DRHP LensEvery Indian IPO is a fresh issue, an offer for sale, or a mix. The split is on the cover page of the DRHP and it answers the first question any investor should ask: does my money go into the business or out to the sellers?
Fresh issue
The company issues new shares. The money comes to the company and existing holders are diluted. The DRHP must explain how it will be used in the Objects of the Offer, with amounts for each object and a deployment schedule.
Offer for sale
Existing shareholders sell shares they already hold. There is no new money for the company and no dilution. The DRHP lists each selling shareholder and the number of shares offered, usually in The Offer and Capital Structure sections. The company's expenses of the issue are often shared with the sellers in proportion.
What to check in the Objects of the Offer
- Specificity. "Purchase of plant and machinery for the Pune facility, quotations obtained" is better than "expansion".
- Debt repayment. Which loans, from whom, and whether any lender is related to the lead managers.
- General corporate purposes. ICDR caps this at 25% of the gross proceeds; together with unidentified acquisitions or investments the cap is 35%.
- Monitoring agency. Where the fresh issue exceeds ₹100 crore, a credit rating agency must be appointed to monitor use of proceeds and report to the audit committee; listed companies then disclose those reports.
- Deployment already made. Money spent before the issue and to be reimbursed from proceeds.
What to check in the OFS
- Who is selling: promoters, private equity, or a long list of individuals.
- The price at which each seller acquired the shares (the DRHP discloses average cost of acquisition).
- Promoter holding after the issue and the lock-in that applies to it.
Reading the split
A small fresh issue alongside an ambitious growth story is a gap worth asking about. A large OFS by financial investors in a mature, cash-generating business is common and often unremarkable. DRHP Lens flags an issue as OFS-heavy when the offer for sale is the majority of the issue and points to the page that shows the split. See the full DRHP red flags checklist.
Run the red-flag scan
Upload a DRHP, RHP, NCD prospectus, AIF PPM or annual report. The scan runs in your browser, nothing is uploaded, and every finding is cited to a page.
Analyse a documentFrequently asked questions
What is an offer for sale in an IPO?
An offer for sale (OFS) is the part of an IPO where existing shareholders, such as promoters or private equity investors, sell their own shares. The money goes to them, not to the company.
Is an OFS-heavy IPO bad?
Not necessarily. Early investors exiting is normal. It becomes a question when the OFS is most of the issue, promoters are selling heavily, or the fresh issue is small relative to the company's stated growth plans.
What is general corporate purposes in an IPO?
It is the part of fresh-issue proceeds not tied to a specific object. SEBI's ICDR Regulations cap it, and they also cap amounts kept for acquisitions not yet identified.
This guide is general education about how Indian offer documents are structured. It is not investment advice or a recommendation to subscribe to any issue. Regulations change; always read the current offer document and the SEBI regulations it refers to, and consult a SEBI-registered investment adviser before you invest.