Offer for Sale (OFS)

An Offer for Sale is about *who pockets the money* when shares change hands. In a fresh issue, a company creates new shares and the cash it raises goes into its own coffers. In an OFS, existing shareholders sell shares they already own, and the proceeds go straight to them — the company itself raises nothing.

Two Meanings of OFS

The term is used in two related ways in India. First, within an IPO, the offer is often split between a *fresh issue* (new capital for the company) and an *offer-for-sale portion* (promoters or early investors cashing out). Second, OFS is also a standalone, exchange-based mechanism, introduced by SEBI in 2012, that lets promoters of already-listed companies sell stake quickly and transparently through a special window. Companies must notify the exchange a couple of trading days in advance, and this route is available to the top listed companies.

A common reason promoters use the standalone OFS is to meet SEBI's minimum public shareholding norms, which require enough of a company to be held by the public.

What It Means for Investors

For IPO investors, the fresh-issue-versus-OFS split is a crucial signal. If most of the issue is a fresh raise, your money funds growth, expansion or debt reduction. If most of it is an OFS, you are essentially buying out earlier shareholders who want an exit — the business gets no new fuel.

This distinction has become a live debate. In 2025, the OFS share of IPO proceeds reportedly hit a three-year high of around 63%, meaning roughly two-thirds of money raised flowed to selling shareholders rather than the companies. Critics argue this lets promoters time their exits at rich valuations, leaving retail investors holding stock at the top.

SEBI has responded with investor-protection measures, including reserving a portion of OFS shares for retail investors and offering them a discount, with proposals to widen access further. For the exchange-based OFS, retail buyers can bid through their brokers during the offer window.

The practical rule for IPO investors: read the prospectus and check how the proceeds are split. A heavily OFS-skewed issue deserves extra scrutiny on price.