Objects of the issue: how IPO money must be spent and tracked

The objects of the issue are the purposes for which a company will spend the money it raises from selling new shares. They appear in a section of the draft red herring prospectus (DRHP) and the final offer document, each with an amount and, often, a timetable.

Only the fresh issue produces money for the company. In an offer for sale, existing shareholders sell and receive the cash, so it is not part of the objects. Typical objects include repaying debt, building a factory, funding research, marketing, buying technology and a catch-all line called general corporate purposes.

A recent live case: Atomberg Technologies' IPO plans to use up to ₹100 crore of the proceeds on research to enter new consumer categories and build components in-house.

It tells you what the money is for, and that decides whether new shares build the business or only repay old promises. A company that spends proceeds on a new plant is investing. A company that uses most of the money to repay loans is mainly cleaning its balance sheet.

It also shows what management thinks is the most useful way to spend cash, and the amounts show how much of the IPO depends on each plan. If a large share sits in an unspecified bucket, the reader learns less about what happens next.

The section is also a promise that can be checked later. Because the company must report on how the money was used, a reader can compare plan and result over the following quarters.

Founders and early investors also use the section to judge priorities. A line for research or technology suggests the company expects to compete on product, while a line for marketing suggests it expects to win through reach.

Most filings list the objects in a table with an estimated cost, the amount to be funded from the net proceeds, and the year of use. Net proceeds means the fresh issue amount minus the issue expenses paid by the company.

The lines below show the usual structure, not a real filing. Each line normally carries its own amount and the financial year in which the money will be used.

• Repayment or prepayment of borrowings: a stated amount.
• Capital expenditure on a plant or equipment: a stated amount.
• Research and product development: a stated amount.
• Sales and marketing: a stated amount.
• General corporate purposes: the remainder, subject to the cap.

General corporate purposes is the flexible line that covers working capital, small expenses and similar uses without a detailed plan. Under the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018, as of November 2026, the amount for this line is limited to 25% of the fresh issue size. Where a company also earmarks money for acquisitions without naming the target, the two together are limited to 35% of the proceeds, and the unidentified acquisitions line has its own limit.

The idea is to stop issuers from raising money with no clear reason. If a company wants a larger share for a specific purpose, it must describe that purpose in the offer document. These caps have been revised in the past, so check the current regulation text.

Companies sometimes argue that flexibility is useful, since plans change between filing and listing. The cap is a compromise: it leaves room for ordinary needs while forcing the main uses to be named. A reader can check the share quickly by dividing the general corporate purposes amount by the fresh issue size.

The cap applies to the amount stated in the offer documents, so a company cannot enlarge it later without following the process for varying objects.

For larger issues the company must appoint a monitoring agency, a scheduled commercial bank or other eligible institution that is not connected to the issuer. As of November 2026, the mandatory threshold under the ICDR rules is a fresh issue above ₹100 crore, and SEBI has floated proposals to change it, so confirm the figure currently in force.

The agency reviews how the proceeds are used and files a report with the company each quarter. The company's audit committee reviews that report, and the report is shared with the stock exchanges. The listing rules, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, require a statement of any deviation from the stated objects.

Until the money is spent, it may only be parked in specified safe places such as scheduled bank deposits, so it cannot be moved into riskier assets.

Auditors and the exchanges also look at the periodic statements. If a company shows unused money, the filing must say where it is parked and when it is expected to be used. If it spends money on something not listed, it must explain the deviation and the reasons.

Yes, but not freely. Under section 27 of the Companies Act 2013, a company that raised money through a prospectus can vary the objects only with a special resolution of shareholders passed by at least 75% of votes cast. Shareholders who object must be offered an exit, and the notice must be published in newspapers.

The change is also disclosed to the stock exchanges. Repeated or large changes are a warning sign that the original plan was weak, so the reader should look at how often a listed company has revised its objects.

An IPO often has two parts. The fresh issue creates new shares and the company receives the money, which is why it needs objects. The offer for sale lets existing holders such as founders and venture funds sell, and they receive the money.

A filing can be mostly one or the other. A large offer for sale with a small fresh issue means most of the cash goes to sellers, and the objects section will look short. Readers should compare the two parts before judging how much new money the business gets.

A few patterns call for a second look. Most of the money goes to repaying loans taken from the promoters or related parties. The general corporate purposes line is close to the permitted cap. The capex numbers lack supplier quotes or timelines. Or several lines sound the same and add up to a figure far from the cost estimate.

None of these proves a problem. They are reasons to read the filing's risk factors and the monitoring reports after listing. Rules and thresholds change, and this guide is not investment or legal advice; confirm with a professional.