By ipomarket.in Editorial Team · Last reviewed: 2026-10-28
Disclaimer: This article is for informational purposes only and does not constitute investment advice. IPO investments are subject to market risks. Please read the offer document carefully and consult a SEBI-registered investment advisor before investing.
When you apply for an IPO, your money does not always reach the company you are buying into. Depending on how the issue is structured, part or all of your cheque can go straight to existing shareholders cashing out. Understanding this split, between a fresh issue and an offer for sale (OFS), is one of the most useful things a retail investor can learn before reading any prospectus.
Fresh issue vs OFS: the basic difference
In a fresh issue, the company creates new shares and sells them to the public. The money raised flows to the company and is typically used for growth, capital expenditure (capex), debt repayment, or working capital.
In an offer for sale (OFS), no new shares are created. Existing shareholders, such as promoters, founders, or early private equity investors, sell part of their holding. Here the money flows directly to those selling shareholders, not to the company.
This distinction matters. Fresh capital can fund expansion and is often read as a signal of investment intent. According to market commentary, fresh capital is usually channelled into capex and viewed as a barometer of economic activity, while an OFS mainly signals a change in who owns the company.
Most IPOs combine both. Reportedly, over 90% of mainboard IPOs between December 2024 and January 2026 used a combination structure of fresh issue plus OFS, according to Equity Research India.
The 2025 numbers tell a striking story
The scale of OFS in the Indian market has grown sharply. Reportedly, funds raised through OFS in 2025 reached nearly ₹96,000 crore, overtaking 2024's record of ₹95,285 crore, according to Business Standard. Over the same year, fresh capital raised via new share issuance stood at ₹56,796 crore.
In other words, in 2025 considerably more money went to selling shareholders than to the companies themselves.
The longer trend is even clearer. Since 2015, nearly two-thirds of total IPO fundraising has been through OFS. Reportedly, around 66% (₹4.73 trillion) came via OFS, against ₹2.44 trillion of primary fresh issuance, according to the same Business Standard analysis.
Two opposing views from the top
This shift has drawn comment from senior policymakers. Reportedly, Chief Economic Advisor V Anantha Nageswaran observed that IPOs were increasingly becoming exit routes for early investors rather than vehicles for long-term capital formation.
Taking a different line, SEBI Chairman Tuhin Kanta Pandey reportedly downplayed concerns about IPO composition, stating that the mix between primary and secondary components varies from one IPO to another. Both views appeared in reporting from November 2025.
For a retail investor, the practical takeaway is simpler than the policy debate: read where the money is going before you form a view on the issue.
Real examples from 2026
Structures vary widely, and recent IPOs illustrate the full range.
- 100% fresh issue: The Jio Platforms IPO was entirely a fresh issuance of 27 crore equity shares worth ₹30,213 crore, with no OFS component at all. Every rupee raised went to the company.
- 100% fresh issue for debt: Horizon Industrial Parks reportedly raised roughly ₹2,600 crore as a fresh issue, with around ₹2,250 crore, about 86.5% of proceeds, earmarked for debt repayment. The money reaches the company, but is used to pay down borrowings rather than for expansion.
- 100% OFS: The SBI Funds Management IPO in July 2026 was entirely an offer for sale. The company received no proceeds; all funds went to the selling shareholders, SBI and Amundi India Holding, across disclosed secondary transactions.
These three cases show why two IPOs of similar size can mean very different things for the underlying business.
What the structure tells you (and what it doesn't)
A large OFS is not automatically a red flag. Early investors and founders are entitled to exit, and a well-run company can thrive even when its IPO is mostly secondary. But as a retail investor it helps to ask a few questions:
- If the issue is mostly OFS, the company is not raising fresh growth capital from this offer. What is funding its future plans?
- If the issue is fresh but earmarked largely for debt repayment, how much is actually left for growth?
- Who is selling in the OFS, and how much of their stake are they offloading?
The objects of the issue section in the prospectus answers most of this. If you are new to that document, our guide on how to read a DRHP before an IPO walks through where to look, and our 10-step framework to analyse an upcoming IPO puts the fresh-issue-versus-OFS question in context with the rest of your checks.
How SEBI regulates the money
SEBI sets rules on both allocation and use of proceeds. Retail Individual Investors (RIIs), those applying for up to ₹2 lakh, are guaranteed a minimum allocation of 35% in IPOs of profitable companies. For loss-making companies, SEBI permits the issuer to reduce retail allocation to just 10% while allocating 75% to qualified institutional buyers (QIBs).
On use of fresh proceeds, SEBI reportedly caps the general corporate purposes allocation at 15% of fresh issue proceeds for SME IPOs and monitors utilisation closely across issues. OFS proceeds, by contrast, go to selling shareholders and are not subject to end-use monitoring in the same way, because that money never enters the company.
You can read more about these safeguards in our overview of retail IPO investor protections under SEBI rules.
FAQ
What is the difference between a fresh issue and an offer for sale?
In a fresh issue, the company creates new shares and keeps the money for growth, capex, debt repayment, or working capital. In an offer for sale (OFS), existing shareholders sell their shares and receive the money directly, so the company gets nothing from that portion.
Does OFS money reach the company?
No. OFS proceeds go to the selling shareholders. For example, the SBI Funds Management IPO in July 2026 was entirely an OFS, so the company received no proceeds, and all funds went to selling shareholders SBI and Amundi India Holding.
How much of recent IPO fundraising has been OFS?
Reportedly, OFS raised nearly ₹96,000 crore in 2025, against ₹56,796 crore of fresh capital. Since 2015, around 66% (₹4.73 trillion) of total IPO fundraising has been through OFS, according to Business Standard.
Is a large OFS a bad sign?
Not necessarily. Founders and early investors are entitled to exit, and some policymakers see nothing unusual in the mix. SEBI Chairman Tuhin Kanta Pandey reportedly said the primary-to-secondary mix varies from one IPO to another. The point for retail investors is to check how much fresh capital, if any, the company is actually raising and what it will be used for.
How much is reserved for retail investors?
SEBI guarantees RIIs a minimum of 35% in IPOs of profitable companies. For loss-making companies, retail allocation can be reduced to 10%, with 75% going to QIBs.
Last reviewed: 2026-10-28 by the ipomarket.in Editorial Team.