Tech, cloud and data infrastructure dominate India’s Q1 IPO capex as investors focus on returns

The change is not being driven only by a handful of technology listings, though they are part of the mix. Recent Q1 IPOs such as Amagi Media Labs, Shadowfax and Fractal Analytics have naturally tilted capital allocation towards digital infrastructure. But experts say the pattern is spreading beyond pure-play tech issuers.

From late 2025, a growing number of IPO-bound companies, including Urban Company, Pine Labs, PhysicsWallah, Capillary Technologies and Meesho, have begun explicitly earmarking funds for technology platforms, cloud capabilities and data infrastructure as core use of proceeds, Uniqus' Raghuram told Mint.

“What was once occasional is quietly becoming standard practice, driven both by the profile of companies now entering public markets and the growing strategic importance of digital infrastructure across industries,” he said.

Shifting investor lens

The second driver is how investors now evaluate capital itself. IPO bankers say the market has shifted away from treating physical expansion as the primary signal of growth.

“The market is no longer rewarding capacity creation alone,” said Aakash Agrawal, associate director at Anand Rathi Investment Banking. “It is rewarding scalability, operating leverage, predictability and capital efficiency. Technology investments are now directly linked to all four.”

The implication is widening beyond tech-heavy sectors. Financial services, retail, manufacturing, healthcare and logistics are increasingly embedding software systems, data architecture, cloud infrastructure and automation into their growth strategies, Agrawal added.

Regulation is also shaping how this capital is labelled and deployed. Securities and Exchange Board of India rules restrict the use of IPO proceeds for unidentified acquisitions and general corporate purposes to 35% of the issue size, pushing issuers to define specific operational uses, which often include technology investments.

At the same time, the IPO pipeline itself is shrinking in size. According to Prime Database, the average mainboard IPO in Q12026 raised about ₹1,043 crore, down roughly 40% from about ₹1,750 crore a year earlier, reflecting continued market volatility and more selective issuance.

Against that backdrop, investors are tightening scrutiny over what IPO capital is actually expected to deliver.

Agarwal said that till at least 2024, capex was largely visible in the form of factories, warehouses or physical expansion. Today, a significant part of competitive advantage sits inside invisible infrastructure like cloud systems, automation layers, proprietary data systems, customer acquisition engines and AI-led workflows. “In many cases, these investments improve margins and scalability, thereby complementing traditional brick-and-mortar expansion.”

Experts agree that institutional investors are increasingly scrutinizing whether a company's capex strategy improves long-term efficiency and return on capital, rather than simply expanding physical footprint. Purely asset-heavy expansion stories without clear technology-enabled productivity layers are becoming harder to justify at premium valuations, they said.

"Investors today have a mature understanding of digital businesses, and valuation premiums are being driven not by technology spend in isolation, but by clear evidence that these investments improve unit economics," Agrawal said, adding that digital infrastructure has transitioned from a sectoral trait to a baseline expectation for market entrants.

Agnidev Bhattacharya

Agnidev is a business journalist with over two years of reporting experience tracking the intersection of capital, policy, and corporate strategy in India.He joined Mint in December 2025, after a stint at NDTV Profit (erstwhile BQ Prime). At Mint, Agnidev focuses on the high-stakes world of the Indian capital market, specialising in mergers and acquisitions, burgeoning IPOs, and the investment banking industry.Backed by a rigorous, data-driven approach, Agnidev frequently breaks news on the valuation cycles, deal pipelines and listing strategies of India’s most prominent companies. His reportage offers deep dives into the operational health of market leaders across the corporate landscape, providing readers with a clear-eyed view of institutional growth.He has reported on major issues like India's derivatives frenzy, IPO froth, the competitive quick commerce industry, the real-money gaming ban, and has broken investigative stories related to scandals such as IndusInd Bank's accounting manipulation and the Gensol-BluSmart fiasco.As a reporter, he brings stories that ultimately affect your stock market investments, and tries to bring clarity and brevity in a field that is often filled with jargon and noise.