Rs 1.8 lakh crore IPO rush: Guess where the money is really going

India's IPO Market Sees Surge in Capital Expenditure

India's IPO market has entered a golden phase, with a renewed thrust on capital expenditure across sectors and aggressive debt payments. This surge has led to a significant deployment of fresh capital, shaping the next investment cycle.

Fresh Equity Raising Hits Rs 1.20 Lakh Crore

An analysis by BOB Economic Research found that 189 IPOs have proposed a total amount of Rs 1.20 lakh crore through fresh equity, with another offer for sale component of Rs 62,000 crore. This results in a proposed fundraising exercise of Rs 1.82 lakh crore.

Breakdown of Proposed Fundraising:

• 66% through Fresh Offer: This means that out of the Rs 1.82 lakh crore, 66% will be raised through a fresh offer.
• Balance through OFS: The remaining amount will be allocated to existing shareholders through the Offer for Sale (OFS) component.

Debt Repayment and Capital Expenditure Lead the Deployment List

The highest share of the deployment list is repayment of debt, which is 29% (Rs 34,441 crore). This is part of the deleveraging process where companies are going to market to raise funds which are used for repaying debt.

• Repayment of Debt: 29% (Rs 34,441 crore)
• Capital Expenditure: 26% (Rs 31,058 crore)

The allocation of capital expenditure becomes even more relevant in the current macro environment, where private sector capex has remained cautious despite strong balance sheets.

Other Allocation Breakdown:

• Investment in Subsidiaries: 9.1% (not yet disclosed)
• Lease Payments: 1.9% (not yet disclosed)
• Branding and Marketing: 3.6% (not yet disclosed)
• Working Capital: 6.2% (not yet disclosed)

Five-Year Analysis:

The quinquennium ending FY25 witnessed an issuance of Rs 5.66 lakh crore by 413 companies. This is marginally lower than the cumulative amount raised from FY05 to FY20, which was Rs 5.64 lakh crore. This indicates a major boom in the IPO market of late.