NSE Valuation Smashed: Early Investors Chronicle Massive Gains and Hidden Risks Ahead of Billion-Crore IPO

NSE Valuation Smashed: Early Investors Chronicle Massive Gains and Hidden Risks Ahead of Billion-Crore IPO​

India’s unlisted shares market is experiencing a profound moment, shifting from a domain reserved for select investors to a subject commanding intense public scrutiny. The National Stock Exchange (NSE) has filed its Initial Public Offering (IPO), followed by Jio Platforms' draft papers. These two anticipated issues are collectively set to raise between Rs.60,000 and Rs.65,000 crore, intensifying the focus on this rapidly evolving sector.

The frenzy is evident in the soaring valuations of unlisted shares. NSE’s unlisted price has more than tripled, climbing from approximately Rs.670 in July 2023 to around Rs.2,085 currently. The PRIMEX-40 index, which tracks 40 leading unlisted companies, has delivered a compounded annual return of 20.9% over three years, outperforming the Nifty 500 index's 12%.

Who Dived Early: Narratives from Unlisted Investors​

Early participation in this market yields radically different outcomes, proving that wealth creation is highly dependent on foresight and discipline. Viren Punjabi, who has traded unlisted shares since age 20, reports that his NSE holding alone has grown about six times, close to seven times when dividends are included. He maintains he will not sell during the IPO, driven by confidence in the company’s long-term potential.

Nitin Balchandani, a freelance expert, provides a measured perspective on unlisted investing. Buying NSE shares incrementally starting in 2024, and subsequently buying back into the stock, he booked a profit of 2.2 times over just over a year from his first sale. He views NSE as fundamentally stronger than its peer BSE based on market share and cash generation ability.

Ankur Khanna, a finance professional, held the NSE thesis simple: it was an investment opportunity where returns felt guaranteed due to NSE’s dominant market share. At the current unlisted price of approximately Rs.2,000, his money has multiplied five times. His approach reinforces that for many retail participants, this market runs on conviction and focused research.

The Unforeseen Pitfalls: When Hype Meets Reality​

The journey in the unlisted space is fraught with risk, as evidenced by several investors' experiences. Punjabi admits to losses from misjudging investments, noting he bought PharmEasy parent API Holdings at Rs.38 during a boom cycle only for the share to languish at Rs.6-7. This highlights that past successes do not guarantee future gains.

Niket Shah, who invested in NSE in 2020, reported his money multiplied five times but views the trade as an underperformance compared to BSE investments. He stresses that he should have diversified into both exchanges. His personal experiences underscore the intense risk profile of the sector, with him stating that the risk taken in unlisted shares is ten times that of a listed stock.

The cautionary tales extend to volatility. Aravindani purchased Hexaware Technologies and saw a notional gain over 100%, but he could not sell due to a six-month lock-in period when the price subsequently fell sharply. This episode serves as a potent reminder that listing gains are not guaranteed profits, and regulatory rules carry significant weight.

Expert Analysis: Decoding Valuation in an Illiquid Market​

Institutional buyers offer validation of the market’s immense potential. Abhishek Ginodia, who invested institutionally back in 2019, stated that those who stayed invested have seen their money multiply 10-12 times, excluding dividends. He also highlighted the democratization of the market, noting the minimum investment in NSE has dropped from about Rs.3.5 crore to roughly Rs.50,000 today.

However, experts also flag critical market pressures. Ginodia pointed out that NSE’s options market share fell significantly over three years due to regulatory rule changes, causing some pressure on valuations. Currently, the stock trades at a Price-to-Earnings (P/E) of about 50 based on FY26 profit of Rs.10,300 crore.

T. R. Prashanth Kumar, CEO of BajajCapital Securities, offered a stern caution regarding the upcoming IPO band. He advises investors to "Treat the eventual IPO price band as the real anchor," noting that if it comes in below the unlisted price, it usually indicates the market is correcting for illiquidity premium and information asymmetry.

Managing Risk: The Unwritten Rules of Unlisted Investing​

The collective advice from industry experts boils down to a disciplined, long-term approach. Varun Shah of InCred Unlisted advises investors to cap conservative exposure at about 5% of their portfolio. He stresses that unlisted shares should be viewed as a satellite allocation rather than the core of any investment strategy.

The most underestimated risks are time and liquidity. Krishna Patwari notes that liquidity is the biggest risk; there may not always be a buyer when one wishes to sell. Furthermore, investors must note the lengthy holding requirement: unlisted shares must be held for 24 months to qualify as long-term, double the threshold for listed shares.

For those seeking high growth, Ginodia suggests that the universe of private companies is vast, and opportunities are often found in pre-IPO firms with market caps above Rs.10,000 crore in emerging sectors like green hydrogen or defense. He reiterates that these bets should be left to investors who gain direct access to company financials.