Companies are primarily using funds raised through fresh equity issuance to repay existing debt, followed by allocation for capital expenditure, according to a study by Bank of Baroda of over 200 filings with the market regulator between April and October 2025.
The report stated that of these filings with the Securities and Exchange Board of India (Sebi) — covering both funds already raised in FY26 and future intent — 189 companies provided clear data on the purpose of the fund-raising.
It also studied draft offer and red herring documents filed with the Registrar of Companies to ascertain the purpose of the issue.
The report found that some companies did not provide fund deployment information, as the issue amount was not known at the time of filing of Initial Public Offering (IPO)/ Follow-on Public Offering.
Bank of Baroda excluded several companies from the study for this reason.
Some companies gave the purpose of the funds but not exhaustively and they, too, were excluded. Several companies that made filings may not have gone in for IPOs or are in the process.
Fund deployment
Data from 189 IPOs where information is available shows the proposed fundraising exercise totals Rs 1.82 trillion, split between Rs 1.20 trillion from fresh equity and Rs 62,000 crore from the offer-for-sale (OFS) component.
“This (OFS amount) is significant because when existing shareholders sell their stake, it could go as profit in their accounts and hence will not go to the company to meet its business plans,” the report said.
Of the Rs 1.2 trillion raised through fresh equity issuances, the largest portion — 29 per cent or Rs 34,441 crore — is being used to repay debt.
“This is part of the deleveraging process where companies are going to market to raise funds, which are used for repaying debt,” said Madan Sabnavis, chief economist, Bank of Baroda.
Sabnavis said that the share of capex in fund use is a little more than a quarter and it will get linked to overall investment in the country that gets classified under capital formation.
Other components like working capital, branding and lease payments account for around 12 per cent, while another quarter is not disclosed by the companies.
Bhavesh Shah, managing director and head of investment banking at Equirus Capital, said strong investor appetite for new-age and digital economy IPOs will continue.
He expects capital raising via the primary market route to touch $20 billion in 2026.
"Large-size IPOs are setting new benchmarks and deepening market liquidity.
"That apart, democratisation of capital markets, driven by rising issuances from Tier-II and Tier-III cities will also keep the primary market buoyant in 2026," Shah said.
© 2025