A story of massive discounts, investments, and IPO

We love discounts, freebies, and gift hampers.  Yes or No? Earlier, we were looking forward to a Discount sale which used to happen on certain occasions or annually. Gone are those days thanks to online portals/platforms. You can browse 24/7, 365 days, and find discounts on each and every product.

Ms. Sunanda, a homemaker, living in an apartment at Kanakapura Road is excited to share her experience of ordering Rs.30 worth of curry leaves and getting it delivered to her doorstep within 30 minutes. An online portal spent over Rs.200 to ship Rs.30 worth of green leaves!

It’s thrilling to know a single Gulab jamun or two idlis are delivered at doorsteps at half the price! Delivered free, of course!

Earlier discounts were on the sale price, for example, on Rs.100, we used to get Rs.10 or Rs.20 as a discount. Today, on Rs.100, you get Rs.250 as a discount, considering the free delivery, packing, etc. Thrilling ideas.

Mr. Shyam, Sunanda’s husband works in an MNC. His favorite pastime is trading in stocks. He was excited to share his experience of subscribing to the IPO (public issue) of one of these online platform companies, early this month.

At this stage of the article, you should know something more about the company.  This is a new-age tech company which was started from a shared office. They created an App and found investors. Initially, a bunch of High Networth Individuals (HNI’s) invested in it, and later it was funded by Private Equity Funds. How much? Tons and tons of money! In fact, all the discounts enjoyed by Ms. Sunanda and her likes were funded from the investment done by the investors.

They pampered Sunanda and others by giving loads of discounts for 5 years. Now, the investors thought to themselves that the time has come to pull out the money invested. How? Asking the company which is currently making tons of losses to go for Public Issue (IPO) at a high valuation.

Now, Mr. Shyam and his likes find investing in these companies very attractive! So, they subscribe to the shares and buy them. The investors who funded the discounts take their money out from the company.

The moral of the story – Ms. Sunanda got peanuts as discounts from the company and Mr. Shyam, returned with thanks, cashew nuts back to the company!

The investors converted peanuts into cashew nuts in 5 years!

At the family level, Shyam and Sunanda’s Balance Sheet tallied! Both husband and wife got thrilling experience at the time of getting the discounts and giving the premium (hoping for the further rise in prices)!! At the investors’ level, they pumped their money to the Public as discounts and got back in the form of a share premium. It’s a happy ending tale, yes, or no?

This is how the modern massive discount schemes, investment, and IPO model works!

Hope you enjoyed this short fiction! Thank you.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at [email protected]

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Sriram Iyengar
Sriram Iyengar
14 days ago

Informative article sir

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