The markets regulator has clarified that mutual funds cannot invest in pre-IPO placements. While the liquidity risks in case an IPO is shelved or delayed are behind the restriction, this route allows mutual funds to enhance returns by paying a preferential price before the issue opens, explains Ananya Grover

What is pre-IPO placement?

A pre initial public offer or pre-IPO placement is a process to raise money before the company starts its official IPO processes, involving the private sale of large blocks of shares that are not listed. Through this process, the selling shareholders offset the performance risk of the stock at listing which is uncertain and depends on the market sentiment.

Meanwhile, buyers usually get a discount on the expected IPO price, compensating for the uncertai

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