For decades, investing in a company before it went public was a privilege reserved for venture capitalists, private equity funds, and insiders. Today, that’s changing. As Indian companies stay private longer and build significant value before listing, retail and HNI investors increasingly want-in on that pre-listing value creation and unlisted share platforms have made it far more accessible.
Here is a practical starting framework for building a Pre-IPO portfolio.
Understand What the Investor is Buying:
Private market investments generally fall into four categories:
- Pre-IPO shares: Companies with a DRHP filed or SEBI approval received, the most actively traded instruments in India’s private market space.
- Unlisted shares: Established private companies with active secondary markets, often with multi-year audited histories.
- ESOP shares: Post-vesting employee equity sold ahead of a potential IPO.
- Delisted shares: Shares of companies once listed on BSE/NSE that have since delisted.
Unlike listed markets, where prices reflect real-time consensus, private market pricing is indicative and shaped by company fundamentals, transaction trends, and negotiation rather than a live order book.
Choose An Access Mode:
Investors typically buy unlisted shares through specialised platforms, PMS, and AIFs, since regular trading apps don’t support these transactions. For direct startup investing, angel networks work well, while ESOPs can be bought directly from employees at private companies. Among specialised platforms, WWIPL is one such option built specifically for pre-IPO investing.
WWIPL makes the process simple: complete your KYC, browse listings with indicative pricing, make payments through regulated banking channels, and receive your shares in the demat account, typically within 48 hours.
The Investment Process: Step by Step:
Purchasing unlisted or pre-IPO shares is quite simple. The five simple stages of the journey are designed to ensure investor protection and transparency in the process.
- Discover: Explore private companies and deals in line with personal goals.
- Understand: Get a clear understanding of the business model, financial health and valuation explained plainly.
- Agree: Go through the offer/term sheet details properly before agreeing.
- Invest: Payments must be made using regulated channels like bank deposits, wire transfers, etc, with proper documentation.
- Hold & Track: When the shares are credited to the demat account, investors can keep track of the company’s happenings.
Three Safeguards Worth Building Into Every Deal:
- Scrutinise the offer: Go through every document closely, and make sure to fully grasp the company’s fundamentals, valuation basis, and deal terms.
- Verify the transfer: Ensure shares show up in the investor’s own demat account, in the investor’s name, not a pooled account or third party.
- Stay on top of it afterward: record the transaction and track the subsequent corporate actions and disclosures.
Apply Real Due Diligence:
Before committing capital, run every opportunity through a structured checklist:
- Revenue quality: Confirm that growth is steady and supported by audited statements, not just management decks.
- Path to profitability: Check with the insights from unit economics on whether the business model will be sustainable in the long term, in case the company is not profitable yet.
- Promoter quality and governance: Assess the management’s track record based on ROC filings, court orders, and regulatory disclosures.
- Exit pathway: Stress-test the investment against multiple outcomes: an IPO, a secondary sale, or a company buyback.
- Valuation discipline: Form an independent view of fair value rather than relying solely on the prevailing market price as a valuation benchmark.
- Information sufficiency: Examine whether a business’s consistent disclosure of high quality information is sufficient for assessment.
- Sector and macro sensitivity: Consider how regulatory shifts, industry trends, and broader economic conditions could affect performance.
- The honest bear case: Evaluate unfavourable outcomes with the same rigour as favourable ones, not just the upside case.
For a deeper walkthrough of these concepts, including a full due diligence framework and structured guidance on accessing India’s private markets, check out WWIPL’s “The Investor’s Guide To Private Markets” guide, available free at wwipl.com
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Disclaimer: This content is published for educational and informational purposes only. WWIPL does not provide investment advice. Please consult a qualified financial advisor before making any investment decision.