Most retail investors treat IPOs as a "lottery ticket" – apply, get allotment, sell on listing day, and pocket the gains. While this strategy works for pocket money, it won't make you wealthy.

Real wealth is created when you catch a company young (at the IPO stage) and hold it for 10-20 years as it grows into a giant. Think of investors who held Infosys, TCS, or Titan since their IPOs.

The "Listing Gain" Trap

Selling immediately often leaves money on the table. A 20% listing gain is nice, but a 50x return over 15 years is life-changing.

The Challenge: Not every IPO is a Titan. Many are duds that crash 80% after listing. The key is selection.

Framework for Long-Term IPO Selection

To find long-term winners, you need a different lens than the one used for listing gains.

1. Market Leadership

Is the company #1 or #2 in its industry? Leaders tend to capture the majority of the profit pool.

• Example: Zomato (Food Delivery), NSE (Exchange), Indigo (Aviation).

2. The "Moat" (Competitive Advantage)

Does it have something that is hard to copy?

• Brand: (e.g., Tata, Godrej)
• Network Effect: (e.g., Platforms like Paytm or PolicyBazaar - value increases as more users join)
• Cost Advantage: (e.g., D-Mart)

3. Clean Management

For long-term holding, integrity is non-negotiable. Check for:

• Clean tax records.
• No political connections driving the business.
• Professional management vs. family-run interference.

4. Scalability

Can the company grow 10x? A company serving only one city has limited scope compared to a pan-India player.

The "Coffee Can" Strategy for IPOs

Popularized by Saurabh Mukherjea, this strategy involves buying high-quality shares and doing nothing for 10 years.

1. Filter: Identify an IPO with >15% Revenue growth and >15% ROCE.
2. Buy: If you get allotment, keep it. If not, buy on listing day (even if it's at a premium).
3. Forget: Don't check the price every day. Let the business compound.

When to Sell?

Holding long-term doesn't mean holding forever blindly. Sell only if:

• The fundamental business model breaks (e.g., Nokia when smartphones came).
• Management integrity is compromised.
• The company makes a disastrous acquisition (Diworsification).

Conclusion

Flipping IPOs is trading; holding them is investing. If you find a company with a long runway, a great driver (management), and a sturdy engine (financials), stay on the bus. The journey might be bumpy, but the destination is worth it.