Summary of this article
Offer-for-Sale (OFS) has become the primary component in new listings, making up a significant 63 per cent of total IPO proceeds.
The trend signals a structural shift where the majority of funds go to existing shareholders (promoters/PE) in lieu of capex
Experts urge investors to look beyond the IPO euphoria and critically assess a company’s financial fundamentals and need for capital
The primary market has seen continued participation from investors across categories in CY 2025. In 2025, news of public issues has dominated conversations. Notably, this strong participation follows a year of record fundraising in 2024. According to a report by Yes Securities, the capital raised by companies in 2025 has already exceeded Rs 1.5 trillion. The report added that the amount raised by companies in 2025 is likely to even exceed the record fundraising of 2024.
In terms of numbers, as many as 93 IPOs have opened so far in 2025, which is significantly higher than the 53 public issues which opened in 2023 and the 86 public issues which opened in 2024. However, the report also said that offer-for-sale (OFS) currently dominates the fund-raising and hints at heavy monetisation of the valuation by the promoters.
As of CY2025, OFS made up nearly 63 per cent of the total IPO proceeds. The report also showed that if LIC’s IPO is not factored in, the share of OFS in the total IPO structure has grown each year. Notably, the share of OFS in IPOs was around 54.5 per cent in 2022(without factoring in the LIC IPO), 57.9 per cent in 2023 and 60.1 per cent in 2024.
The trend hints at caution in the IPO space as existing shareholders, like promoters of the company or private equity funds, sell their shares and the proceeds go directly to them, not to the company. This can have potential risks as the promoters and selling shareholders get the proceeds of the IPO, and the money is not invested in the company’s business.
Hemant Nahata, Executive Vice President, Equity Strategy & Quant, Yes Securities, told Outlook Money that one concern associated with the rising trend of OFS in IPOs is that the money is not getting deployed into the capital-expenditure cycle.
“What happens with OFS is the investors or the promoters get an exit to a certain extent, they can take their money home, the money does not get deployed into the company again or capex. So if you have more OFS and more investors taking up money, then the capex cycle, which generally gets a boost from an IPO boom, does not really take place. So that is a slight bit of a concern,” Nahata said.
Typically, companies use the proceeds of the IPO for core activities like business expansion, debt reduction, or capacity building, which can then become potential engines of future growth. Other potential risks of the rising trend of OFS making up a significant part of IPO structures are that when company insiders, such as promoters, pare their stake heavily via OFS, it can be viewed as a sign that they're ‘cashing out’ at peak or inflated valuations and transferring the risk to new public investors.
On the other hand, if no fresh capital is infused in a new and emerging business which has just listed, the initial listing-day euphoria of OFS-heavy IPOs fizzles out, and the stock may become more volatile and start trading at fundamental-based valuations, which may lead to potential losses for some investors.
“So if a heavy industry is coming up with an IPO or an asset-heavy model company is coming with an IPO and they are not putting the money into capex, and promoters are taking the largest chunk of the pile, then I might just be a little worried,” Nahata added.
However, Nahata urged investors not to panic amid the rising number of OFS-based IPOs. Nahata added that a large OFS component is not an issue by itself and added that there are some situations in which a company may want to list at a high valuation and have a business which does not require raising money via a fresh issue of shares or the addition of capital. Thus, making an OFS an ideal way of raising money for the company.
“At certain valuations, people do want to list their company, and sometimes they don't require money for the capex. They have a kind of business which is kind of smooth going, and they don't require much of a capex, much of a working capital. They just want to list the company to get that value unlocking done for themselves as well as their investor. So in this case, we cannot say OFS is completely bad,” Nahata said.
Nahata said that this is true for large and well-established companies. In recent years major companies such as Hyundai Motors India Ltd and LG Electronics India Ltd's public issues were pure OFS IPOs.
“A large part of these companies are well-established companies which generally do not need money to grow. They have a very set model and a set asset that can give them a higher effect over the next few years. So, they don't need to create a new asset for those things. So that is where I feel that even with higher OFS, qualitatively there is no concern,” Nahata said.
To conclude, while an OFS may not be bad itself, it is one of the many factors which investors should consider before applying for an IPO. Ultimately, investors should view the offer document objectively and invest as per their risk appetite and broader financial goals.
