Every Indian IPO's offer document splits the headline issue size into two possible parts: a fresh issue and an offer for sale (OFS). The split decides who actually receives the money you pay for your shares. This guide explains the difference, shows how to read the split next to the disclosed uses of the money, and is clear about what the numbers cannot tell you.
Fresh issue vs offer for sale
In a fresh issue, the company creates new shares and the money raised goes to the company. In an offer for sale, existing shareholders sell shares they already own, and the money goes to those selling shareholders — not to the company. An IPO can be made up only of a fresh issue, only of an OFS, or of both together, and the offer document states the size of each.
SEBI's own classification of offer types draws the same line: an "IPO (Fresh)" is an initial public offer through issue of shares, and an "IPO (Offer for Sale)" is an initial public offer through offer for sale of existing shares (see Sources below).
| Fresh issue | Offer for sale (OFS) | |
|---|---|---|
| Where the shares come from | Newly created by the company | Already held by the selling shareholders |
| Who receives the money | The company, after the offer expenses attributable to the fresh issue | The selling shareholders, after their share of offer expenses and taxes |
| Effect on total share count | Increases it | No change from this component — existing shares change hands |
| Disclosed use of proceeds | Set out in the offer document's "Objects of the Offer" | None for the company; it receives no OFS money |
New shares, existing shares and who receives the proceeds
The cleanest way to see the distinction is in the wording offer documents themselves use. The red herring prospectus of Apeejay Surrendra Park Hotels Limited (dated 29 January 2024, hosted on SEBI's website) states that the selling shareholders "will be entitled to their respective portion of the proceeds of the Offer for Sale after deducting their proportion of the Offer related expenses and relevant taxes", and that "our Company will not receive any proceeds from the Offer for Sale". The same document defines the company's Net Proceeds as the proceeds from the fresh issue less the offer-related expenses applicable to the fresh issue. We quote it only to illustrate standard disclosure language: how expenses are shared between the company and sellers is set out separately in each IPO's own document.
Two consequences follow from the share mechanics alone:
- A fresh issue increases the number of shares in existence. A shareholder who does not buy any of the new shares ends up owning a smaller percentage of a larger company. That is dilution of ownership percentage. Its size depends on share counts, not on the rupee issue size, so it cannot be calculated from the crore figures in a headline table.
- An OFS does not create shares. Ownership moves from the sellers to new investors, and the company's share count is unchanged by that component.
One naming caution: "offer for sale" is also used for share sales in companies that are already listed. That is a separate transaction from the OFS component of an IPO, and this guide covers only the IPO case.
Read the issue split alongside disclosed uses of proceeds
The split tells you how much of the headline issue size can reach the company at all; the Objects of the Offer tell you what the company says it will do with that money. Read them together, in this order:
- Total issue size, fresh issue and OFS. The fresh-issue figure is the gross amount the company raises from new shares. The OFS figure is money that leaves with the sellers. If a document or data table shows a total but not both components, treat the missing part as unknown rather than working it out by subtraction — the figures may come from different disclosure stages.
- Fresh issue is gross, not net. Offer expenses attributable to the fresh issue come off before the company receives its Net Proceeds, so even the fresh-issue figure overstates the money available for the stated objects.
- Objects of the Offer. This section lists the proposed uses of the net proceeds — for example repaying borrowings, funding capital expenditure, or general corporate purposes — often with an amount against each. These are proposed uses at the time of the offer, not money already spent, and some objects may not carry a fixed amount.
- Check the figures add up. Where the fresh issue and OFS do not sum to the stated total, go back to the document before drawing any conclusion.
The two 2026 mainboard IPOs below come from ipostation's IPO database and were chosen because their structures sit at opposite ends. Milky Mist Dairy Food raised most of its issue through new shares; Behari Lal Engineering's issue was mostly an offer for sale. We checked each record against the company's red herring prospectus (RHP) — the offer document filed before the price is fixed — and show only figures at that stage. Anything the RHP leaves blank reads "Not available".
Worked example 1: Milky Mist Dairy Food
Data as of the red herring prospectus dated 4 Aug 2026; checked against it on 6 Oct 2026.
| Total issue size | ₹1,553 Cr |
|---|---|
| Fresh issue (new shares) | ₹1,428 Cr |
| Offer for sale (existing shares) | ₹125 Cr |
| OFS share of total issue size | 8% (calculated by ipostation from the amounts above) |
| Promoter and promoter group holding before the issue | 93% |
| Promoter and promoter group holding after the issue | Not available — the red herring prospectus leaves it blank until pricing |
| Disclosed objects of the fresh issue (proposed use of net proceeds, not completed spending) |
|
| Selling shareholders | Both selling shareholders are promoters: Sathishkumar T (up to ₹750.00 million) and Anitha S (up to ₹500.00 million). |
| Source | Exchange / SEBI offer document All three amounts are the RHP’s “up to” figures (₹15,530.00 million total, ₹14,280.00 million fresh issue, ₹1,250.00 million offer for sale). Our record last changed: . |
Of this issue, ₹1,428 Cr was new shares — money for the company before the offer expenses attributable to the fresh issue — and ₹125 Cr was existing shares sold by selling shareholders, which the company does not receive. The company’s net proceeds after expenses are not available: the red herring prospectus leaves them blank until the offer price is fixed.
Before the issue, promoters and the promoter group held 93%. Because the post-issue figure is blank in the red herring prospectus, we do not show a change — and even a before-and-after pair could not, by itself, separate shares sold in the OFS from dilution by new shares.
Worked example 2: Behari Lal Engineering
Data as of the red herring prospectus dated 6 Aug 2026; checked against it on 6 Oct 2026.
| Total issue size | ₹301.62 Cr |
|---|---|
| Fresh issue (new shares) | ₹93 Cr |
| Offer for sale (existing shares) | ₹208.62 Cr |
| OFS share of total issue size | 69.2% (calculated by ipostation from the amounts above) |
| Promoter and promoter group holding before the issue | 88.51% |
| Promoter and promoter group holding after the issue | Not available — the red herring prospectus leaves it blank until pricing |
| Disclosed objects of the fresh issue (proposed use of net proceeds, not completed spending) |
|
| Selling shareholders | Four of the five selling shareholders are promoters or promoter group, offering up to 4,587,246 shares between them; the fifth, SG Tech Engineering Private Limited, is an investor offering up to 2,732,755 shares. |
| Source | Exchange / SEBI offer document The fresh issue is the RHP’s “up to ₹930.00 million”. The RHP states the offer for sale as up to 7,320,001 shares without a rupee amount; the OFS and total shown are our record’s values, equal to those shares at the ₹285 upper end of the price band. Our record last changed: . |
Of this issue, ₹93 Cr was new shares — money for the company before the offer expenses attributable to the fresh issue — and ₹208.62 Cr was existing shares sold by selling shareholders, which the company does not receive. The company’s net proceeds after expenses are not available: the red herring prospectus leaves them blank until the offer price is fixed.
Before the issue, promoters and the promoter group held 88.51%. Because the post-issue figure is blank in the red herring prospectus, we do not show a change — and even a before-and-after pair could not, by itself, separate shares sold in the OFS from dilution by new shares.
Read side by side, the two records answer different questions. For a reader examining company funding, Milky Mist's split puts almost all of the issue into new shares, and its RHP names where the net proceeds are meant to go — repaying borrowings, expanding a manufacturing facility, and deploying coolers and freezers — with a separate, unquantified amount for general corporate purposes. For a reader examining shareholder exits, Behari Lal's split shows the larger part of the issue leaving with selling shareholders, while a smaller fresh issue funds specific equipment and solar installations. Neither split, on its own, says which IPO was the better investment.
What promoter holdings reveal—and what they cannot explain
Promoter holding before and after the issue shows how much of the company the promoter group owns on either side of the IPO; it does not show why that stake changed. A fall in the percentage can come from two different sources, alone or together:
- promoters selling some of their shares in the OFS, and
- new shares from the fresh issue enlarging the share count, which shrinks every non-participating holder's percentage even if no promoter sells a single share.
The before-and-after percentages cannot separate those two effects. To find out how many shares each seller is offering, read the offer document's list of selling shareholders and the capital-structure section. Keep two more limits in mind. The promoter holding is an aggregate for the whole promoter group, so it hides changes between individual promoters. And OFS sellers need not be promoters at all. In the Behari Lal Engineering example above, one of the five selling shareholders is an investor, not a promoter — its exit never shows up in the promoter figure. In Milky Mist's, both sellers are promoters.
Which is better, OFS or fresh issue?
Neither is better in itself. The split answers two different questions — how much new money the company raises, and how much existing shareholders are selling — and neither answer tells you whether an IPO is a good investment. We hold no return statistic or numerical threshold showing that fresh-issue-heavy IPOs perform better, are safer or are more profitable than OFS-heavy ones, so that comparison is not available.
What the structure does tell you is where to look next. If you are examining company funding, focus on the fresh issue, the Net Proceeds after expenses and the specific objects: debt repayment, expansion and general corporate purposes have very different implications for the business. If you are examining shareholder exits, focus on who the selling shareholders are, how much each is selling and how promoter ownership changes. Valuation, financial history and the risk factors in the offer document matter whatever the split, and none of them can be read off the split alone.
What are the disadvantages of OFS?
The main disadvantage of an OFS, from the company's side, is that it brings in no new money: the OFS portion of an IPO is paid to the selling shareholders, not to the business. For a reader of the offer document, that has a few practical consequences:
- The headline issue size can overstate company funding. An IPO described by its total size may be raising only part of that amount, or none of it, for the company.
- The offer document does not price motive. Shareholders can have many reasons to sell — for example, a fund that must return money to its own investors, a promoter diversifying personal wealth, or early backers realising part of their investment. The figures show that they are selling and how much, not why.
- Promoter percentages can blur the picture, as described above, because dilution and selling both lower the figure.
So is an OFS IPO good or bad? It is neither. An OFS is a mechanism for existing owners to sell, and selling on its own does not establish an adverse motive or predict how the company or its shares will perform. It is one disclosure to weigh alongside everything else in the document.
To see how IPOs differ in another dimension — size, minimum investment and listing platform — read Mainboard vs SME IPO. To look at this year's issues and their individual pages, browse 2026 mainboard IPOs.
Sources, dates and unavailable figures
Definitions and regulatory wording come from official documents; worked-example figures come from ipostation's IPO database, checked against each company's red herring prospectus on 6 October 2026.
- Issue-type definitions: SEBI, Processing status of draft offer documents filed with SEBI during the financial year 2007-08 (page dated 5 June 2009), abbreviations section: "IPO (Fresh)" and "IPO (Offer for Sale (OFS))". Used only for these definitions; the page's procedural content is historical.
- Proceeds wording: Red herring prospectus of Apeejay Surrendra Park Hotels Limited, dated 29 January 2024, hosted by SEBI — "Objects of the Offer" (page 134) and the definition of "Net Proceeds". Quoted as an illustration of disclosure language; it is not one of the worked examples and does not set a universal rule on expense allocation.
- Worked examples: issue size, fresh issue, OFS, objects of the issue and pre-issue promoter holding from ipostation's IPO records, checked against the RHPs of Milky Mist Dairy Food Limited (dated 4 August 2026) and Behari Lal Engineering Limited (dated 6 August 2026), both hosted on bseindia.com and linked in each example. Behari Lal's RHP states its offer for sale in shares, not rupees; the rupee figure shown is our record's value at the upper end of the price band, as noted beside it.
- Not available for the worked examples: post-issue promoter holdings, general-corporate-purpose amounts and net proceeds after expenses, which both RHPs leave blank until pricing; exact ownership dilution; and each seller's proceeds. Values our database holds from a later stage are not mixed in.
- Not available anywhere on this page: any statistic comparing returns of fresh-issue-heavy and OFS-heavy IPOs.
This article is published by ipostation for education. It is not investment advice; read the offer document before investing.