Mumbai: Do you know that you can invest in some of the most promising and profitable companies in India before they go public? Yes, this is possible through Investing in pre-IPO shares.

Investing in companies before they go public can be a lucrative opportunity for investors who want to get an early stake in the next big thing. However, finding and accessing such pre-IPO deals can be challenging, especially for retail investors who lack the connections and resources like institutional investors.

What are pre-IPO investments?

Pre-IPO shares are shares of a company that are sold to investors before the company launches its initial public offering (IPO). Pre-IPO shares offer a unique opportunity to get early access to high-growth companies and potentially earn huge returns. Pre-IPO investments occur during a company's growth phase before its stock becomes publicly available after an IPO.

Pre-IPO investments play a crucial role in unlocking net worth for savvy investors. Let's explore how:

1.   High return potential: Investing early in a company's growth journey can yield substantial returns if the company's value increases post-IPO.

2.   Low allotments: Pre-IPO investments offer an opportunity to invest at a discounted valuation before shares become publicly available, avoiding the challenges of oversubscribed IPOs.

 3.  Invest in growth: Many companies choose to stay private for an extended period, and retail investors may miss out on the high-growth phase.

The following companies show the pre-IPO share price and the expected IPO price of some of the companies that offers, and the potential return on investment:

 1.  CDSL (Central Depository Services Ltd)

CDSL, a Mumbai-based central securities depository, had a PreIPO price of ₹60. After ~8 years, it's now trading at ~₹1,800, boasting an impressive average annual return of ~400 per cent. A Rs. 10 lakh investment would now be worth around Rs. 3 crores.

 2.  Anandrathi

Anand Rathi Wealth Ltd, an Indian wealth solutions company, had a PreIPO price of ₹267. After 3.4 years, it's now at ~₹4,000, with an average annual return of ~400 per cent. A Rs. 10 lakh investment would now be worth around Rs. 1.5 crores.

 3.  BSE (Bombay Stock Exchange)

BSE is an Indian stock exchange that allows investors to trade in stocks, equities, mutual funds, commodities, derivatives etc. BSE was available in the PreIPO at an investment price of ₹67.   After the tenure of 7 years, the current price stands at ~ ₹2,860. The investment yielded an impressive average annual return of ~595 per cent. If an individual investor has invested Rs. 10 lakhs, the value is  Rs. 4.2 Crs.  

 4.  Nazara Technologies

Nazara Technologies, a Mumbai-based mobile gaming company and sports media platform, saw its PreIPO investment price at ₹225. After 1.5 years, the present price stands at ₹650, yielding an impressive average absolute return of ~130 per cent. For an individual investor who invested Rs. 10 lakhs, the invested value now stands at Rs. 28 lakhs.

  5. Tata Technologies Ltd

Tata Technologies Ltd, an India-based global engineering services company offering product development and digital solutions, had a PreIPO investment price of ₹90. After approximately 3 years, the present price stands at ₹1,100, resulting in an impressive average absolute return of ~380 per cent. For an individual investor who invested Rs. 10 lakhs, the invested value now stands at Rs. 1.2 crores.

Hot Investments in Pre-IPO

1.   Studds: Two-Wheeler Helmets and Lifestyle Accessories

Studds Accessories Ltd is a globally recognized brand specializing in manufacturing two-wheeler helmets and lifestyle accessories. With the strong operational fundamentals, the company has established a monopoly business, exporting to more than 40 countries.

Financial snapshot (in Rs. Crs)

The financials of studds accessories for the FY22-FY23 as: In FY22,  Studds Accessories recorded a total revenue of ₹466 crore in FY22 and in FY23, this figure increased to ₹504 crore. The gross profit for Studds Accessories in FY22 stood at ₹201 crore and in  FY23, it improved to ₹239 crore.

Studds Accessories achieved an EBITDA of ₹57 crore in FY22 and  in FY23, this metric rose to ₹64 crore.  The company's Profit Before Tax  was ₹40 crore. By FY23, it had increased to ₹47 crore. Studds Accessories' net income in FY22 amounted to ₹29 crore. In FY23, the net income further improved to ₹34 crore.

The earnings per share for Studds Accessories were ₹15 in FY22. By FY23, this metric had risen to ₹17. These financials indicate positive growth trends for Studds Accessories during this period.

 2.  National Stock Exchange(NSE)

NSE is gearing up for its IPO. However, SEBI (Securities and Exchange Board of India) has set pre-conditions for NSE:

 a.  Strengthening technology infrastructure: NSE must ensure glitch-free operations for at least one year.

 b.  Enhancing corporate governance: NSE needs to improve its standards of corporate governance before filing for the IPO.

Financial snapshot (in Rs. Crs)

NSE recorded a total revenue of  ₹8,652 crore and in FY22, this figure increased to ₹12,347 crore in FY23. NSE  achieved an EBITDA of ₹6,944 crore in FY22 and  in FY23, this metric rose to ₹10,121 crore.  The company's Profit Before Tax  was ₹6,810 crore. By FY23, it had increased to ₹10,386 crore. NSE net income in FY22 amounted to ₹5,111 crore.  In FY23, the net income further improved to ₹7,846 crore.

The earnings per share for NSE were ₹105 in FY22. By FY23, this metric had risen to ₹149. These financials indicate positive growth trends for Studds Accessories during this period.

Both Studds and NSE represent exciting investment opportunities in the pre-IPO space. Whether you're eyeing innovative lifestyle accessories or the backbone of India's stock market, these ventures are worth exploring!

However, investing in pre-IPO shares isn't always easy, as it entails uncertainties and regulations. That's why you need a reliable and trustworthy platform that can help you find, buy, and sell pre-IPO shares in India. So, whether you're a seasoned investor or just dipping your toes into the investment waters, consider exploring the exciting world of pre-IPO stocks.

The article has been authored by Planify founder & CEO Rajesh Singla.