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Investing

Fresh Issue vs Offer for Sale in an IPO

In a fresh issue the company gets the money. In an offer for sale, existing shareholders sell their shares and keep the proceeds.

RM

Written by Rohan Mehta

Published 30 October 2026·7 min read

On this page8 sections
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In a fresh issue, the company creates new shares and the IPO money goes to the company. In an offer for sale (OFS), existing shareholders such as promoters or early investors sell shares they already own. That money goes to them, and the company receives none of it. Many IPOs combine the two, and the red herring prospectus (RHP) shows the split.

Key facts

Point Fresh issue Offer for sale
Who receives the money The company The selling shareholders
New shares created Yes; existing holders are diluted No; the share count stays the same
Use of money disclosed Yes, as the objects of the issue Not applicable; sellers keep the proceeds
General corporate purposes Capped at 25% of the amount the company raises Not applicable
Monitoring agency Needed if the issue, excluding the OFS, is above ₹100 crore Not counted
Seller holding period Not applicable Shares held at least one year before the draft offer document (with exceptions)

The rules above come from the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as last amended on 21 March 2026. For the basics of how an IPO works, see our IPO explainer.

Fresh issue explained

A fresh issue, sometimes called the primary component, adds new equity shares to the company’s capital. The company receives the money, less issue expenses, and must state in the offer document what it will do with it. Common uses are repaying loans, building plants or funding a subsidiary.

Two ICDR rules apply only to this portion:

  • General corporate purposes cannot exceed 25% of the amount the company raises (Regulation 7(2)).
  • A monitoring agency, which must be a SEBI-registered credit rating agency, has to track how the money is used when the issue size is above ₹100 crore. The OFS is excluded from that figure (Regulation 41). The agency reports every quarter until all the money is used, and the company publishes those reports.

A fresh issue dilutes existing holders because the total share count goes up. Earnings per share after listing are spread over more shares.

The Jio Platforms draft offer document is an example: it proposes a fresh issue only, with no offer for sale. Our Jio IPO page tracks its status.

Offer for sale explained

In an OFS, the ICDR Regulations call the sellers “selling shareholders”. They can be promoters, private equity funds, government bodies or other investors. The company issues no new shares and receives none of the money. The OFS does not add to the company’s cash. It changes who owns the shares.

Conditions under the ICDR Regulations:

  • One-year holding (Regulation 8). Only fully paid-up shares held for at least one year before the draft offer document is filed can be sold. Exceptions cover some bonus shares, shares from court or tribunal-approved schemes, and infrastructure companies owned by the government.
  • Caps for companies using the QIB route (Regulation 8A). This applies to companies that list under Regulation 6(2) because they do not meet the profitability track record. A shareholder holding more than 20% can sell at most half of that holding. A shareholder holding less than 20% can sell at most 10% of the company’s pre-issue shareholding. The caps include any secondary sales before the issue.

The NSE IPO is entirely an offer for sale, so NSE itself receives nothing from it. Our NSE IPO page lists the sellers.

Why the split matters to you

A large OFS alongside a small fresh issue means much of your money goes to existing holders. That is not a verdict on the company: early investors often exit at listing. It does tell you how much new capital the business gets for growth or debt repayment. Check the sellers’ average cost of acquisition, which the offer document must disclose, against the IPO price.

Where to find the split in the RHP

  1. Open the RHP or abridged prospectus from the SEBI public issues page, the exchange website or the lead manager’s site.
  2. Look at the cover page and “The Offer” section. The offer size is shown as the fresh issue and the offer for sale separately, in rupees or number of shares.
  3. Read the objects section, usually titled “Objects of the Offer”. It lists each planned use of the fresh-issue money and states that the company will not receive the OFS proceeds.
  4. Find the table of selling shareholders. SEBI’s abridged prospectus format lists each seller’s type, the shares offered and their weighted average cost of acquisition.
  5. Check the capital structure section for pre-issue and post-issue shareholding. It shows how far promoters’ stakes fall.

Our IPO calendar lists current issues. The guide to applying through ASBA or UPI covers bidding, which is the same for both components.

Anchor investors and their lock-in

Anchor investors are qualified institutional buyers who are allotted shares a day before the issue opens. They bid for the whole offer, not separately for the fresh issue or the OFS. The main-board rules in Schedule XIII of the ICDR Regulations say:

  • Up to 60% of the QIB portion can go to anchor investors.
  • Since 1 December 2025, 40% of the anchor portion is reserved: 33.33% for domestic mutual funds and 6.67% for life insurers and pension funds. Any shortfall in the insurer and pension share can go to mutual funds.
  • If the anchor allocation is above ₹250 crore, at least 5 and at most 15 anchors are allowed for the first ₹250 crore. Another 15 are allowed for each further ₹250 crore, with at least ₹5 crore per anchor.
  • Anchors pay the difference if the final price is higher than their allocation price, and get no refund if it is lower.
  • Lock-in: 50% of anchor shares are locked in for 30 days and 50% for 90 days from allotment.

Anchor allocations are published on the exchange websites before the issue opens, so you can see who has committed before you bid.

The stock-exchange OFS mechanism

“OFS” also means a separate route: a sale of shares that are already listed, through a special window on NSE and BSE. It is not an IPO. Promoters often use it to bring public shareholding up to the required minimum. NSE’s operating guidelines, revised on 24 February 2026, set these rules:

Rule Detail
Eligible companies Average market capitalisation of ₹1,000 crore or more over six months, or promoters selling to meet minimum public shareholding
Notice Seller announces the sale and floor price by 5 pm on the day before (T-1)
Minimum size ₹25 crore, unless a smaller sale achieves minimum public shareholding in one tranche
T day Non-retail bids only
T+1 day Retail bids, employee bids and carried-forward non-retail bids
Retail reservation At least 10% of the offer, for individuals, HUFs and NRIs bidding up to ₹2 lakh in total
Mutual funds and insurers At least 25% reserved
Retail price At or above the T-day cut-off, or at the floor price if non-retail was undersubscribed; the seller may offer a retail discount
Employees Bid at the T-day cut-off, up to ₹5 lakh per bid

To take part, place the bid through your broker on T+1 day in the retail series. Choose the cut-off price if you want the best chance of allotment.

Frequently asked questions

What is an offer for sale in an IPO?

It is the part of an IPO in which existing shareholders sell their shares to the public. The money goes to those shareholders, not the company.

What does fresh issue mean?

The company creates and sells new shares. It receives the money for the purposes listed in the offer document.

Is an IPO that is only an OFS a bad sign?

Not by itself. It means the company raises no new money, so check who is selling, at what cost, and why.

Does the price or allotment differ between the two parts?

No. You bid for the offer as a whole at one price band, and allotment follows the category rules for the whole offer.

What is the lock-in for anchor investors?

Half of their shares are locked in for 30 days from allotment and the other half for 90 days.

Can retail investors bid in a stock-exchange OFS?

Yes, on T+1 day. At least 10% of the offer is reserved for individuals, HUFs and NRIs bidding up to ₹2 lakh.

Sources

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