Initial Public Offerings (IPOs) have always stirred excitement among Indian investors, sparking hopes of quick profits and market buzz that make them appear as an easy path to wealth. However, CA Abhishek Walia, co-founder of Zactor Money, points out that the reality differs significantly from this optimistic facade.
In a recent LinkedIn post, Walia recounted a client’s question, “Are IPOs truly the simplest way to profit in the stock market?” His response challenged the common perception surrounding IPO investments.
“While IPOs may seem like a promising avenue with their potential for rapid gains and market excitement, the truth is often far from the glamorous image they portray,” Walia emphasized.
Highlighting the discrepancy between perception and reality, Walia shared insights on the utilization of IPO funds in the Indian market. He revealed that out of the staggering Rs 5 lakh crore raised through IPOs over the past five years, a substantial portion, approximately Rs 3.3 lakh crore, did not contribute to new ventures or industrial development. Instead, this capital primarily served as an exit strategy for promoters and private equity stakeholders.
Walia’s analysis further exposed the allocation of IPO proceeds, indicating that only a fraction of the raised funds were directed towards plant and machinery, working capital, and debt repayment. The disparity between the publicized success of IPOs and their actual impact on company growth became evident.
Even the Reserve Bank of India (RBI) acknowledged this trend, noting a subdued investment climate in project financing despite the exuberance in the stock market. The discrepancy between market enthusiasm and tangible industrial advancements underscored the prevalent practice of using IPOs as a means for investors to exit rather than fostering genuine business growth.
Walia also shed light on the evolving dynamics of IPO performance, citing a decline in returns from recent offerings. While 41% of IPOs in 2024 yielded returns exceeding 25%, this figure plummeted to 15% in 2025, with a significant portion of IPOs since 2021 listing below their issue prices.
In essence, Walia emphasized that the success or failure of IPOs hinges on the underlying intentions driving these offerings. When IPO funds are channeled into expanding operations and enhancing infrastructure, it fortifies the economy and benefits all stakeholders. Conversely, when IPO proceeds primarily facilitate early investors’ exits, retail investors might bear the brunt of such strategies.
Concluding his analysis, Walia asserted that India’s IPO surge reflects a monetization of confidence rather than a definitive signal of sustainable growth. Only when IPO objectives shift from facilitating exits to driving expansion will the true beneficiaries emerge, reshaping the landscape for both issuers and investors.