Carnelian Asset Advisor's recent letter to investor has cautioned that a fresh wave of speculative investing is building in India’s private market and preferential allotment space, drawing parallels to the boom and bust in new-age tech IPOs in 2021.
Reflecting his thoughts, Vikas Khemani, Founder, Carnelia, reiterated the firm’s earlier “FAD–FOMO–FADE” framework. It describes how hype (FAD) sparks a rush to buy (FOMO) before enthusiasm ebbs and prices correct sharply (FADE).
“We are seeing ‘another’ FAD building,” said the note, adding that this time the hotspots are direct investments in unlisted shares and preferential issues by listed companies.
2021 as a warning sign
Carnelian’s 2021 note had warned about the frenzy in new-age technology listings, where valuations were “unsustainably high” and often misunderstood. As sentiment turned, many such stocks saw deep price erosion or prolonged stagnation.
“Nearly three years on, most of these so-called revolutionary new tech stocks have seen significant price declines or gone through extended periods of time correction,” the letter said, adding that investors suffered both capital losses and opportunity costs.
A FAD begins when a sector or theme is touted as the “next big thing” and early success stories are widely amplified. As prices rise, FOMO sets in, pushing more investors to buy without due diligence. Eventually, reality catches up, the narrative loses steam, and prices fade, leaving investors with losses and “valuable lessons”.
Unlisted shares under the spotlight
Fueled by past successes like NSE’s listing and active secondary markets, unlisted shares have become “fashionable”, the letter said. Many family offices now hold sizeable positions in direct unlisted equities, encouraged by intermediaries and online channels. Khemani flagged the growing role of social media, informal dealers and Telegram groups promising returns above 30 percent, often without discussing fundamentals such as profitability, return ratios or industry structure.
Examples cited in the letter include:
HDB Financial: unlisted at Rs 1,045 before IPO; listed at Rs 835, now around Rs 735.
NSDL: peaked at Rs 1,275 in unlisted trade; listed in August 2025 at ₹800 after a two-year wait.
Swiggy: unlisted at Rs 500; listed at Rs 390, now below entry prices for most pre-IPO investors.
Waaree Energies: listed near Rs 2,000 versus unlisted highs of Rs 2,500.
PharmEasy: unlisted at Rs 135 in 2021; IPO withdrawn; now Rs 7.5.
OYO: down from Rs 145 unlisted to ~Rs 42 after three failed IPO attempts.
Good Glamm: valuation down ~90 percent from 2021 peak.
BluSmart Mobility: from Rs 4,844 to Rs 1,900 after governance concerns.
Structural flaws in the market
The letter highlights recurring problems in the unlisted ecosystem — prices often set by intermediaries rather than market discovery, information asymmetry, illiquidity due to IPO delays and six-month lock-ins, blind allocations driven by FOMO, lack of investor rights, and lucrative banker commissions regardless of outcomes.
Preferential allotments as the second hotspot
Similar speculative patterns have also been spotted in preferential allotments, as per the note. Khemani described a “template” where companies build a compelling narrative, cite participation by one or two prominent names, and price the issue attractively based on SEBI’s two-week average formula. Retail and HNI investors often commit Rs 2–10 crore expecting post-lock-in profits, but face price pressure as many try to exit at once.
Examples include: a mid-tier real estate firm’s preferential issue at Rs 714 now trades at Rs 289 (down ~60 percent); a solar EPC firm’s June 2024 issue at Rs 871 is 95 percent lower; a payment solutions provider’s July 2024 issue at Rs 79 trades at Rs 5; and other cases with 26 to 93 percent drawdowns.
Advice to investors
The letter stressed that unlisted and preferential investments are “the domain of professional investors” with the ability to negotiate terms, assess risk and illiquidity, and price governance challenges. For most, he advised sticking to fundamentals — evaluating management quality, business models, valuations and governance — and avoiding distractions that can drag down portfolio returns. “Price ≠ value, scarcity ≠ quality, new ≠ better returns, and most importantly, unlisted ≠ better returns,” he wrote.
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