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In an IPO, the total issue may consist of a Fresh Issue, an Offer for Sale (OFS), or a combination of both. While both involve shares being offered to the public, they differ in terms of who receives the proceeds and why the shares are being sold.
|
Basis of Difference |
Fresh Issue |
Offer for Sale (OFS) |
|
Nature of Shares |
New shares are issued by the company. |
Existing shares held by promoters or investors are sold. |
|
Recipient of Proceeds |
Funds go to the company, increasing its share capital. |
Funds go to the selling shareholders; the company does not receive any money. |
|
Purpose |
To raise funds for specific Objects of the Issue such as expansion, debt repayment, or working capital. |
To provide liquidity or exit to existing shareholders or investors. |
|
Impact on Share Capital |
Increases the company’s paid-up share capital (dilution of ownership). |
No change in the company’s share capital (no dilution). |
|
Who Benefits |
The company benefits from the inflow of funds. |
The selling shareholders benefit from monetising their holdings. |
|
Disclosure in Prospectus |
Utilisation of proceeds is detailed under Objects of the Issue. |
Details of selling shareholders and number of shares offered are disclosed. |
|
Example Scenario |
A company issues new shares to fund a new manufacturing plant. |
Promoters sell part of their stake to reduce holding or realise pro |
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