The IPO wave in India is stronger than ever in 2025, with major listings sailing through, even at premium valuations! Between 2021 and 2024 alone, Indian companies raised a massive $60.4 billion (Rs. 5.4 lakh crore) through IPOs. However, the interesting part is that nearly two-thirds of this amount, i.e., about Rs. 3.37 lakh crore, came through the Offer for Sale (OFS) route. This shift shows how the market has evolved. Earlier, promoters selling their stake was often seen as a red flag. Today, investors are looking beyond optics and are focusing more on the company’s fundamentals and long-term story. So, what exactly is an Offer for Sale? And how is it different from a traditional IPO? Dive into this blog as we break it down in simple words and explore why OFS has become such an important part of India’s market landscape.
An IPO, or Initial Public Offering, is a process by which a private company raises funds through a public subscription. In this process, a private company sells its shares to the public for the first time, becoming a listed company on the stock market. It is the time when the company opens its doors to everyday investors to buy a small ownership stake. Companies launch an IPO to raise funds for growth, such as expanding their business, repaying loans, or enhancing operational efficiency. An IPO offers investors the opportunity to invest early in a company that has the potential to grow in the future. However, it also comes with risks because the business is still proving itself in the public markets. Once listed, the company’s shares can be freely bought and sold on exchanges like the NSE and BSE, making it easier for investors to enter or exit their investment.
An Offer for Sale (OFS) is a method in which existing shareholders, usually promoters, early investors, or institutions, sell a part of their stake to the public through the stock market. Unlike an IPO, the company itself does not raise fresh money in an OFS. The sale proceeds from the OFS go directly to the shareholders who are selling. In simple words, an OFS allows current owners to reduce or exit their holdings cleanly and transparently. It is an opportunity for investors to buy shares of a company (often already listed or going public) directly from large shareholders at a price discovered through bidding. The process is quick and regulated by SEBI, ensuring a level playing field for retail investors by reserving a portion specifically for them.
OFS provides a clean and efficient way for large shareholders to sell a portion of their stake. The OFS process, which enables investors an opportunity to buy shares at market-driven prices through a fair and transparent mechanism, is explained below.
The starting point of the OFS (Offer for Sale) is when the promoters or large investors (for example, institutional investors or VCs) decide to reduce their shareholding in the company and thus offer their shares for sale on the exchange. The company does not receive any proceeds under the OFS process. The proceeds directly go to the promoter or large investors offloading their shares.
Following the intention of the promoters and large investors, the company notifies the stock exchanges about the upcoming OFS. This announcement includes the sale date, the number of shares being offered, any applicable retail discount, and the categories of investors eligible to participate in the sale. This helps all investors understand the sale's structure well in advance.
On the scheduled day, the OFS bidding window opens on the NSE and BSE. Investors can place their bids through their brokers during market hours. The OFS typically lasts only one trading day, making the process fast and efficient. Both institutional and retail investors can participate in this process, depending on the structure announced by the company.
The bidding window invites investors to submit a quote for the price they are willing to pay for the shares. After the window closes, all bids are reviewed, and the final ‘cut-off price’ is determined based on overall demand. Anyone who has placed a bid at or above this cut-off price becomes eligible to receive shares. Any retail discount offered is applied after the cut-off is finalised.
Once the cut-off price is decided, shares are then allotted to eligible investors. A portion of the offer is reserved specifically for retail investors to ensure fair participation. If the OFS receives more bids than the number of shares available, allotment is made on a proportionate basis or as per SEBI guidelines.
After allotment, the shares are credited directly to the investor’s Demat account, usually within a short settlement period. At the same time, the funds collected are credited to the shareholders who are offloading their shares. As the entire process takes place through stock exchanges, the process is highly transparent and well-regulated.
SEBI provides specific rules that the companies opting for OFS must adhere to. Some of these key rules are explained below.
SEBI permits only certain types of shareholders to use the OFS route. These include promoters, promoter groups, and large shareholders who hold at least 2% of the company’s share capital. This ensures that only significant shareholders with meaningful ownership use the mechanism, keeping the process transparent and relevant for the public markets.
SEBI has made it clear that OFS is available only for companies already listed on the stock exchanges. This means the company’s shares must be trading on NSE or BSE before an OFS can take place. Since the company is already public, investors can review its financials and history before placing their bids.
If the OFS is being done by promoters, SEBI rules require that they must maintain the minimum public shareholding (MPS) of 25% after the offer. The OFS can also be used as a tool to bring promoter shareholding down to meet this requirement. This rule ensures that companies remain compliant with public shareholding norms.
If a non-promoter shareholder (such as a private equity fund) chooses to sell shares through OFS, SEBI allows promoters to also participate in the same OFS. However, they must follow all SEBI takeover regulations while doing so. This rule provides flexibility to both promoters and non-promoters while maintaining investor protection.
SEBI mandates that an OFS is usually conducted over one trading day, making the process quick and efficient. Institutional investors typically get access earlier in the day, while retail investors are allocated a dedicated time slot. This fast process helps maintain market stability and avoids long periods of uncertainty.
SEBI requires sellers to announce a floor price before the OFS begins. This is the minimum price at which investors can bid. By disclosing the floor price upfront, SEBI ensures that the process remains fair and transparent, preventing sellers from changing conditions mid-way or confusing retail investors.
SEBI has laid out clear rules to ensure fair participation for both retail and institutional investors in an Offer for Sale. At least 10% of the total OFS offer must be reserved for retail investors, i.e., those placing bids up to Rs. 2,00,000. Sellers may also provide a retail discount, which is fully regulated by SEBI to protect small investors. At the same time, institutional investors, including Mutual Funds, Insurance Companies, and Foreign Institutional Investors, are given priority access to the OFS window earlier in the trading day. Retail investors typically place their bids in the second half of the session. This structured timing helps manage large institutional bids smoothly, reduces early volatility, and ensures that both investor groups get fair and orderly access to the OFS.
SEBI has strict rules to ensure stability and protect investors once an OFS is announced. After the OFS window opens, sellers are not allowed to change key terms, such as the number of shares or the floor price, after market hours. Any modifications must be communicated during trading hours only. Similarly, once the OFS has been officially announced, it cannot be withdrawn except in rare and exceptional situations. These rules prevent sudden surprises, safeguard retail investors from last-minute shifts, and help maintain investor confidence by ensuring that the offer remains predictable and free from manipulation.
SEBI requires companies to give the stock exchanges at least one trading day’s notice before launching an OFS, ensuring investors have enough time to review the offer details, understand the floor price, and plan their bids. Additionally, the OFS operates on a T+1 settlement cycle, where both the transfer of funds and the credit of shares must be completed within one working day after the transaction. This streamlined settlement process enhances efficiency, reduces risk for both buyers and sellers, and maintains the overall OFS mechanism as smooth and reliable as possible.
OFS offers a faster and easier route to liquidating promoters’ holdings and access to the company shares for retail investors. A few key benefits of the offer for sale include,
No Change in Company Ownership Structure - Since OFS involves selling existing shares and not issuing new ones, the company’s total equity remains the same. This avoids dilution, ensuring that every shareholder’s percentage ownership stays intact.
Quick and Clean Exit for Large Shareholders - OFS provides an efficient exit route for promoters, early investors, and large institutional players, including private equity and venture capital firms. It allows them to sell their shares quickly, unlock their gains, and complete the transaction through a simple, transparent, and fully regulated process, i.e., without waiting for long company approvals.
Fair Pricing Through Open Bidding - The price of shares in an OFS is decided by the market through bidding. This ensures a fair and transparent price that reflects actual demand rather than being fixed by the sellers.
Freedom in Timing and Quantity - Shareholders choosing the OFS route can decide exactly when they want to sell and how many shares they wish to offload. This flexibility helps them plan exits smoothly based on market conditions.
Lower Cost Compared to Other Routes - OFS is less expensive than an IPO because it eliminates the need for detailed prospectuses, roadshows, or underwriting. This reduces the overall cost for sellers and streamlines the process more efficiently.
Helps Companies Meet SEBI Shareholding Rules - If promoters hold more than the allowed limit, OFS becomes a useful tool to bring their shareholding down and meet SEBI’s requirement of having at least 25% public shareholding.
IPO and OFS are both SEBI-approved routes for companies to invite the public to subscribe to their shares. However, there are significant differences between the two. These differences are explained below.
An Offer for Sale (OFS) is a simple, transparent, and efficient method for promoters, early investors, and large institutions to sell their shares in a listed company without affecting the company’s share capital. It is a cost-effective and efficient way to realign the SEBI rule on minimum retail subscription in the company, making it more attractive for companies in recent times, despite the huge IPO swing in the country.
This article talks about the Offer for Sale and how it can be a good opportunity for investors to be part of growing companies. Let us know your thoughts on the topic or if you need any further information on the same, and we will address it soon.
Till then, Happy Reading!
Read More: Who are the Participants in an IPO?
Marisha Bhatt is a financial content writer @TrueData.
She writes with the sole aim of simplifying complex financial concepts and jargon while attempting to clarify technical and fundamental analysis concepts of the stock markets. The ultimate goal is to spread vital knowledge and benefit the maximum audience. Her Chartered Accountant background acts as the knowledge base to help clarify crucial concepts and create a sound investment portfolio.
Interesting Article!
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pls share the requirements to investing in an ipo indepth
To invest in an IPO, you need a valid PAN, a Demat account, a trading account, and a linked bank account (ASBA/UPI). We also have a dedicated blog that highlights the factors to consider while investing in an IPO. We hope this resolves your query. You can also reach us at support@truedata.in for more details.
Is it possible that company share price can experience downward pressure due to more shares hitting the market
Yes, that is quite possible. When more shares enter the market, such as through new share issues or promoter selling, the increased supply can put downward pressure on the share price if demand does not rise equally. We hope this resolves your query. Keep reading and engaging more with TrueData for more insightful content!
Your posts are unique and interesting
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