Fresh issue vs offer for sale
When you buy shares in an IPO, your money goes to one of two places. In a fresh issue it goes to the company. In an offer for sale (OFS) it goes to existing shareholders who are selling.
Fresh issue: money for the business
The company creates new shares and sells them. The money goes into the business, to repay debt, build plants or fund growth.
New shares mean existing owners now own a slightly smaller slice. That is called dilution.
Offer for sale: money for the sellers
Existing shareholders, such as founders, private-equity funds or the parent company, sell some of their shares. The company itself gets nothing.
An OFS isn’t bad by itself. Early investors have to exit sometime. But a large OFS by people who know the business best is worth a question: why are they selling now, and at this price?
Where to check
The prospectus has a section called Objects of the Offer. It shows how much is fresh issue, how much is OFS, and exactly what the fresh money will be spent on.
See it in a real issue
Jio Platforms is 100% fresh issue: up to 27 crore new shares, with no offer for sale. Of the money raised, ₹27,500 crore is earmarked to prepay borrowings of its main subsidiary, Reliance Jio Infocomm, and the rest goes to general corporate purposes.
An IPO raises ₹1,000 crore: ₹200 crore fresh issue and ₹800 crore offer for sale. How much does the company receive?
- ₹1,000 crore
- ₹800 crore
- ₹200 crore
Show the answer
₹200 crore. Only the fresh issue goes to the company. The ₹800 crore OFS goes to the shareholders who are selling.
Common questions
Is a fresh issue better than an OFS?
Not automatically. A fresh issue funds the business; an OFS lets early investors exit. What matters is why money is being raised, who is selling, and the price.
What is dilution in an IPO?
When a company issues new shares, each existing share represents a slightly smaller part of the company. That is dilution.
Where do I find the fresh issue and OFS split?
In the prospectus, in the “Objects of the Offer” and “The Offer” sections, and in the summary at the start of the document.
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