Should You Invest in IPOs? What Salaried People Must Know

If you’ve been following financial news lately, you might have noticed a flood of IPOs (Initial Public Offerings) hitting the Indian stock market. Every other week, a new company seems to be making headlines with flashy ads, big promises, and analysts talking about “listing gains.”

As a salaried employee, it’s natural to feel tempted. You earn a fixed income every month, and an IPO looks like an exciting chance to multiply your money quickly. After all, who doesn’t like the idea of buying shares at the ground floor and watching them soar on listing day?

But here’s the big question: Should you invest in IPOs just because everyone is talking about them?

In this detailed guide, we’ll break down everything a salaried person needs to know about IPOs — what they are, how they work, the risks, the rewards, and the practical way to approach them without risking your hard-earned salary savings.

📌 What is an IPO?

IPO stands for Initial Public Offering. It’s the process through which a private company raises money by offering its shares to the public for the very first time.

Think of it like this: a company that has been privately owned so far decides to grow bigger — maybe they want to expand into new markets, pay off debt, or build new products. To do this, they need money. Instead of borrowing from banks, they invite common people (like you and me) and large institutions to invest in their company by buying shares.

Once the IPO is done, the company gets listed on a stock exchange (NSE or BSE in India), and its shares start trading like any other listed company.

📌 Why Do IPOs Attract Salaried People?

For salaried employees, IPOs often feel like a shortcut to wealth. Here’s why:

1. Listing Gains: The most popular reason. Many IPOs list at a higher price than the issue price, giving quick profits.
2. FOMO (Fear of Missing Out): Seeing friends, colleagues, or news reports about people making money overnight creates a sense of urgency.
3. Easy Access: With apps like Zerodha, Groww, and Upstox, applying for IPOs has become as easy as ordering food online.
4. Small Ticket Size: Unlike buying property or gold, IPOs allow you to invest with as little as ₹15,000 (one retail lot).
5. Dream of Catching the Next Big Thing: Everyone wants to be the early investor in the “next Infosys, HDFC Bank, or TCS.”

But is it really that simple? Let’s dig deeper.

📌 Types of IPO Investors in India

Before you apply, it helps to know how IPO shares are allocated:

1. Retail Individual Investors (RII) – That’s you! Salaried employees fall into this category. You can apply for IPOs up to ₹2 lakh.
2. High Net-worth Individuals (HNI) – People investing above ₹2 lakh.
3. Qualified Institutional Buyers (QIBs) – Banks, mutual funds, insurance companies, etc.
4. Anchor Investors – Large investors who invest before the IPO opens to the public.

As a salaried person, you’ll apply under the retail category, which is usually reserved for about 35% of the total IPO shares.

📌 How to Apply for an IPO as a Salaried Employee

Applying for an IPO has become super easy. Here’s a step-by-step:

1. Demat & Trading Account: Make sure you have one (Zerodha, Groww, ICICI Direct, etc.).
2. UPI Mandate: Link your UPI (like Google Pay or PhonePe) to block funds.
3. IPO Application: Log in to your broker’s app, select the IPO, enter the lot size (number of shares), and submit.
4. Funds Blocked: The amount is blocked in your bank account until allotment.
5. Allotment: If you’re lucky, you’ll get shares. If not, the blocked amount is released.
6. Listing Day: Shares get listed on NSE/BSE. You can choose to sell immediately or hold long-term.

📌 Pros of Investing in IPOs

1. Potential Quick Gains
   Many IPOs list at a premium, giving instant profits. For example, Nykaa’s IPO listed at nearly 80% higher than the issue price in 2021.
2. Early Entry
   You get a chance to invest in a company before it becomes widely popular and expensive.
3. Diversification
   Investing in IPOs can give you exposure to new sectors or companies not already in your portfolio.
4. Transparency
   Companies must disclose detailed information (prospectus, financials, risks) before launching the IPO, giving you access to data before you decide.

📌 Risks of Investing in IPOs

Here’s where salaried employees need to be careful:

1. Not All IPOs Give Profits
   While some IPOs list with gains, many don’t. Paytm’s IPO in 2021 was one of the largest in India, but it fell over 25% on listing day.
2. Hype vs Reality
   Companies often use heavy marketing to create hype. As a salaried investor, don’t get swayed by ads.
3. Low Chances of Allotment
   If an IPO is oversubscribed (which often happens in popular ones), you may not get any shares at all.
4. Lock-in of Money
   Your application money remains blocked for a few days. Not a big risk, but for salaried people with tight budgets, this matters.
5. Long-Term Uncertainty
   Some IPOs may perform well initially but struggle later if the business model is weak.

📌 IPOs and the Salaried Mindset

As a salaried employee, your financial life is built on stability — monthly income, fixed expenses, and planned savings. IPOs, on the other hand, are unpredictable.

Here’s how to align your approach:

• Don’t treat IPOs as your primary investment strategy.
• Use them only as a small part of your portfolio — say, 5–10% of your investments.
• Never use money meant for EMIs, rent, or emergency funds.
• Think of IPOs as a bonus opportunity, not a guaranteed wealth creator.

📌 How to Research an IPO Before Investing

Before you apply, check these:

1. Company Fundamentals: What does the company do? Is it profitable? Does it have growth potential?
2. Valuation: Is the IPO price fair compared to peers in the industry?
3. Use of Proceeds: Is the money being raised for growth, or just for existing investors to exit?
4. Promoter Background: Does the management have a good track record?
5. Market Conditions: Is the stock market bullish or bearish during the IPO?

📌 Examples of IPO Hits and Misses

• Hits: Infosys (1993), TCS (2004), Avenue Supermarts (DMart, 2017), Nykaa (2021).
• Misses: Reliance Power (2008), Paytm (2021), CarTrade Tech (2021).

Moral of the story? IPOs can create wealth — but they can also disappoint badly.

📌 Should Salaried Employees Invest in IPOs?

Here’s a practical framework:

• ✅ Yes, if…
  • You have spare money not needed for essential expenses.
  • You understand the risks and are okay with possible losses.
  • You treat IPOs as a bonus, not your core investment.
• ❌ No, if…
  • You are struggling with EMIs or loans.
  • You are building an emergency fund.
  • You get carried away by hype and FOMO.

Remember: Your SIP in mutual funds or PPF contributions are long-term wealth builders. IPOs are more like lottery tickets — exciting, but uncertain.

📌 Practical Tips for Salaried Investors

1. Apply for IPOs you genuinely believe in, not just every IPO.
2. Read the RHP (Red Herring Prospectus) — at least the summary.
3. Don’t borrow money to apply for IPOs.
4. If you get allotment and the listing price shoots up, book profits if they align with your goals.
5. If you plan to hold, make sure the company has long-term potential.

📌 Conclusion

So, should salaried employees invest in IPOs?
Yes — but carefully.

Think of IPOs as the “dessert” in your financial meal plan, not the “main course.” Your main course should always be stable investments like mutual funds, PPF, EPF, FDs, and insurance. IPOs can add flavor and excitement, but they are not the foundation of your financial journey.

As a salaried professional, your wealth-building journey is a marathon, not a sprint. Chasing quick IPO gains can be thrilling, but building consistent savings and investments is what will truly secure your future.

Bottom line: Go ahead and apply for IPOs if you have spare money, but never at the cost of your financial stability.

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FWK

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