The funds raised in primary issuances have been buoyant throughout this year, with record retail and domestic institutional participation, and have largely provided exits for existing investors and facilitated promoters in taking some money off the table by offloading their holdings.
The funds raised through IPOs so far this year have increased 7 per cent to ₹1.71 lakh crore, up from ₹1.59 lakh crore in 2024, according to data released by NSE.
Interestingly, the offer-for-sale (OFS) component by existing investors and promoters in IPOs has increased 13 per cent to ₹1.07 lakh crore (₹95,217 crore), accounting for 63 per cent of the overall fund-raise.
In contrast, the fresh funds raised for capital expenditure have remained almost static at ₹64,031 crore (₹64,307 crore).
While some of the IPOs with large OFS were required to meet regulatory norms, a majority provided an exit to early investors, such as venture capital and private equity investors.
The biggest IPO of this year, Tata Capital, which was raising ₹15,512 crore, was completely OFS by the parent company Tata Motors, while HDB Financial Services had an OFS of ₹12,500 crore by its promoter HDFC Bank.
However, in the case of ICICI Prudential AMC, its joint venture partner, the UK-based Prudential plc, sold 10 per cent through OFS to raise ₹10,603 crore.
Other large OFS issues include LG Electronics (₹11,607 crore), KSH International (₹290 crore) and Swiggy (₹6,828 crore).
Market valuations
Narinder Wadhwa, Managing Director & CEO of SKI Capital, said that while OFS-led issues help improve free float and liquidity, their growing dominance suggests that market valuations may be nearing a cyclical peak, as informed insiders typically divest when pricing is most favourable.
Historically, this kind of trend has been associated with late-stage bull markets, where abundant liquidity and strong retail participation allow exits at stretched valuations, he said.
The relatively-lower share of fresh issue proceeds dilutes the broader objective of IPOs as a tool for funding expansion, capex and balance-sheet strengthening, said Wadhwa.
Better assessment
Looking ahead, he said, while OFS-heavy IPOs are expected to continue, retail participants should shift their focus from short-term listing gains to a deeper assessment of the use of proceeds, promoter skin in the game post-IPO and valuation comfort.
Vinit Bolinjkar, Head of Research at Ventura, said that while providing an exit for early investors is a sign of a mature market, retail investors often buy into these businesses at peak valuations without any fresh growth capital entering the business.
When OFS dominates an IPO, extra due diligence is essential, because investors should not end up funding someone else’s exit at an inflated price, he said.
Estimates suggest fundraising through IPOs could be anywhere between ₹1.8 lakh crore and ₹2.5 lakh crore next year, with the high OFS share may continue, especially as valuations cool slightly and promoters look to lock in gains, he added.