Reviewed on 24 Oct 2026 · Source: IPO Bulletin explainer; checked against SEBI ICDR Regulations 2018 (as amended) and offer-document practice
A fresh issue is the part of an IPO in which the company creates and sells new shares, so the money raised goes to the company itself. Because new shares are added, the total number of shares outstanding rises, and the ownership of existing shareholders, including the promoters, is diluted. The proceeds are used for the purposes stated in the offer document under objects of the issue, such as building a factory, repaying debt, funding working capital, expanding a brand or general corporate purposes. Many IPOs combine a fresh issue with an offer for sale, and the split between the two is a useful clue. A larger fresh issue suggests that the company is raising capital to grow, whereas a mostly offer-for-sale issue means existing shareholders are cashing out, and the company receives little. Investors should read the objects of the issue carefully, check how much is earmarked for debt repayment compared with expansion, and see whether proceeds from the issue are expected to raise earnings per share in the coming years. The size of the fresh issue is stated in the price band announcement.
Example: An IPO of Rs 500 crore has a fresh issue of Rs 350 crore and an offer for sale of Rs 150 crore. The company receives the Rs 350 crore to expand a plant and repay loans, while the selling shareholders receive the Rs 150 crore.
A fresh issue is the part of an IPO in which the company creates and sells new shares, so the money raised goes to the company itself. Because new shares are added, the total number of shares outstanding rises, and the ownership of existing shareholders, including the promoters, is diluted. The proceeds are used for the purposes stated in the offer document under objects of the issue, such as building a factory, repaying debt, funding working capital, expanding a brand or general corporate purposes. Many IPOs combine a fresh issue with an offer for sale, and the split between the two is a useful clue. A larger fresh issue suggests that the company is raising capital to grow, whereas a mostly offer-for-sale issue means existing shareholders are cashing out, and the company receives little. Investors should read the objects of the issue carefully, check how much is earmarked for debt repayment compared with expansion, and see whether proceeds from the issue are expected to raise earnings per share in the coming years. The size of the fresh issue is stated in the price band announcement.
A price band is the range, with a lower limit (floor) and an upper limit (cap), within which investors may bid for shares in a book-built IPO. The company and its lead managers announce the band in the price band advertisement, usually a few working days before the issue opens, and the Red Herring Prospectus carries the same range. The final issue price is discovered through bidding and is fixed inside this range, so it can never be higher than the cap or lower than the floor. Under SEBI rules the cap should not exceed 120 percent of the floor price, which keeps the range reasonably tight. Retail investors normally bid at the cap or at the cut-off price so that their bid stays valid whatever the final price turns out to be. The band matters because it sets the maximum money you must keep blocked in your bank account: lot size multiplied by the cap price. Companies can revise the band during the issue, but that requires public notice and an extension of the bidding period by at least three working days. Fixed-price issues do not have a band; they have a single price.
Worked example
An IPO of Rs 500 crore has a fresh issue of Rs 350 crore and an offer for sale of Rs 150 crore. The company receives the Rs 350 crore to expand a plant and repay loans, while the selling shareholders receive the Rs 150 crore.
