The Government of India sold up to a 2% stake in Indian Railway Finance Corporation (IRFC) via an Offer for Sale at ₹91/share, raising over ₹2,300 crore. The OFS was oversubscribed 1.86x on Day 1, prompting the government to exercise the full greenshoe option — yet IRFC's own balance sheet didn't see a single rupee.
Here's a question I love asking finance learners: a listed company does a share sale, raises ₹2,300 crore — does the company get the money?
With IRFC, the answer is no. And understanding why is one of the most clarifying moments in corporate finance.
This was an Offer for Sale (OFS) — a mechanism where an existing shareholder, in this case the Government of India, sells its own shares to the public on the stock exchange. The government is the seller. The government gets the cash. IRFC, the company, is simply the underlying asset being traded.
Contrast this with a fresh issue (also called a primary issue): the company itself creates new shares, sells them, and the proceeds land on its balance sheet as equity capital. That's what funds capex, pays down debt, or fuels growth.
In an OFS, no new shares are created. No cash enters the company. The only things that change are: (a) government's ownership percentage drops, and (b) public float increases.
So why does the stock price fall when an OFS is announced — as IRFC's did, by over 5%? Two reasons: the floor price is set at a discount (₹91 vs. a prior market price near ₹98.69), signalling a price ceiling; and more supply hits the market, which pressures price.
For a CFO, the lesson is sharp: always ask who is selling and where does the money go. Capital structure decisions — equity, debt, OFS, fresh issue — determine whether capital actually enters the business or simply moves between shareholders.
The government's goal here isn't to fund IRFC. It's fiscal: ₹80,000 crore disinvestment target for FY27, and this OFS chips away at that. Two completely different agendas sharing one transaction.
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