The great Indian IPO lottery

Applying for IPOs has quietly become a national pastime. Every few weeks, millions of investors line up online, hoping for that one lucky allotment. The attraction isn’t ownership, growth or dividends. It’s the promise of listing gains. In a market obsessed with “instant returns,” IPOs are the new scratch cards.

The numbers tell a clear story. Between 2000 and 2019, Indian companies raised Rs 4 lakh crore via IPOs. But since 2020, they’ve raised Rs 5 lakh crore—more in five years than in the previous two decades combined. IPOs, it seems, flourish when optimism peaks. The 2003-07 bull run saw Rs 1.15 lakh crore raised; 2015-17 saw another Rs 1.03 lakh crore; and since 2020, Rs 5 lakh crore and counting. When investors are euphoric, promoters don’t miss the chance to cash in.

Are investors lining up out of long-term interest? Not at all. The game is played for listing gains. And yet, for all the frenzy, the math of listing gains is brutal. Since 2000, 56 per cent of IPOs have listing gains of less than 10 per cent (which includes listings at a discount too). In other words, more than half the issues barely covered the cost of enthusiasm. Still, these IPOs were oversubscribed by 10-12 times. Investors willingly queued for single-digit returns, convinced their luck would defy probability.

The gainers, the 44 per cent of IPOs that did deliver meaningful gains, were far harder to catch. Even among these ‘gainers’, 45 per cent have gains between 10-25 per cent. But their subscriptions? An average of 45-50 times. What about IPOs that have exceptional listing gains of over 25 per cent? The average subscription is over 100 times. The higher the gain, the longer the queue and the slimmer your odds of getting in.

For retail investors, allotment in oversubscribed IPOs is done through a computerised lottery. That’s not a metaphor; it’s literally a lottery. Each application, no matter how meticulously timed or researched, has an equal, random chance of success. The outcome depends less on analysis and more on algorithmic luck.

Think of it this way: applying for a “hot” IPO is like buying a movie ticket where only one in 50 seats actually exists. The rest of the buyers walk home with refunds and regret.

Applying as high-net-worth investors (HNIs) through the leveraged route isn’t immune either. Their allocations depend on how much leverage they can stomach. The problem? Margin funding costs often eat up a chunk of the potential listing gain. And if the issue disappoints, the leverage amplifies the loss.

The irony is hard to miss. Investors chase IPOs precisely because they seem like guaranteed quick profits, not realising they’re entering a game where the odds of getting an allotment—and then getting a good listing gain—can be lower than winning a decent lottery prize.

Listing gains are the financial equivalent of a sugar rush: fast, thrilling and unsustainable. The process rewards randomness more than reasoning. And yet, every new offer draws the same crowd, hopeful that this time will be different, this time the computer will pick their name.

The IPO market thrives on this collective optimism. Promoters ring the bell, bankers collect their fees and the rest of India waits for an email that says, “Congratulations, you have been allotted.” Most, of course, never receive it. And those who do don’t have much luck either.

It’s hard not to admire the enthusiasm. But let’s call it what it is: a national obsession with one of the lowest-probability trades in finance. IPOs promise excitement, not certainty. The listing-day jackpot may exist, but for most investors, the IPO form remains just that—a ticket in the Great Indian Lottery.

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This column was originally published in Times of India.

This article was originally published on November 18, 2025.