General Corporate Purposes in an IPO: The 25% Cap and Why Vague Objects Matter

Every IPO prospectus has a section called “Objects of the Issue”, and near the bottom of that table there is usually a line that says general corporate purposes. In an IPO, this is the money the company is raising without tying it to a specific project, loan or purchase. SEBI lets companies keep some of that flexibility, but only up to a limit, and how close a company goes to that limit tells you a fair bit about how well it has planned the use of your money.

We’ll go through what the rules actually say, using the text of the SEBI ICDR Regulations, 2018 (as amended up to March 21, 2026), and then work through a made-up example so the percentages feel real.

What “general corporate purposes” means in an IPO

The ICDR Regulations define the term in regulation 2. Put simply, general corporate purposes covers two kinds of money in the offer document:

• identified purposes for which no specific amount has been allocated, and
• any amount set aside for “general corporate purpose” or for any similar purpose, whatever the company chooses to call it.

That second part matters. A company can’t dodge the definition by renaming the line “strategic initiatives” or “business growth”. If the money has no specific job, the label doesn’t change what it is.

There is one carve-out written into the definition. Issue-related expenses are not treated as general corporate purposes just because no specific amount was allocated to them. So the bankers’ fees and listing costs don’t get counted against the cap simply because the draft document left them unquantified.

If you are new to reading this part of the document, our guide to the objects of the issue in an IPO covers the whole table. This post zooms in on the one line most investors skip.

The 25% cap on main board IPOs

For an initial public offer on the main board, regulation 7(2) says the amount for general corporate purposes, as stated in the objects of the issue in the draft offer document and the offer document, shall not exceed 25% of the amount being raised by the issuer.

Note the base. It is the amount raised by the issuer, which is the company’s own fresh issue. In an offer for sale, existing shareholders are selling their shares and the money goes to them, not to the company, so there is nothing there for the company to allocate in the first place.

The same 25% ceiling shows up elsewhere in the regulations too. The further public offer chapter (Chapter IV) carries a 25% cap worded the same way, and so does the chapter on initial public offers of Indian Depository Receipts.

A quarter of the issue with no named purpose is the outer edge SEBI allows, not a target. The tighter a company plans, the less of its money sits in that line.

The 35% combined limit with unidentified acquisitions

Here is where it gets a little more involved. A SEBI amendment that took effect on January 14, 2022 added regulation 7(3) for main board IPOs. It looks at two buckets together:

1. general corporate purposes, and
2. objects where the company has not identified the acquisition or investment target.

The two together cannot exceed 35% of the amount being raised by the issuer. And within that, the money for unidentified acquisitions or investments on its own cannot exceed 25%.

There is an escape hatch. These limits do not apply if the company has actually identified the proposed acquisition or strategic investment and made suitable specific disclosures about it in the draft offer document and the offer document when it files them. In other words, SEBI is relaxed about acquisition money when you name the target. It is the “we’ll find something to buy later” money that gets capped.

We’d read this as SEBI closing a gap. Before the combined limit, a company could keep 25% for general purposes and park a large separate slice under a broad acquisitions line with no named target. Both were blank cheques in practice. Now they share a ceiling.

SME IPOs have a much tighter limit

Small and medium enterprise IPOs sit under Chapter IX of the ICDR Regulations, and the rule there is stricter. Regulation 230(2), after an amendment effective March 8, 2025, says the general corporate purposes amount shall not exceed 15% of the amount being raised by the issuer or ₹10 crore, whichever is less. Before that amendment, the SME figure was 25%.

The “whichever is less” part is the bit people miss. For any SME issue where the fresh money raised is above roughly ₹66.7 crore (₹10 crore divided by 15%), the ₹10 crore figure becomes the binding limit. Below that, the 15% does.

The SME chapter also has the same 35% combined test for general corporate purposes plus unidentified acquisitions, inserted with effect from January 14, 2022.

SME issues already carry other differences, like the market maker requirement, so it’s worth reading the SME offer document with its own rulebook in mind rather than assuming main board norms.

One platform where the cap doesn’t apply

The Innovators Growth Platform is an exception. It has its own chapter, Chapter X of the ICDR Regulations. Regulation 282(2) says sub-regulation (2) of regulation 7, the restriction on the amount of general corporate purposes, does not apply to issuers listing under that chapter. The same regulation says the platform is accessible only to institutional and non-institutional investors. So a retail investor applying in a regular main board IPO won’t run into this exception, but it explains why you might see a different pattern in those listings.

A worked example with made-up numbers

Let’s take a hypothetical company, XYZ Engineering Ltd, planning a main board IPO. All numbers below are invented for illustration and don’t refer to any real issue.

XYZ’s IPO has two parts: a fresh issue of ₹1,000 crore and an offer for sale of ₹600 crore by its private equity backer. The total issue size is ₹1,600 crore, but the base for the general corporate purposes cap is the ₹1,000 crore XYZ itself is raising.

Now three possible objects tables XYZ might file:

Plan A. ₹500 crore to repay term loans, ₹300 crore for a new plant, ₹200 crore for general corporate purposes. GCP is 20% of ₹1,000 crore, under the 25% cap. There’s no unidentified acquisition line, so the combined test is also met (20% against 35%). This passes.

Plan B. ₹400 crore for loan repayment, ₹250 crore for the plant, ₹150 crore for general corporate purposes and ₹200 crore for “inorganic growth through acquisitions” with no target named. GCP alone is 15%. Unidentified acquisitions alone are 20%, under 25%. Together they are ₹350 crore, which is exactly 35%. It sits right on the line, so it passes, but only just.

Plan C. ₹350 crore for loan repayment, ₹200 crore for the plant, ₹200 crore for general corporate purposes and ₹250 crore for unnamed acquisitions. GCP is 20% and unidentified acquisitions are 25%, so each passes on its own. But together they are ₹450 crore, or 45%, well above the 35% combined limit. This plan fails. XYZ would have to either cut those lines or name its acquisition target and disclose it properly, at which point the limits wouldn’t apply to that acquisition object.

Now flip it to an SME. Say ABC Components Ltd is raising ₹40 crore through a fresh issue on an SME platform. 15% of ₹40 crore is ₹6 crore, which is less than ₹10 crore, so the cap is ₹6 crore. If another SME issuer raises ₹90 crore, 15% would be ₹13.5 crore, but the ₹10 crore figure is lower, so ₹10 crore is the cap. The bigger the SME issue, the smaller the GCP slice gets as a percentage.

Who keeps an eye on the money after listing

A cap at the filing stage is only half the story. The other half is what happens to the money after the shares list.

Under regulation 41, if the issue size, excluding the offer for sale portion, is more than ₹100 crore, the issuer must have the use of proceeds monitored by a credit rating agency registered with SEBI. There is an exemption for issues by banks, public financial institutions and insurance companies. The monitoring agency reports to the issuer every quarter in the format in Schedule XI until 100% of the proceeds have been used. The board and management have to give their comments on its findings, and the company has to publish the report on its website and file it with the stock exchanges within 45 days of the end of each quarter.

Since a 2022 amendment, the Schedule XI format includes a separate section for the details of how the amount stated as general corporate purposes in the offer document was actually used. So the “vague” money doesn’t stay vague forever. It shows up, quarter by quarter, in a document you can read. We’ve written a separate guide on how to read a monitoring agency report.

The objects table tells you what the company promised. The monitoring agency report tells you what it did. Reading both is where the real picture comes from.

And if a company later wants to change the objects stated in its offer document, regulation 59 requires the promoters or controlling shareholders to give dissenting shareholders an exit offer, as provided for in the Companies Act, 2013, in the manner set out in Schedule XX. That exit route doesn’t apply where the company has no identifiable promoters or controlling shareholders.

Why vague objects matter to you as an applicant

None of this means a big general corporate purposes line is a red flag by itself. Businesses do need some cash that isn’t locked into a project. A company that hasn’t decided between two expansion options may honestly prefer to keep flexibility rather than invent precise numbers.

Still, a few practical observations hold up when we read offer documents:

• Check how close it is to the ceiling. A GCP line at 5% of the fresh issue and one at 24% say different things about how settled the company’s plans are.
• Add GCP and unnamed acquisition lines together. That combined number is what SEBI tests, and it’s the real measure of how much of the money has no named destination.
• Look at the base. A headline issue size of ₹1,600 crore with a ₹1,000 crore fresh issue means the company gets ₹1,000 crore. Percentages should be read against that.
• Follow up after listing. If the issue is above ₹100 crore excluding the OFS, there will be monitoring agency reports. If the GCP money is spent in ways that seem far from the core business, that’s worth noticing.
• For SMEs, remember the ₹10 crore ceiling. An SME document showing more than that under general corporate purposes would not fit the current rule.

SEBI’s own FAQ on public issues describes the monitoring agency as the intermediary appointed to oversee how proceeds raised through public issues such as an IPO or FPO are used. It’s a short and readable document if you want the regulator’s plain-language version of how the IPO process fits together.

Quick recap of the numbers

• Main board IPO: general corporate purposes up to 25% of the amount raised by the issuer.
• Main board IPO: GCP plus objects with unidentified acquisition or investment targets up to 35%, with the unidentified acquisition part capped at 25% on its own. Not applicable when the target is identified and properly disclosed.
• SME IPO: GCP up to 15% of the amount raised or ₹10 crore, whichever is less (since March 8, 2025), plus the same 35% combined test.
• Monitoring agency: required when the issue size excluding OFS exceeds ₹100 crore, with quarterly reports published within 45 days of each quarter’s end.

For the wider picture of how IPOs work in India, from price bands to allotment, start with our IPO investing in India guide.

Disclaimer: This article is for education only and is not investment advice or a recommendation to apply for any IPO. The companies and numbers in the examples are hypothetical. Regulations change, so check the current SEBI text and the offer document, and speak to a SEBI-registered adviser before investing.