The current hype around IPOs is at its peak. Every other issue is getting massive subscriptions, and the recent example of Meesho’s 82-times subscription clearly shows that investors are highly active in the IPO market. While many believe that these new-age companies have strong future potential and that the money raised through IPOs will go toward expansion and capex to support long-term growth, the actual numbers tell a different story.
Data shows that companies are using only 26% of their fresh equity for capex. This raises an important question for investors who assume they are backing a genuine growth story. It is worth understanding where IPO proceeds are truly being allocated and how companies are utilising the funds raised this fiscal year. Let us break it down.
What’s Happening?
According to the latest research by Bank of Baroda, out of the Rs 1.82 lakh crore planned to be raised, 66% is through fresh equity, while the remaining amount is via offer for sale (OFS), which benefits existing shareholders, not the company.
Within the fresh equity portion, only 26% is being directed toward capital expenditure. A larger share is going toward cleaning up balance sheets. About 29% is allocated to debt repayment, 9% to investments in subsidiaries, and 6.2% for working capital needs. Interestingly, nearly 24.5% of the funds do not have a clearly declared purpose.
The study covers 189 companies that have either tapped the equity market this year or filed draft red herring prospectuses, highlighting how most IPO-bound firms are prioritising financial restructuring over business expansion.
IPO Market in 2025
The IPO market in 2025 has seen a sharp rise in activity. According to Prime Database, in the first seven months of FY25, 96 companies raised Rs 1.25 lakh crore through IPOs, FPOs, and OFS. For the full fiscal year, IPOs alone touched Rs 2.11 lakh crore across 105 companies, marking a new record.
Breakdown of IPO Proceeds Deployment (Shared PIE Chart for Creative)
| Heading | Share |
| Capital Expenditure | 25.9% |
| Investment in Subsidiaries | 9.1% |
| Lease Payments | 1.9% |
| Branding/Marketing | 3.6% |
| Working Capital | 6.2% |
| Repayment of Debt | 28.8% |
| Balance Not Disclosed | 24.5% |
This surge becomes clearer when compared with past trends. In the five years ending FY25, companies raised Rs 5.66 lakh crore, slightly higher than the Rs 5.64 lakh crore raised in the 15 years from FY05 to FY20. The momentum in IPOs aligns with strong secondary market sentiment, where the Nifty 50 delivered a cumulative return of 123%, almost double the 62.6% return recorded in the previous decade.
Bank of Baroda’s chief economist Madan Sabnavis notes that understanding why companies are raising fresh capital is crucial. Unlike the secondary market, where shares simply change hands, new capital raised through IPOs is usually tied to investment plans and long-term strategies.
Start-ups Shift Focus – From Large Funding Rounds to IPOs
Amid the ongoing IPO buzz, many start-ups are looking toward public markets instead of pursuing large private funding rounds. VC funds remain active, but most transactions are happening in the small and mid-sized bracket, under $50 million. Deals above $100 million are now mostly coming as pre-IPO rounds, such as Zepto’s $450 million raise and Infra.Market’s nearly $200 million funding.
Deal trends clearly reflect this shift. According to Venture Intelligence, big-ticket deals above $100 million fell to $2.5 billion this year from $3.7 billion last year. Meanwhile, deals in the $10–$50 million range increased to $3.8 billion from $3.5 billion.
With investor appetite strong in public markets, start-ups are reassessing their funding strategy. Many are choosing IPOs for growth capital and shareholder liquidity, even at sub-unicorn valuations, as seen with Urban Company’s $215 million listing.
What’s in It for Investors?
For investors, the current IPO wave brings both opportunities and caution. On one side, the surge in listings and strong sentiment offer more chances to invest in new-age businesses that are finally choosing public markets over large private rounds. With more start-ups going public at realistic valuations, investors get access to companies earlier in their growth journey, something previously limited to large VC funds.
At the same time, the data shows that companies are using only a small portion of their IPO proceeds for capex. A significant share is being directed toward debt repayment, working capital, and shareholder exits. This means investors need to look beyond the growth narrative and carefully assess how the funds raised will actually benefit the business.
What’s Next?
The primary market is set to remain active, with 13 IPOs opening this week from December 8 and 11 new companies preparing to make their market debut. Together, these issues aim to raise more than Rs 14,700 crore, mostly from the mainboard. The SME segment will also be busy, with eight smaller public issues adding to the momentum.
If the end of 2025 feels explosive, early 2026 could be even bigger. Estimates by Equirus Capital suggest that India may see nearly $20 billion worth of new listings next year. The pipeline includes heavyweight names such as Jio, NSE, SBI Mutual Fund, OYO, PhonePe, and Flipkart, potentially creating one of the busiest listing calendars in India’s history.
If December deals go through as expected, 2025 will not only surpass 2024 by a wide margin but will also place India among the most active primary markets globally.
*The companies mentioned in the article are for information purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
