How Investing in IPOs Can Be a Reliable Alternative Source of Income.
In the dynamic world of investing, Initial Public Offerings (IPOs) present a lucrative opportunity for investors seeking alternative sources of income. IPOs allow investors to buy shares of a company before it is publicly traded, often enabling substantial gains on listing day if the share price appreciates. In 2025, the Indian market has witnessed numerous IPOs listing with either premium or discount, creating varying income opportunities for investors.
Understanding IPOs as an Alternative Income Source
Investing in IPOs is becoming increasingly popular as an alternative income source beyond traditional dividends or fixed income investments. This is primarily because certain IPOs list at a premium, meaning their opening price on the stock exchange is higher than the IPO issue price, providing immediate gains for investors.
Alternative income from IPO investments comes from capital appreciation during the listing and post-listing periods. Active investors monitor market appetite, grey market premiums (GMP), and company fundamentals to decide which IPOs could generate listing gains and long-term value.
IPO Listing Premiums and Discounts: What the Data Shows
Recent trends in 2025 show that out of the total IPOs listed on Indian exchanges, approximately 65-70% have categorized gains by listing at a premium, while around 30-35% have listed at a discount or faced listing day challenges. Data from leading IPO tracking platforms indicate:
- About 68% of IPOs in 2025 have listed at a premium, with average listing gains between 5% to 20%.
- Around 32% of IPOs have listed at or below the issue price, reflecting market caution or overvaluation concerns.
- The highest listing gains are often seen in sectors like technology, fintech, and e-commerce, where investor enthusiasm remains strong.
For example, recent notable IPOs like Groww listed at a 14% premium, indicating robust investor demand. However, every IPO does not guarantee listing profit, underscoring the need for careful due diligence.
Factors Influencing IPO Listing Performance
Several factors determine whether an IPO will list at a premium or discount:
- Market Sentiment: Bullish markets tend to favor premium listings, while bearish conditions might suppress IPO gains.
- Company Fundamentals: Strong revenue growth and profitability metrics attract investors, increasing listing demand.
- Grey Market Premium (GMP): GMP reflects the unofficial price at which IPO shares trade before listing; high GMP often signals a premium listing.
- Subscription Levels: Oversubscribed IPOs generally suggest higher demand and a likelihood of listing gains.
- Sector Trends: Hot sectors garner more interest, driving premium listings.
Leveraging IPO Investment for Alternative Income
Investors can use IPOs as an alternative income stream by adopting disciplined investment strategies:
- Pre-IPO Research: Study the company’s financials, competitive position, and prospectus details before applying.
- Monitor GMP: Track GMP values for insights into market interest.
- Diversify IPO Portfolio: Invest in multiple IPOs to spread risk, as not all will yield listing gains.
- Exit Timing: Consider booking profits soon after listing to capitalize on the premium.
- Long-Term Investing: Some IPOs, despite no initial premium, may grow to provide substantial returns over time.
