics Wallah!

Investors are showing a strong surge in interest for pre-IPO placements, essentially private sales of unlisted shares before companies launch their Initial Public Offerings (IPOs). Prominent companies like Lenskart, Physics Wallah, and Aequs are seeing significant investor demand. This trend is fueled by a fear of missing out (FOMO) on potentially high-growth companies and the opportunity to secure stakes at valuations that might appear more attractive than post-listing prices. Prakash Bulusu of IIFL Capital notes this is a comeback for such transactions, with more expected as long as market conditions remain stable and domestic liquidity is strong.

While this late-stage pre-IPO placement activity is picking up, earlier pre-IPO funding rounds (typically 12-18 months before listing) have slowed down. This is attributed to narrowing valuation gaps between private and public markets. Recent deals include Think Investments buying shares from Physics Wallah employees and SBI Funds, DSP India Fund, and Think India Opportunities Fund investing in Aequs. Lenskart also secured funds through pre-IPO placements. SEBI's recent circular restricting mutual funds from direct pre-IPO placements is expected to be navigated through AIFs and PMS.

Impact: This news signifies increased investor activity and capital inflow into promising unlisted companies in India, potentially boosting their valuations and market performance upon listing, and influencing the IPO market sentiment. Rating: 8/10.

Difficult Terms: * **Pre-IPO Placement**: A private sale of shares by a company that is planning to go public (IPO) but has not yet launched its public offering. It allows select investors to buy shares before they are available on the stock exchange. * **Anchor Book Placement**: A specific allocation of shares made by an IPO-bound company to a select group of institutional investors (like mutual funds, FIIs) one day before the IPO opens to the public. This helps in building confidence and price discovery. * **DRHP (Draft Red Herring Prospectus)**: A preliminary document filed by a company with the securities regulator (like SEBI in India) when planning an IPO. It contains detailed information about the company, its financials, business, and the proposed IPO. * **Offer-for-Sale (OFS)**: A method where existing shareholders of a company (like promoters or early investors) sell their shares to the public during or after an IPO, rather than the company issuing new shares. * **AIFs (Alternative Investment Funds)**: Pooled investment vehicles that invest in a wide range of assets, including private equity, venture capital, and hedge funds, often used by sophisticated investors and funds to access opportunities like pre-IPO placements. * **PMS (Portfolio Management Services)**: Services offered by professional firms to manage investment portfolios on behalf of clients, allowing access to various investment strategies and asset classes.