Public share offers aren’t raising much capital for new ventures

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Subscribe to enjoy similar stories. Last week, Hyundai Motor India raised close to ₹28,000 crore through its initial public offering (IPO). Data from Prime Database suggests that as of 17 October, 42 IPOs had raised more than ₹78,000 crore during 2024-25.

With the exception of 2017-18, when ₹81,553 crore was raised by companies through IPOs, and 2021-22, when over ₹1.1 trillion was raised, this is the highest amount ever with more than five months left for the financial year to end. Of course, these are absolute numbers and don’t take the size of the Indian economy into account. Historically, IPOs have typically been seen as a way for companies to sell the public new shares in order to raise money to finance new investments and expand their business.

As Satyajit Das writes in The Age of Stagnation: “Stock markets are designed to facilitate capital raisings for investments [in] projects." Or, as John Kay writes in Other People’s Money: “The first companies to obtain listings on modern markets were companies like railways and breweries, with large requirements for capital for very specific purposes. Building a railway is expensive, and once you have built it the only thing you can do with it is run trains. You cannot use a brewery except to brew beer." But that’s history.

In 2024-25, a major chunk of the funds raised so far through IPOs in India came from offers for sale. In an offer for sale, no new shares are issued; it is the promoters of companies and their existing large investors who sell their shares to the public. In fact, all the funds raised through Hyundai Motor India’s IPO came from an offer for sale.