Zerodha's Nithin Kamath Warns IPO Investors About Lock-in Expiry Risks
Zerodha CEO Nithin Kamath has cautioned retail investors to track lock-in periods when investing in IPOs, as large shareholder sell-offs after expiry can pressure stock prices. He noted that promoters, early investors, and ESOP holders face lock-in restrictions ranging from 30 days to 18 months. Data shows 96 companies have lock-in expiries between January 6 and April 30, 2026, covering approximately $45 billion in share value. Separately, Kamath highlighted that SEBI's 15% open interest cap limits broking firm growth while benefiting consumers by reducing concentration risk.
*this image is generated using AI for illustrative purposes only.
Zerodha CEO and founder Nithin Kamath has issued an important advisory to retail investors, emphasizing the need to closely monitor lock-in periods when investing in initial public offerings (IPOs). In a post on social media platform X, Kamath warned that large shareholder sell-offs following lock-in expiries can create significant downward pressure on stock prices.
Understanding IPO Lock-in Mechanisms
Kamath explained that when companies go public, not all shareholders receive immediate selling permissions. Specific categories of stakeholders face mandatory lock-in restrictions that vary considerably in duration.
| Shareholder Category: | Lock-in Period Range |
|---|---|
| Promoters: | 30 days to 18 months |
| Early Investors: | 30 days to 18 months |
| ESOP Holders: | 30 days to 18 months |
These shareholders typically hold substantial stakes in their respective companies, making their eventual market participation particularly impactful. "Since these are large shareholders, whenever they sell, there can often be a downward move in the stock price," Kamath noted, highlighting a risk factor that retail investors frequently overlook when pursuing newly listed stocks.
Upcoming Lock-in Expiries Present Market Opportunity
Data from Nuvama reveals significant upcoming lock-in expiries that investors should monitor carefully. The research indicates substantial market activity expected in the coming period.
| Parameter: | Details |
|---|---|
| Time Period: | January 6 to April 30, 2026 |
| Number of Companies: | 96 companies |
| Total Share Value: | Approximately $45 billion |
| Shareholder Composition: | Promoters and promoter group entities hold significant portions |
While this figure represents the total value of shares becoming eligible for trading, it does not guarantee that all shares will enter the market, as promoters and promoter group entities typically retain substantial holdings for strategic purposes.
Broking Industry Structural Limitations
In a separate communication, Kamath addressed structural constraints within the broking industry that affect business growth potential. He described broking as a "unique business" due to regulatory frameworks that impose specific operational limits.
"Broking is a unique business because there's a hard ceiling on how much we can grow and the rate at which we can grow," Kamath explained. He specifically referenced SEBI's 15% open interest (OI) cap at the broker level, which creates definitive growth boundaries for broking firms.
Regulatory Framework Benefits
Despite growth limitations, Kamath emphasized the consumer protection benefits of current regulatory structures. The 15% open interest cap serves multiple protective functions within the financial ecosystem.
Key regulatory benefits include:
- Concentration Risk Reduction: Prevents excessive market concentration among individual brokers
- Market Stability: Maintains balanced competitive environment
- Consumer Protection: Reduces systemic risks associated with broker dominance
- Industry Health: Promotes sustainable growth patterns across the sector
Investment Strategy Recommendations
Kamath's advisory centers on incorporating lock-in expiry tracking into investment decision-making processes, particularly for recently listed companies. This approach enables retail investors to make more informed decisions by understanding potential supply-side pressures that could affect stock performance.
The Zerodha founder's insights reflect broader market dynamics where institutional knowledge and timing considerations play crucial roles in investment outcomes, emphasizing the importance of comprehensive research beyond basic financial metrics when evaluating IPO investments.
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