The Indian primary market witnessed a landmark year in 2025, with fundraising crossing the Rs 1.75 lakh crore mark through mainboard initial public offerings (IPOs). However, a significant trend has ignited a fresh debate among market observers: the overwhelming dominance of offers-for-sale (OFS) over fresh capital issuance. While a section of experts views this as a sign of a maturing ecosystem providing crucial exits to early-stage investors, concerns are being raised about the high volume of promoter stake dilution and the diversion of funds away from corporate expansion.
The OFS Surge: A Structural Shift in IPO Proceeds
The data reveals a stark reversal in the composition of IPO proceeds over the last decade. An analysis by Prime Database highlights a dramatic shift. Historically, from 1989 to 2012, fresh capital constituted about 87% of the total issue amount, with OFS making up a mere 13%. Post-2013, this trend inverted. From 2013 onward, OFS components ballooned to account for roughly 68% of IPO amounts, with fresh capital shrinking to 32%.
This pattern peaked in 2025. Of the total Rs 1.75 lakh crore raised, a substantial Rs 1 lakh crore, or 57%, came from OFS. This means the majority of funds flowed to existing shareholders—promoters and early investors—rather than into the company's treasury for growth. Specifically, offers for sale by private promoters alone accounted for Rs 79,030 crore (45%). Additionally, 19 IPOs featured exits by private equity or venture capital investors, who sold shares worth Rs 20,643 crore (12%).
Maturing Market or Cause for Concern? Expert Views Diverge
Market veterans are divided on interpreting this OFS wave. Many see the exit of PE and VC investors as a positive evolution. The CEO of a leading mutual fund explained that in the 1990s and early 2000s, when fresh capital dominated, the organized PE/VC ecosystem was nascent. "PEs and VCs entered the Indian market in the mid-2000s, providing seed capital and handholding businesses through growth phases. Their successful exit after nurturing a company is healthy. The recycled capital fuels new ventures, strengthening the entire funding cycle," he noted.
This sentiment is echoed by the Chief Investment Officer of another fund, who emphasized that providing liquidity to angel, venture, and private equity investors is critical for fostering a strong funding environment for future startups and new-age companies.
The Core Concerns: Promoter Dilution and Capital Utilisation
However, the euphoria is tempered by two primary concerns. The first is the scale of promoter stake dilution. Promoter OFS worth Rs 79,030 crore raises questions about long-term commitment. A CEO of a leading brokerage firm, requesting anonymity, pointed out a generational shift: "The traditional risk-takers were promoters. Now, the next generation is often less interested in the core business, setting up family offices abroad to invest globally in other asset classes."
The second concern revolves around the use of the fresh capital that is raised. In 2025, fresh capital totalled Rs 64,406 crore (37% of total). Alarmingly, data indicates that only 31% of this fresh capital was earmarked for expansion, new projects, or plant and machinery. A larger share was allocated for debt retirement (26%) and general corporate purposes like working capital (23%).
Performance Paradox and the Road Ahead
Adding an intriguing layer to the debate is the performance analysis. A study of IPOs from 2015 onward shows that 102 pure OFS issues delivered an average absolute return of over 350%. In contrast, 80-odd pure fresh capital issues gave returns of about 170%—roughly half of the OFS-led IPOs. This includes mega-listings like Hyundai's India IPO, which was a pure OFS.
This record year has undoubtedly rekindled the OFS versus IPO debate. The consensus among experts is that the phenomenon is an inevitable part of a maturing, deep equity market. The ability to provide exits builds trust and attracts more risk capital to the economy. Yet, the underlying message is clear: while investor exits signal maturity, sustained growth requires that a significant portion of primary market funds also fuel tangible business expansion and that promoter families retain skin in the game. The evolution of India's equity story will be shaped by balancing these two dynamics.
