An Offer for Sale (OFS) is the component of an IPO where existing shareholders — typically promoters, private equity funds, venture capital firms, or angel investors — sell some or all of their existing shares to the public. The proceeds from an OFS go directly to the selling shareholders, not to the company.
OFS-heavy issues are common when a long-tenured PE or VC investor seeks an exit, or when a promoter is partially monetising their stake. Pure-OFS issues (100% OFS, zero fresh issue) are particularly common when the company does not have an immediate capex need but a large pre-IPO shareholder needs liquidity.
The mix of fresh issue vs OFS in the IPO structure is one signal worth examining. High OFS percentages do not automatically mean a bad issue — but they do mean the offering is primarily a liquidity event for existing shareholders, not a capital-raising event for the company. The use of fresh-issue proceeds, when present, deserves closer scrutiny.