Only about a quarter of equity raised through initial public offerings (IPOs) is set aside for capital expenditure, while most funds are used to repay debt, invest in subsidiaries and reduce working capital borrowings, according to a research paper by Bank of Baroda (BoB) chief economist Madan Sabnavis.
The study, which analysed 189 IPOs worth Rs 1.82 lakh crore in the first seven months of FY26, found that companies planned to raise Rs 1.20 lakh crore through fresh equity and Rs 62,000 crore via offer-for-sale (OFS) by existing shareholders.
Of the fresh equity component, 26% was allocated for capex, 29% for debt repayment, 9% for investments in subsidiaries and 6.2% for working capital. Details for 24.5% of the funds were not disclosed, the report said. The 189 IPOs include those companies that have tapped equity market this fiscal year or have filed draft red herring prospectus.
The findings echo comments by chief economic adviser V Anantha Nageswaran, who recently said IPOs are increasingly becoming exit routes for early-stage investors rather than vehicles for raising long-term capital. “This undermines the spirit of public markets,” he had said, adding that India’s capital markets must grow not just in scale but in purpose.
The BoB economist noted that raising fresh capital is typically linked to new investment plans. “The striking point here is that out of Rs 1.82 lakh crore proposed to be mobilised, 66% was through a fresh offer while the balance would go to existing shareholders via OFS,” said the report. “When existing shareholders sell their stake, proceeds go to them and not to the company for business plans.”
The paper concluded that companies receive 65-67% of total IPO proceeds, and of that, roughly 26%—or 16.5% of overall equity raised—is deployed for capex, while a slightly higher share is used to repay debt.
The analysis was based on draft offer documents and red herring prospectuses filed with the Registrar of Companies.
The study, which analysed 189 IPOs worth Rs 1.82 lakh crore in the first seven months of FY26, found that companies planned to raise Rs 1.20 lakh crore through fresh equity and Rs 62,000 crore via offer-for-sale (OFS) by existing shareholders.
Of the fresh equity component, 26% was allocated for capex, 29% for debt repayment, 9% for investments in subsidiaries and 6.2% for working capital. Details for 24.5% of the funds were not disclosed, the report said. The 189 IPOs include those companies that have tapped equity market this fiscal year or have filed draft red herring prospectus.
The findings echo comments by chief economic adviser V Anantha Nageswaran, who recently said IPOs are increasingly becoming exit routes for early-stage investors rather than vehicles for raising long-term capital. “This undermines the spirit of public markets,” he had said, adding that India’s capital markets must grow not just in scale but in purpose.
The BoB economist noted that raising fresh capital is typically linked to new investment plans. “The striking point here is that out of Rs 1.82 lakh crore proposed to be mobilised, 66% was through a fresh offer while the balance would go to existing shareholders via OFS,” said the report. “When existing shareholders sell their stake, proceeds go to them and not to the company for business plans.”
The paper concluded that companies receive 65-67% of total IPO proceeds, and of that, roughly 26%—or 16.5% of overall equity raised—is deployed for capex, while a slightly higher share is used to repay debt.
The analysis was based on draft offer documents and red herring prospectuses filed with the Registrar of Companies.