Pre-IPO Hype Can Hurt Investors, Warns WWIPL Founder

India’s private market has evolved rapidly since WWIPL began operations in 2007, driven by growing retail participation, improved price discovery and rising interest in pre-IPO opportunities. In an exclusive interview with Manoj Yadav, Business Editor (Digital), The Free Press Journal, WWIPL Founder and Managing Director Krishna Patwari discusses the firm’s journey, investor safeguards, pricing transparency, regulatory readiness and the risks of chasing short-term listing gains.

What opportunity did you identify in India’s private market when you started WWIPL in 2007?

Several strong companies, including RBL Bank, Bombay Stock Exchange, Tamilnad Mercantile Bank, ICICI Prudential Life Insurance and HDFC Standard, were available at attractive valuations. However, retail investors knew little about unlisted or pre-IPO shares. The market was largely limited to informed high-net-worth individuals and institutions. Retail investors accounted for barely 5 percent to 10 percent of participation and mostly approached the market to sell illiquid holdings. Today, retail investors represent nearly half of the market and also actively buy such shares.

How did your banking experience influence your approach to investors and risk?

My experience at IDBI Bank and ICICI Bank taught me both what to do and what to avoid. I understood the importance of KYC, client profiling and risk management. Before discussing an investment, it is important to assess a client’s risk-taking ability and decide how much of the portfolio should be allocated to direct equities, mutual funds or other products.

What were the major turning points in WWIPL’s development?

Initially, many transactions involved physical share certificates. Completing a deal could take three to six months and, occasionally, eight to 12 months. That created significant trust and pricing concerns because the value could change before completion. We introduced technology, displayed updated rates on our website and began revising them whenever the market moved. We also launched PrimeX 40, which we describe as India’s first live private-market index. It tracks 40 unlisted stocks and is updated throughout the week.

How does WWIPL’s transaction model work?

The unlisted market is an over-the-counter market where transactions are negotiated between buyers and sellers. WWIPL does not operate as an exchange or merely match two parties. We first purchase shares into our books, make payments from our books and then deliver those shares directly to the buyer. Every transaction passes through WWIPL’s books. We believe this structure reduces counterparty uncertainty and helps build trust.

What safeguards do you offer when there is no dedicated SEBI framework for such intermediaries?

We verify the KYC details and holdings of buyers and sellers. Third-party payments or transfers are not permitted. Transaction conditions, including the expected delivery period, are communicated beforehand through written channels. Unlike mutual funds or insurance distribution, this segment currently has no specific certification requirement. A dedicated regulatory framework would benefit the market, and we are prepared to comply with any future requirements.

How are prices determined without a central exchange?

Prices depend mainly on demand and supply. We publish rates daily and may revise the price of a particular security three or four times during a day. Historical charts are also available to help investors understand the trend. Other platforms publish their prices too, allowing investors to compare quotations. Generally, market-wide differences remain within about 1 percent, although this can vary depending on liquidity and demand.

What happens if a demat transfer or payment is delayed?

Clients are informed at every stage of the transaction. If a technical issue or corporate action causes a delay, we immediately explain the situation. The client may exit the transaction if the revised conditions are unacceptable. Our team assists buyers and sellers throughout the process. We communicate through email, WhatsApp and telephone, including confirmation after shares reach the buyer’s demat account or payment reaches the seller.

What checks do you conduct before adding an unlisted company?

We study its annual reports, cash flows, profitability, operating history, shareholding structure, liquidity and free float. We generally avoid early-stage companies without at least a three-year track record. Corporate governance is also critical because poor governance is among the biggest warning signs in an unlisted company.

What is the biggest mistake pre-IPO investors make?

Many investors buy shortly before an IPO only for expected listing gains. That is risky because valuations may already be close to the proposed IPO price, and every listing does not generate profits. Investors purchasing pre-IPO shares must also consider the applicable post-listing lock-in period. Ideally, investors should enter promising companies several years before an IPO, after studying their fundamentals, rather than responding to hype or fear of missing out.

How would you describe private markets in one word?

Opportunities. However, fundamentals must come before valuation excitement, and investors must avoid treating unlisted shares as a shortcut to quick listing gains.