Primary mkt surge fuels investor, promoter exits; a concern for cos, Pg11

Key Highlights:

• In 2025, primary market activity surged, marked by an increase in Offers For Sale (OFS) in Initial Public Offerings (IPOs).
• OFS allows promoters/early investors to sell existing shares, unlike fresh capital IPOs where new shares are issued.
• In 2025, 103 mainboard IPOs raised over Rs 1.75 lakh crore, with nearly Rs 1 lakh crore (57%) from OFS issues.
• OFS issues have delivered higher returns (350%) since 2015 compared to fresh capital issues (170%).

Detailed Insights:

• OFS trend raises concerns about promoters diluting stakes and next-generation promoters investing abroad instead of in their own businesses.
• From 1989-2012, OFS averaged 13% of total issue amount, but from 2013 onwards, it rose to about 68%.
• In 2025, OFS by private promoters stood at Rs 79,030 crore, accounting for 45% of the total IPO amount.
• A portion of fresh capital raised in IPOs is used for debt retirement and capital enhancement rather than expansion.
• Experts suggest OFS provide exits for early investors, fostering a healthy funding cycle for new companies.

Key Concepts Involved:

• Initial Public Offering (IPO): The first time a private company offers shares to the public.
• Offers For Sale (OFS): A mechanism where existing shareholders sell their shares in the market.
• Promoters: Individuals or entities who establish and control a company.