Does an OFS kill the IPO's buzz?

[Uditi_Kalra]

Does an OFS kill the IPO’s Buzz??

Hypothesis: Higher OFS percentage in an issue results in lower subscription rates and does not have a significant direct impact on listing gains/losses.

The Data behind this Analysis

Sample Selection Process

• Initial Dataset: 79 IPOs from FY24 and FY25
• Refined Dataset: 69 IPOs (removed 10 outliers with extreme OFS percentages of 0% and 100%)
• Focus Group: Top IPOs by issue size for visualization (numbers vary per chart)

Findings:

1. OFS% in an issue VS Subscription Rates

Looking at the top 10 IPOs by issue size, there’s a clear pattern: OFS percentage increases, total subscription rates tend to decrease.

Key Insight: The Pearson correlation coefficient of -0.3023 confirms this negative relationship. Link

What does this correlation tell us?

• -0.30 falls in the moderate negative correlation range (between -0.3 and -0.5)
• The relationship is moderate and meaningful
• For every increase in OFS percentage, we can expect subscription rates to decline with moderate confidence.

2. Subscription Patterns Across OFS Categories

OFS Category	Average Subscription
Pure Fresh (0%)	154.605
Low OFS (1-30%)	87.21125
Medium OFS (31-70%)	56.16785714
High OFS (71-100%)	66.97

What’s interesting here?

1. Pure fresh issues absolutely dominate with 154x average subscription
2. Clear decline from Pure Fresh to Low OFS to Medium OFS
3. Surprising uptick in High OFS category - this suggests other factors at play

3. OFS% in an issue VS Listing Gain/Loss

When I analyzed the top 10 and bottom 10 issues by issue amount against their listing gains/losses, the correlation was much weaker.

Pearson correlation coefficient: +0.2113 Link

What does this mean?

+0.21 indicates a weak positive correlation
Key Takeaway: OFS percentage doesn’t strongly predict listing day performance

Hypothesis Validation & Conclusion

This analysis confirms our hypothesis with clear evidence:

1. Higher OFS % → Lower Subscription Rates

• Moderate negative correlation (-0.30)

• The relationship is meaningful and consistent.

• Investors show moderate preference for fresh capital deployment

2. Minimal Direct Impact on Listing Performance

• Weak positive correlation (+0.21) with listing gains.

• Other factors dominate listing day performance.

• OFS is not a strong predictor of immediate returns.

The Bottom Line: OFS percentage has a moderate impact on investor appetite, with higher OFS leading to notably lower subscription rates. However, when it comes to listing performance, OFS structure plays a minimal role.

Key Insight: Investors are rational - they subscribe less enthusiastically to high OFS issues but listing day performance is driven by broader market factors beyond just OFS structure.

References:

OFS Vs Fresh Issue
OFS Vs Listing Gains

[cvs]

Thanks for digging this up.

Especially focussing on correlation and not claiming causation.
That -0.30 correlation is definitely actionable info for anyone evaluating IPOs.

Now that the OFS% - Subscription-level correlation has been established,
i wonder what other confounding variables are hiding in the background.

Business viability could be one.
Weaker companies would have both more OFS pressure and lower investor interest.
But there’s probably other stuff at play too -

@Uditi_Kalra, in your analysis, did you come across…

• any sectoral patterns?
  • Some industries have higher risk tolerance from investors?
• any market phase/timing patterns?
  • Bull market periods having higher risk tolerance from investors?
• any other such “confounding variable” patterns in the data?

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PS: Unable to view the spreadsheets using the 2 reference links at the end of the post.
Could you update links with the permission “Anyone with the link can view” in Google Sheets.

[Rohith_Raj]

Great analysis!
It aligns well with the general market perception that OFS = promoters offloading their stake → often seen as a red flag by retail investors. It’s almost like the company is asking for a big cheque without giving fresh value in return, so the dip in subscription rate makes sense.

But the listing day data is surprising, I assumed high OFS would drag down listing performance too. Looks like the market momentum and investor sentiment still dominate.

One thing I’m curious about:

• Do we have any granular data on the breakdown of OFS subscription by category? (Retail vs QIB vs HNI)? Would love to see if retail investors are the ones still subscribing heavily to OFS-heavy IPOs, or if the institutional side is more cautious too.

• Also Did IPOs with higher OFS % also come with more aggressive valuations? Would be interesting to check if high OFS correlates with steeper pricing.