General corporate purposes
Also called: GCP · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
General corporate purposes (GCP) is the part of IPO money that a company can spend on ordinary business needs without naming a specific project. An IPO (Initial Public Offering) is a company's first sale of shares to the public. In its offer document, the company must list the objects of the issue, which are the specific uses of the money, such as repaying loans or building a plant. GCP is the loosely defined part left over. It gives the company flexibility, but investors cannot easily check how this money is spent. To limit this, the SEBI ICDR Regulations 2018 cap GCP at 25% of the money raised. GCP plus money kept for acquisitions that have not yet been identified cannot exceed 35% together. SEBI tightened these limits in 2022, because companies were raising large sums for vague purposes.
Example
A company raises ₹2,500 crore through a fresh issue. At most ₹625 crore (25%) can go to GCP. GCP and unidentified acquisitions together cannot exceed ₹875 crore (35%). The rest must go to clearly stated uses, such as repaying borrowings.
Don't confuse with
- Objects of the issue: these are specific uses that the company names and must follow. GCP is the small, flexible part left after them.
- Offer for Sale (OFS): in an OFS, existing shareholders sell their shares and the money goes to them. The company receives none of it, so none of it can be used for GCP.