How does an Offer for Sale (OFS) in the primary market fundamentally differ from a fresh public issue of equity shares by a corporate issuer?

[ A ]In an OFS, existing shareholders (promoters/investors) sell their pre-existing allotted shares to the public, so the sale proceeds go to the sellers and the company's issued share capital does not expand.[ CORRECT ]

[ B ]In an OFS, the company creates new shares and expands its paid-up capital, retaining all proceeds for capital expenditures.

[ C ]An OFS is an informal loan granted by commercial banks without any stock market listing requirements.

[ D ]An OFS is restricted exclusively to foreign central banks purchasing sovereign gold bullion.

Takeaway

Option A is correct: In an OFS, existing shareholders (promoters/investors) sell their pre-existing allotted shares to the public, so the sale proceeds go to the sellers and the company's issued share capital does not expand.

Derivation

In a fresh public issue of equity shares, the company creates new shares, thereby expanding its issued and paid-up capital, and the capital proceeds flow directly into the company's treasury for business expansion. In contrast, an Offer for Sale (OFS) represents existing shareholders (such as promoters, private equity funds, or the Government in PSU disinvestments) offloading their pre-existing shares to the public. The proceeds go to the selling shareholders, and the company's share capital remains unchanged. This tests primary issue structures. The common error is assuming OFS expands company equity.

Why the others fail

B — In an OFS, the company creates new shares and expands its paid-up capital, retaining all proceeds for capital expenditures.

Creating new shares and expanding paid-up capital defines a fresh issue of shares, not an Offer for Sale.

C — An OFS is an informal loan granted by commercial banks without any stock market listing requirements.

An OFS is a regulated public share offering conducted through stock exchanges, not an unlisted commercial bank loan.

D — An OFS is restricted exclusively to foreign central banks purchasing sovereign gold bullion.

An OFS is an equity market divestment mechanism for corporate/government shares, not a central bank bullion trade.