Aman Singhal/AI-Generated Image
Summary: Grey market investors have lost over 50 per cent overnight in the Tata Capital IPO. But what most investors miss is that IPOs fail to deliver even in the listed market after their debut. This story reveals surprising data that shows how most IPOs go on to underperform over time.
“Please don’t buy unlisted shares”. That was the blunt warning from a Reddit user on r/IndianStreetBets after the much-hyped Tata Capital IPO dealt a massive blow to investors in the grey market.
The IPO is now priced at Rs 326 at the upper band, a massive 55 per cent discount to its recent grey market price of Rs 735 and a staggering 71 per cent drop from the April peak of Rs 1,125.
Those who bought the unlisted shares at these elevated levels have effectively seen their entire investment wiped off. Grey market trades often look lucrative in the run-up to an issue, only to unravel when reality strikes. Tata Capital’s slide is just the latest reminder that the unlisted market is little more than a speculative playground.
But here’s the bigger truth: the disappointment doesn’t end with GMPs. Even after companies officially list on the exchanges, IPOs rarely live up to the hype.
Not just in the grey market, IPOs disappoint even after listing
Here’s some hard data. IPO backers might want to look away.
We checked the post-listing performance of all IPOs in the last four years, from 2021 to April 2025, and they were mostly disappointing.
Their median returns post-listing (against listing price) trailed the BSE 500 over three different periods.
- Three months after their debut, they delivered 1 per cent median returns against the benchmark’s 4 per cent gain.
- Six months later, the gap only widened. Their return slipped into negative territory while the index climbed 8 per cent.
- One year out, their returns were about 4 per cent in the red, even as the index still returned healthy gains of 8 per cent.
In fact, nearly half of all the IPOs ended their first year with losses!
So while the grey market is justifiably known to disappoint, the main market hasn’t been much kinder to IPO investors either.
A note for readers: You might wonder why we considered median returns and not averages. That’s because IPO performance is often wildly uneven. A handful of stocks may double or triple after listing, while most struggle or even lose value.
If you only look at average returns, those few big winners skew the numbers, making it seem like IPOs are better bets than they really are. That’s why median returns capture the middle point that tells you what the typical investor experiences, giving a more realistic picture.
Why IPOs disappoint
- Overpricing: Companies prefer to go public when valuations are frothy, ensuring maximum benefit for promoters and early investors, not new shareholders.
- Hype-driven demand: FOMO around ‘hot’ issues draws in retail investors chasing quick gains, but over time, they are usually left with poor performance.
- Scant track record: IPOs come with limited operating history, making it difficult to accurately assess the company’s past financials and track record. This often results in investors overpaying in the grey market and even in the listed space.
Your takeaway
Tata Capital’s GMP disappointment may have brought much-needed caution back to unlisted trades but this prudence should extend to IPOs in general.
For long-term investors, the lesson is simple: don’t let IPO hype drive your portfolio. Forget the euphoria of day-one listing gains. The hard truth, as data proves, is that IPO investors over time are usually left with losses. The chances of an IPO turning into a long-term multibagger are extremely slim.
What should you do instead?
The smarter thing to do is focus on established businesses with proven fundamentals, stable earnings power, growth runways and long-term compounding potential.
That’s what we do at Value Research Stock Advisor. We cut through hype and headlines and identify companies that can genuinely compound wealth over the long term, backed by solid underlying fundamentals.
If you want to know which stocks truly deserve your money beyond the IPO buzz, check out our buy recommendations and join thousands of serious investors using our research to build long-term wealth, one smart stock at a time.
Data inputs from Udhayaprakash
Also read: IPO investing: Is it the right strategy for you?
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
