Only 26% Of IPO Proceeds Go Into Capex, Bulk Used For Debt Repayment: Report

Bank of Baroda Study Reveals IPO Proceeds Allocation

According to a study by Bank of Baroda chief economist Madan Sabnavis, around a quarter of the funds raised through initial public offerings (IPOs) is being channelled into capital expenditure, while the bulk is going toward debt repayment, investments in subsidiaries and working capital reduction.

Breakdown of Equity Offering Proceeds

• 26%: Capex - funds earmarked for capital expenditure
• 29%: Debt Repayment - funds allocated for debt repayment
• 9%: Investments in Subsidiaries - funds invested in subsidiaries
• 6.2%: Working Capital Reduction - funds used to reduce working capital
• 24.5%: Unspecified - funds allocation not specified

The analysis covers 189 IPOs comprising companies that either tapped the equity markets this fiscal year or have filed draft red herring prospectuses.

Equity Raising and Fund Utilization

• Rs 1.82 lakh crore: Total Amount to be Raised - the total amount of funds expected to be raised through IPOs
• 66%: Fresh Issue - the proportion of funds to be raised through fresh issue
• 34%: Offer for Sale (OFS) - the proportion of funds to be raised through OFS

Impact of IPO Market Boom

The study highlights the recent surge in the IPO market, with data showing that during the first seven months of FY25, 96 companies together raised Rs 1.25 lakh crore through FPOs, IPOs and OFS.

• Rs 2.11 lakh crore: Record IPO Fundraising - the record amount raised through IPOs in FY25
• 105 Companies: Number of Companies Tapping the Market - the number of companies that tapped the IPO market in FY25
• Rs 5.66 lakh crore: Total Equity Issuance (FY05-FY25) - the total amount of equity issued by companies over the five-year period ending FY25
• 123%: Cumulative Return of Nifty 50 - the cumulative return of the Nifty 50 over the secondary market