New Delhi: India loves a good boom. And few booms excite policymakers, investors and television anchors quite like an IPO wave. It signals confidence, ambition, animal spirits — a belief that corporate India is gearing up for its next big leap.
The problem with the current cycle, however, is painfully simple: the money being raised isn’t actually building much. For all the noise and record-breaking issuance, a surprisingly thin sliver of IPO proceeds is going into creating new capacity or future growth engines.
The data is the giveaway. This fiscal year, companies filing for IPOs plan to raise about Rs 1.82 lakh crore. On paper, it looks like a spectacular endorsement of India’s economic prospects. But study the fine print — particularly the deployment plans tucked away in draft offer documents — and the shine fades quickly.
Only about 16–17 per cent of this total pool is headed toward capital expenditure. That’s it. The remaining 83–84 per cent is being used to reduce debt, finance working capital, cover branding costs or, most commonly, hand existing shareholders a handsome exit.
That number should give policymakers pause.
India is supposedly in the early innings of a once-in-a-generation capex cycle — a private-sector investment revival that the government has been waiting for ever since public capex began carrying the load. Yet when public markets are pouring unprecedented liquidity into companies, those companies are using the opportunity not to expand capacity but to clean up old balance-sheet baggage. It is pragmatic, yes. But it is not transformative.
The scale of the IPO boom itself is undeniable. In the first seven months of the fiscal year, the market saw Rs 1.25 lakh crore raised through IPOs, FPOs and offers for sale. FY25 had already smashed all records with Rs 2.11 lakh crore. In fact, the five years leading up to FY25 saw issuances of Rs 5.66 lakh crore — more money raised in half a decade than in the entire fifteen-year period before that.
The boom is riding on a buoyant secondary market in which the NIFTY delivered a blazing 123 per cent cumulative return over five years. Investors are flush, promoters are emboldened, and valuations are rich enough to tempt many firms to go public earlier than they otherwise would have.
But buoyancy alone does not build economies.
And the troubling question is whether India’s IPO surge is simply riding the liquidity wave without contributing meaningfully to this much-celebrated investment cycle.
A closer analysis of 189 draft and red herring prospectuses by the Economics Research Department, Bank of Baroda offers a clearer — and more sobering — picture.
These filings show companies planning to raise Rs 1.20 lakh crore as fresh equity. The other Rs 62,000 crore will come from offers for sale. That split is meaningful. It means fully one-third of the total IPO haul is not entering companies at all.
It is going directly into the pockets of promoters, private equity funds and early-stage investors.
One may argue that offering liquidity to early backers is part of a well-functioning market. True. But when such exits dominate fresh fund-raising cycles, the IPO market becomes less a tool of productive capital creation and more a conveyor belt for investor churn.
Even the fresh capital that companies retain leans heavily away from growth and toward deleveraging. The largest disclosed use of funds is debt repayment — almost 29 per cent of the fresh equity pool. Nearly a third of the total proceeds is going to pay down old loans. Again, prudent.
But hardly the kind of spending that generates jobs, output or innovation.
Capital expenditure — the holy grail of growth — accounts for just 26 per cent of the fresh equity raised. Once the OFS component is factored in, this translates to barely 16–17 per cent of total IPO mobilisation. For an economy chasing high-single-digit growth, that is a remarkably anaemic figure.
Working capital, branding and lease payments together take up about 12 per cent. And the most worrying category of all — “not disclosed” — accounts for nearly a quarter of planned usage.
That opacity may be legal at the draft stage, but it does little for investors trying to assess whether they are funding expansion or just financial housekeeping.
This disconnect — between the scale of fund-raising and the modestity of productive deployment — is more than a statistical curiosity. It speaks to the heart of India’s growth narrative.
The government has spent the past four years driving the investment engine almost single-handedly through giant publicly funded capex projects. The hope, bordering on insistence, has been that private corporate capex will eventually step forward and shoulder its share of the burden.
Yet what we are witnessing is something very different: corporate India using the best capital-raising window in years to deleverage rather than to expand.
This is not irrational behaviour. Companies burned by the balance-sheet crisis of the pre-pandemic years remain cautious. Many industries — from textiles to metals to real estate — still feel the aftershocks of demand volatility. Promoters want to avoid repeating the mistakes of the previous capex binge, where aggressive borrowing met uncertain revenue streams.
But caution, when aggregated across the corporate sector, produces a collective investment shortfall. And India is beginning to feel that shortfall.
Consumption is patchy, exports remain under pressure, and the manufacturing push has not yet found its stride. Without a strong private investment surge, sustaining high growth will get progressively harder.
And the IPO boom could have been that spark — a deep pool of relatively cheap equity capital ready to underwrite the next wave of factories, supply chains, green-tech transitions, and digital expansion. Instead, the opportunity is being used as a refinancing window.
What is more, a market driven by liquidity tends to blur the difference between “healthy deleveraging” and “opportunistic valuation capture.”
When promoters sell large stakes into a hot market while allocating only a slim fraction of proceeds to growth, it raises an uncomfortable question: Are companies themselves signalling that business opportunities are not compelling enough to justify aggressive capex?
Investors, too, have a role here.
In a euphoric market, the discipline of asking tough questions about deployment tends to loosen. If IPOs are oversubscribed by retail investors who treat them as a lottery ticket, and institutional investors view them as index-rebalance exercises, issuers have little incentive to commit more transparently to productive usage.
None of this is an argument against IPOs.
A thriving primary market is a sign of economic vitality. India needs more companies tapping equity rather than debt, more investors participating in value creation rather than chasing speculative fads. Deleveraging is healthy. Shareholder exits reflect a maturing capital ecosystem.
But a record IPO cycle that produces only a trickle of new investment is not a win. It is a missed opportunity — especially for an economy that needs large, sustained capital expenditure to maintain momentum.
If the bulk of IPO proceeds are not going into building capacity, then the public markets are not playing the developmental role they are often credited with.
The lesson is not to shut the window but to use it better. Regulators may need to tighten disclosure norms on fund deployment.
Investors need to demand greater clarity on how their money will create value. And companies must recognise that capital raised in a bull market still carries an obligation — not just to shareholders but to the larger economy.
Booms do not last forever. When the tide turns, what remains are the assets built, the capacity created and the productivity unlocked. India’s current IPO frenzy is impressive to watch.
But unless more of that capital is channelled into concrete, steel, technology and innovation, the glow will fade quickly — leaving behind cleaner balance sheets, yes, but not the high-growth future we keep expecting them to deliver.