What Is an Offer for Sale (OFS) — and Why the Company Doesn't Get a Single Rupee

What it is

An Offer for Sale (OFS) is a fast, exchange-based way for a large existing shareholder — usually the promoter or, for public-sector companies, the government — to sell a big chunk of their shares to the public. SEBI introduced it in 2012, mainly to help companies meet the rule that at least 25% of shares must be held by the public.

Think of it like the original owner of a flat selling to a new buyer. The flat doesn't change, and the builder who first constructed it gets nothing. Money simply moves from the new buyer to the seller.

The key distinction: the company earns nothing

This is the part most people miss. In an IPO or an FPO, the company creates and sells brand-new shares, so fresh cash flows into the business. An OFS is different — it only sells shares that already exist. So the money goes straight to the seller (the promoter or government), and the company itself receives zero.

That also means the total number of shares stays the same. Your slice of the company isn't diluted — but the identity of who owns the big blocks does change.

How it actually works

An OFS is quick and rule-bound. The seller must tell the exchanges two days in advance, and the whole sale happens in a single trading day (an IPO or FPO can stay open for days). A floor price is announced — the lowest price at which shares will be sold — and it's usually set at a discount to the current market price to attract buyers. Big institutions bid on the first day; retail investors get their turn (often the next day) and typically get a small extra discount. You bid through your normal broker.

A real example: IRCTC (2020)

In December 2020, the government decided to trim its stake in IRCTC, selling up to 20% (a 15% base offer plus a 5% top-up) through an OFS. It set the floor price at ₹1,367 a share — about a 16% discount to the stock's price at the time.

Here's the twist retail investors felt: on the day the OFS was announced, IRCTC's share price fell around 5%. Nothing had gone wrong with the business — no bad results, no scandal. The stock dropped simply because a large seller was about to flood the market with shares at a discount, so buyers had little reason to pay full price.

The lesson: an OFS is a seller cashing out, not the company raising money. If you see a stock you own suddenly dip on OFS news, that dip is usually about supply and the discount — not about the health of the company underneath.