Yes, there is risk involved as investors may be required to take on significant losses when investing in IPO Funding.
Here are a few examples of situations where IPO Funding can be risky:
Investors can either pay the lender to hold shares or sell them for loss if an IPO is not listed at a high price.
The investor allocated more shares than expected. Investor can make a good profit in the event of positive listing. However, losses can be significant if it's not that way.
Investors are responsible for paying the interest on any IPO shares that take longer to list. This is common in IPOs whose listing was delayed by SEBI (Indian Securities and Exchange Board), by between 2 and 8 weeks.
The applicant must still pay the loan interest if no shares are issued in IPO due to oversubscription or rejection.