Pre-IPO Hype Can Hurt Investors, Warns WWIPL Founder

India’s private market has seen rapid growth since WWIPL initiated operations in 2007, thanks to increased retail investment, better pricing, and heightened interest in pre-IPO shares. In an exclusive interview with Manoj Yadav, Business Editor (Digital) from The Free Press Journal, WWIPL’s Founder and Managing Director Krishna Patwari shared insights on the firm’s evolution, safeguards for investors, and the risks of chasing short-term listing profits.

When WWIPL began in 2007, the firm identified a gap in the market for unlisted and pre-IPO shares. Although several prominent Indian companies were available at attractive valuations, retail investors had limited knowledge about these opportunities. At that time, retail investors constituted only 5 to 10 percent of participation, primarily engaging in illiquid holdings sales. Today, retail investors make up nearly half of the market and actively purchase these shares.

Patwari’s banking background at IDBI Bank and ICICI Bank influenced his approach to risk and investor relations. He emphasized the importance of understanding a client’s risk tolerance and determining the appropriate portfolio allocation between direct equities, mutual funds, or other products. Before discussing an investment, Patwari highlighted the necessity of assessing a client’s risk-taking ability.

A significant turning point in WWIPL’s development was the transition from handling physical share certificates to a more efficient digital platform. This shift reduced deal completion times from three to six months (occasionally up to eight to twelve months) and addressed concerns related to trust and pricing volatility. WWIPL introduced technology, live updates on its website, and a live private-market index, PrimeX 40, which tracks 40 unlisted stocks and updates throughout the week.

The firm’s transaction model differs from traditional exchanges. WWIPL operates as an over-the-counter market where it first purchases shares into its books, makes payments from its books, and then delivers the shares directly to the buyer. This structured approach minimizes counterparty uncertainty and builds trust in the process.

Unlike other intermediaries, WWIPL does not rely on SEBI regulations, as there is currently no dedicated framework for private-market intermediaries. However, the company is prepared to comply with any future requirements.

Price determination in the unlisted market is primarily driven by demand and supply. WWIPL publishes daily rates, which may be revised multiple times throughout the day. Historical charts are also available to help investors track trends. Other platforms also publish prices, enabling investors to compare quotations, with market-wide differences generally remaining within about 1 percent.

In the event of a delayed demat transfer or payment, clients are promptly informed about the situation. If a technical issue or corporate action causes a delay, clients can exit the transaction if the revised conditions become unacceptable. WWIPL assists both buyers and sellers throughout the process, communicating via email, WhatsApp, and telephone, including confirmation of shares reaching the buyer’s demat account or payment reaching the seller.

Before adding an unlisted company to its platform, WWIPL conducts thorough due diligence, examining annual reports, cash flows, profitability, operating history, shareholding structure, liquidity, and free float. The firm generally avoids early-stage companies without a three-year track record and emphasizes the importance of corporate governance, as poor governance often serves as a significant warning sign in unlisted companies.

One of the most common mistakes made by pre-IPO investors is purchasing shares right before an IPO, anticipating significant gains from the listing. However, this approach carries substantial risks, as valuations may already be close to the proposed IPO price, and not every listing generates profits. Investors should ideally enter promising companies several years before an IPO, after conducting a comprehensive analysis of their fundamentals, rather than reacting to hype or the fear of missing out.