Every IPO season brings the same rush. Fresh applications get filed within minutes of the window opening, and most of that decision-making happens in a hurry, based on a GMP figure, a subscription number or a tip forwarded on WhatsApp.
IPO mistakes rarely show up on allotment day. They happen earlier, in the few days between an IPO opening and closing, when investors decide to apply without reading the DRHP or without checking what the company actually plans to do with the money raised.
This article breaks down eight such mistakes that repeat with almost every IPO. None of them looks serious on its own. Seen together, they explain why so many investors feel blindsided by how a stock performs once it actually lists.
Mistake 1: Treating GMP as the Final Decision
Grey Market Premium, commonly called GMP, is an unofficial estimate of where a stock might list. If a stock is priced at ₹100 and the GMP is ₹30, investors often assume the stock will list at ₹130.
GMP is not a guarantee. SEBI and the stock exchanges do not track or regulate it, and it can move sharply within hours. A GMP that looks strong the night before listing can shrink by the next morning, since it reflects sentiment among a small group of traders rather than the company’s fundamentals.
Small and mid-sized IPOs, in particular, often show this gap between the premium being quoted and the actual price on listing day, which is a pattern worth understanding before applying to SME IPOs with a high GMP.
Mistake 2: Assuming High Subscription Means Guaranteed Profit
Large subscription numbers create a sense of safety in numbers. Investors assume that if lakhs of people are applying, the stock must be a safe bet.
Subscription data only reflects demand at the time of application. It says nothing about how the stock will perform after listing.
- Paytm’s IPO was subscribed close to two times, yet the stock listed well below its issue price.
- LIC’s IPO was also oversubscribed, with a similar outcome on listing day.
Retail, HNI and institutional investors all apply for different reasons, so a high combined number can hide weak conviction within any one category.
Mistake 3: Not Checking Where the IPO Money Is Going
Every IPO document specifies how the funds raised will be used, yet this is one of the least-read sections of a DRHP.
Two structures exist within most IPOs:
- Fresh Issue: New shares are issued and the money raised goes directly to the company, usually for expansion, new plants or new technology.
- Offer for Sale (OFS): Existing promoters or early investors sell part of their holding to the public. The company itself receives nothing from this portion.
An IPO with a large OFS component is not automatically a poor investment but it does change what the listing is really about. In some cases, it signals an exit for early stakeholders rather than fresh capital going into the business.
Mistake 4: Ignoring Valuation Compared to Listed Peers
Strong IPO demand does not mean the pricing is fair. A company can be heavily subscribed and still be priced higher than businesses already listed in the same sector.
Comparing basic valuation metrics, such as P/E ratio, against listed peers takes only a few minutes. It often reveals whether an IPO is priced for growth already baked in or genuinely offers room to grow.
Mistake 5: Skipping the Risk Factors Section of the DRHP
Every DRHP carries a dedicated risk factors section. It usually covers pending litigation, customer concentration, debt levels and risks specific to the sector the company operates in.
Most investors rely on news headlines or brokerage notes instead of this section. Brokerage views are useful but they summarise selectively. Risk factors are disclosed in full because regulations require it, which makes this section one of the most honest parts of the entire document.
Mistake 6: Applying Only for Listing Gains
Many investors apply to an IPO with a single goal: sell on listing day and pocket the difference. There is nothing wrong with this strategy when it works but it leaves no room for patience when it does not.
When a stock lists flat or below its issue price, investors who applied purely for listing gains often panic and sell immediately, locking in a loss that might have recovered with time. Companies like Bharat Coking Coal faced exactly this question around its 2026 IPO, where investors had to decide between a quick exit and a longer-term view.
Mistake 7: Ignoring Promoter Lock-in Expiry
Promoter and anchor investor shares typically carry a lock-in period after listing, usually ranging from a few months to a year. This detail rarely gets attention at the time of applying.
Once the lock-in period ends promoters or early investors may choose to sell part of their holding. Heavy selling at this stage can put pressure on the stock price, sometimes months after the excitement of the listing has faded.
Mistake 8: Following the Crowd Instead of the Company
Social media discussions, WhatsApp forwards and influencer opinions can make an IPO feel like an obvious bet, even when very little research has actually gone into evaluating it.
This mistake connects directly back to the first two on this list. Herd mentality is often built on GMP chatter and subscription numbers alone, with almost no attention paid to the company’s actual business, financials or use of proceeds.
How to Evaluate an IPO Properly
A more reliable approach to applying involves a short checklist rather than a gut feeling:
- Read the DRHP, particularly the objects of the issue and the risk factors section.
- Compare valuation with listed peers operating in the same sector.
- Check the fresh issue versus OFS split before assuming the company will actually receive the funds raised.
- Treat GMP and subscription numbers as indicators of sentiment, not as decision-making tools.
- Look at revenue and profit trends across the last three years instead of relying on the latest quarter alone.
Investors exploring opportunities beyond individual IPOs can also look at curated investment Themes on TejiFactor, where research-backed baskets of stocks are built around specific sectors rather than single-company bets.
GMP reflects sentiment. Subscription numbers reflect demand. Where the money actually goes reflects intent. An IPO decision holds up only when all three are read together, not treated as separate signals pointing in the same direction.
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