The price of purpose: An empirical study of “use of proceeds” in Indian IPOs

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Abstract

Companies going public are mandated by the Securities and Exchange Board of India (SEBI) to disclose the purpose for which the funds are being raised. However, it is unknown if such disclosure is actually being used by investors in India while making decisions regarding the price. The study tries to understand the value of such information to investors. This study investigates the impact of disclosed use of offer proceeds on the issue price and listing price, thereby providing a more comprehensive understanding of price formation in the primary market. Utilizing a sample of 195 initial public offerings (IPOs) issued between 2010 and 2021, we examine the impact of the intended use of proceeds disclosure on the offer price and the average listing price. To empirically investigate our hypotheses, we first apply principal component analysis to consolidate the various use-of-proceeds disclosures into five factors and then estimate their impact on the offer price and list price using multivariate ordinary least squares (OLS) regression models with appropriate control variables. The findings suggest that allocations for capital expenditure and debt repayment are positively associated with higher prices. When funds are intended for capital expenditure and debt repayment, the offer price and the average list price are higher. In contrast, using proceeds for working capital, advertising, business promotion, and general corporate purposes shows no significant influence. While prior studies have primarily focused on initial returns, this study uniquely analyzes how specific categories of fund utilization influence IPO pricing, specifically, the offer and list prices, in the Indian capital market.

Keywords: Use of Proceeds, Subscription Rate, List Price, Issue Price

Authors’ individual contribution: Conceptualization — S.S and V.S.; Methodology — S.S and V.S.; Software — S.S and V.S.; Validation —S.S.; Formal Analysis — S.S. and V.S.; Investigation — S.S. and V.S.; Resources — S.S.; Data Curation — S.S.; Writing — Original Draft — S.S.; Writing — Review & Editing — V.S.; Visualization — S.S. and V.S.; Supervision — S.S. and V.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G14, G24, G32

Received: 16.10.2025
Revised: 18.11.2025; 10.12.2025
Accepted: 15.12.2025
Published online: 17.12.2025

How to cite this paper: Sahoo, S., & Saxena, V. (2025). The price of purpose: An empirical study of “use of proceeds” in Indian IPOs. Corporate Ownership & Control, 22(4), 123–132. https://doi.org/10.22495/cocv22i4art11