Debt repayment, capital expenditure: How IPO proceeds are being utilised

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Money raised via fresh equity issuance is being mostly to repay debt, followed by capital expenditure, suggests a recent study by Bank of Baroda’s economic wing that studied over 200 filings with Securities and Exchange Board of India (Sebi) between April and October 2025.

 

Of these (over 200) filings with Sebi that have raised funds thus far in fiscal 2025-26 (FY26), or have shown intent of doing so in near future, said the report, data is available for 189 companies where the purpose of raising such funds is clear.

 

The draft offer documents as well as red herring documents filed with the Registrar of Companies (ROC) were scanned to ascertain the purpose of the issue, the note said. 

 

While these documents were scanned, the note said, some companies did not provide the 'fund deployment' information as the issue amount was not known at the time of filing for the IPO/FPO. This, Bank of Baroda said, led to exclusion of several such companies.  

 

In some cases, companies that disclosed the details of purpose of use of funds have not necessarily provided an exhaustive list of the proposed utilization of funds raised. They, too, were excluded from the study. 

IPO fund use

 

That apart, several companies which have made these filings may not have gone in for the IPO yet, the note said, or are still in the process of doing so.

 

Fund deployment

 

Meanwhile, data on 189 IPOs where information is available show that the total amount to be raised through fresh equity was Rs 1.20 trillion, with another offer for sale (OFS) component being Rs 62,000 crore. Hence, the proposed fund-raising exercise was to garner Rs 1.82 trillion.

 

“This (OFS amount) is significant because when existing shareholders sell their stake, it could go as profit in their accounts and hence will not go to the company to meet its business plans,” the report said.

 

Of the Rs 1.2 trillion raised through fresh equity issuances, the largest portion — 29 per cent or Rs 34,441 crore — is being used to repay debt. "This is part of the deleveraging process where companies are going to market to raise funds, which are used for repaying debt," said Madan Sabnavis, chief economist, Bank of Baroda. 

 

The share of capex is a little more than a quarter, Sabnavis said, which would get linked to overall investment in the country that gets classified under capital formation. 

 

Other components like working capital, branding and lease payments account for around 12 per cent, while another quarter is not disclosed by the companies.

 

Looking ahead, Bhavesh Shah, managing director and head investment banking at Equirus Capital believes strong investor appetite for new-age and digital economy IPOs will continue. He expects capital raising via the primary market route to touch $20 billion in 2026.

 

"Large-size IPOs are setting new benchmarks and deepening market liquidity. That apart, democratisation of capital markets, driven by rising issuances from Tier-2 and Tier-3 cities will also keep the primary market buoyant in 2026," Shah said.