Fresh issue vs offer for sale (OFS) in an IPO explained
Updated 26 October 2026 · 4 min read
An IPO can have two parts. In a fresh issue, the company creates new shares and sells them, and the money goes into the company. In an offer for sale (OFS), existing shareholders such as promoters or private equity investors sell some of the shares they already own, and the money goes to them, not to the company. Many IPOs are a mix of both.
The split matters because it tells you who actually benefits from your money. A fresh issue funds the company's plans; an OFS gives existing owners a way to cash out. Neither is good or bad on its own, but together with the "Objects of the issue" section of the RHP, the split says a lot about why the company is going public now.
Fresh issue and OFS side by side
| Point | Fresh issue | Offer for sale (OFS) |
|---|---|---|
| Who sells the shares | The company | Existing shareholders |
| Where the money goes | To the company | To the selling shareholders |
| Total number of shares | Increases | Stays the same |
| Effect on existing holders | Their percentage holding is diluted | Sellers' holding falls; others unchanged |
| Use of money | Stated in "Objects of the issue" | Not used by the company |
| Typical reasons | Expansion, debt repayment, working capital, acquisitions | Investor exit, promoter partial sale, meeting listing float rules |
Why the split matters to you
- Growth funding: a large fresh issue with specific, sensible uses (new plants, debt reduction) means your money is put to work inside the business.
- Dilution: a fresh issue increases the share count, so earnings per share after the IPO are spread over more shares. Check post-issue valuation, not just pre-issue figures.
- Who is selling: an OFS shows which existing owners want to sell and how much of their stake they are selling.
- Skin in the game: how much the promoters keep after the issue tells you how closely their interests stay tied to the company.
How to find the split in the RHP
- Start with the cover page of the RHP: it states the total issue and how much is fresh issue and how much is OFS, usually in rupees or number of shares.
- Go to the section on the offer (often titled "The Offer" or "Issue structure") for the exact numbers.
- Look at the table of selling shareholders, which lists each seller and the number of shares they are offering.
- Read "Objects of the issue" to see exactly how the fresh issue money will be used, with amounts against each purpose.
- Check "Capital structure" for promoter and other shareholding before and after the issue.
Each IPO page on this site shows the issue size and links to the RHP, so you can go straight to these sections.
Worked example
Say a company plans a ₹1,000 crore IPO at a cap price of ₹500 per share: ₹400 crore through a fresh issue and ₹600 crore through an OFS. Before the IPO it has 10 crore shares, of which promoters hold 7 crore and a private equity fund holds 3 crore.
| Item | Before IPO | After IPO |
|---|---|---|
| New shares created (₹400 crore ÷ ₹500) | — | 0.8 crore |
| Shares sold in OFS (₹600 crore ÷ ₹500) | — | 1.2 crore (say 0.4 crore by promoters, 0.8 crore by the fund) |
| Total shares | 10 crore | 10.8 crore |
| Promoter holding | 7 crore (70%) | 6.6 crore (about 61%) |
| Fund holding | 3 crore (30%) | 2.2 crore (about 20%) |
| Public holding | 0 | 2 crore (about 19%) |
| Money to the company | — | ₹400 crore (before issue expenses) |
Illustration only. Real issues also include issue expenses and may have other shareholders.
In this example, 60% of what investors pay goes to the selling shareholders and only 40% reaches the company. That is common and not a problem by itself; it simply means you should judge the IPO mainly on the business and the price, not on the idea that it is raising money for growth.
What a large OFS can signal
A large OFS is not automatically a warning. Private equity and venture investors usually have a fixed time horizon and an IPO is a normal way for them to exit. But a few patterns are worth a closer look:
- The whole issue is OFS and the company receives nothing, while the RHP describes heavy capital needs.
- Promoters are selling a large part of their own stake, not just early investors exiting.
- Sellers bought their shares recently at a price far below the IPO price. The RHP discloses the average cost of acquisition for selling shareholders.
- The fresh issue mainly repays loans taken shortly before the IPO, or the objects are vague, such as large "general corporate purposes".
None of these is proof of anything. They are questions to answer by reading the business, financials and risk factors, not reasons to skip an IPO on their own.
Common misunderstandings
- An OFS does not mean the company is selling assets. It only means some owners are selling shares.
- Investors get the same shares whether they come from the fresh issue or the OFS; there is no separate class.
- A fresh issue is not a guarantee of growth. What matters is how well the money is used.
Frequently asked questions
Does the company get any money from an offer for sale?
No. OFS proceeds go to the selling shareholders. Only the fresh issue part brings money into the company.
Are OFS shares different from fresh issue shares?
No. Investors receive the same equity shares with the same rights, whichever part of the issue they come from.
Is a 100% OFS IPO bad?
Not necessarily. It means existing owners are selling and the company raises nothing. Judge it on the business, valuation and who is selling, using the RHP.
Where do I see how much is fresh issue and how much is OFS?
On the cover page of the RHP and in the offer section, with the selling shareholders listed in a separate table. "Objects of the issue" explains the use of fresh money.
Does a fresh issue dilute existing shareholders?
Yes. New shares increase the total share count, so existing holders own a smaller percentage, though the company has more money.