Why Investors Lose Money in IPOs: RBI and SEBI Data Reveal Hidden Risks

Many small investors now face a hard truth about the real risks behind IPO dreams.

Have IPOs stopped rewarding small investors? The average IPO listing gain in India has fallen to 8.4 percent, down from 28.9 percent in 2024. The fall shows how the risks of investing in IPO markets have grown. Many first-time investors still enter expecting quick profits, only to watch prices slip within days.

This year, retail participation has dropped sharply. Institutions now take the larger share, leaving small buyers at the edge. The retail investor IPO performance that once looked bright now feels uneven and uncertain.

Why Retail Investors Keep Losing Money in IPOs 

In 2025, several IPOs saw retail quota subscription near 83 percent and 77 percent, while institutional demand touched full levels. The difference says enough. Many small investors still make common IPO mistakes by investors, like trusting hype or selling the stock on day one for small gains.

Market watchers say the problem is simple, people apply without checking company records or real value. Few check verified data before investing, though it’s all available in government reports.
 

These sites are open to all. But many retail investors rely only on social media or broker messages. That’s how errors repeat.

Why IPO Investments Lose Value After Listing

Most IPOs lose shine after the first week. Prices fall once big buyers exit. Stocks without strong business models fade fast. Analysts say this is why IPO investments lose value so often.

A Loansjagat article in 2025 said banks increased IPO financing limits to ₹25 lakh. Easy credit made it simpler to borrow and apply for larger amounts. The trouble begins when shares drop and borrowers must repay with interest.
 

These official numbers show how borrowing and liquidity shape IPO demand.

In 2024, SEBI’s study found 93 percent of individual equity-derivative traders lost money, a total loss of ₹1.8 lakh crore between FY22 and FY24. The same pattern appears in IPOs – overconfidence, poor research, and chasing quick returns.

The story links to our earlier report on “Retail Trading Boom Turns Risky After Derivatives Crackdown”. Retail behaviour hasn’t changed much since then.

Conclusion 

Both SEBI and RBI have started acting again. SEBI made IPO disclosures simpler in 2024, forcing companies to share risk factors in clear words. The RBI, early 2025, advised banks to keep watch on IPO loans used for speculation.

Officials believe rules can guide, not save, investors. The rest depends on awareness and caution. These are the financial lessons from failed IPOs every investor should remember.

Many still see IPOs as quick money. But the market today feels different – tighter, slower, more watchful. Real investing means reading before rushing. Maybe that’s how the “great IPO gamble” finally turns into a fair game.

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.