India’s IPO Boom Is Dazzling — But What Exactly Are We Building?

For all the noise and record-breaking issuance, a surprisingly thin sliver of IPO proceeds is going into creating new capacity or future growth engines

- R SURYAMURTHY

India loves a good boom. And few booms excite policymakers, investors and television anchors quite like an IPO wave. It signals confidence, ambition, animal spirits —abelief that corporate India is gearing up for its next big leap.

The problem with the current cycle, however, is painfully simple: the money being raised isn't actually building much. For all the noise and record-breaking issuance, a surprisingly thin sliver of IPO proceeds is going into creating new capacity or future growth engines.

‘The data is the giveaway. ‘This fiscal year, companies filing for IPOs plan to raise about Rs 1.82 lakh crore. On paper, it looks like a spectacular endorsement of Indias economic prospects. But study the fine print — particularly the deployment plans tucked away in draft offer documents — and the shine fades quickly.

Only about 16-17 per cent of this total pool is headed toward capital expenditure. That's it. The remaining 83-84 per cent is being used to reduce debt, finance working capital, cover branding costs or, most commonly, hand existing shareholders a handsome exit. That number should give policymakers pause.

India is supposedly in the early innings of a once-in-a-generation capex cycle — a private-sector investment revival that the government has been waiting for ever since public capex began carrying the load. Yet when public markets are pouring unprecedented liquidity into companies, those companies are using the opportunity not to expand capacity but to clean up old balance-sheet baggage. It is pragmatic, yes. But it is not transformative.