SEBI has barred mutual fund from investing in the Pre IPO Placement. From now onwards they are allowed to invest in IPO as an anchor investor of the companies who are coming through IPO. In simple terms, pre IPO Placement that the company will sale some of us shares to the Mutual funds before the official public offering. So the mutual fund house will get the shares at the low price.
https://youtu.be/fxNJR7mM8ZA
The problem with MF investing in pre IPO is that it will be biased for the investor in the MF as well as not all issues are good and that will have loss for the investors. Also seeing the MF investing in the pre IPO the company can come up with higher valuation and eventually it will make a loss for the investors.
Now IPO is a hot topic in India. Last year millions of dollars have gone to the IPO. Some are good and given a great return whereas some were bad and a lot of money have been lost. So yeah investing in IPO is the new trend but not all IPOs are good. And that's why the MF is barred from investing in pre IPO.
I too invest in the IPI and sometimes I get lucky to get few of the good ones. I also ask people to invest in IPO because that's basically a great way to earn some money from the idle money. Say you have 15K lying in your bank account, you invest in IPO. The money doesn't go out of your bank account until and unless you get the IPO. Say you got the IPO then you can sell at the time of listing and thus you will earn good money if the IPO is good. Basically you can get anywhere between 5% to 50% if the company is good. And that's why I invest in IPO.
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