As OFS-heavy IPOs surge, Madhusudan Kela lays down his investing rule

His comments come in a year of intense debate over initial public offerings (IPOs), which have largely been used as exit routes for promoters and private equity backers.

“If an entrepreneur is withdrawing money at a time when the company needs capital, I would never touch that company,” Kela said. Mint BFSI Meeting On December 12th.

However, he emphasized that exits will not be a problem if the company does not require fresh capital and the IPO is attractively priced. “If promoters act ethically and the issue is handled transparently, it doesn’t matter to me who sells or who buys.”

Kela said investors should focus on the company’s fundamentals (whether it offers growth and returns) and not who the buyers or sellers are in an IPO.

His words assume significance at a time when raising funds through IPO in 2025 is dominated by offer for sale (OFS) issues. By 2025, OFS accounts for approximately 63% of total IPO proceeds, according to a report by Yes Securities.

In OFS, no new shares are issued and no money flows into the company; Existing investors are selling their assets.

According to a report by Quantum Mutual Fund, in the longer period between FY15 and FY25, approximately 71% of IPO proceeds were attributed to OFS; this was just 23% in FY 2005-15, when a larger share of money raised went to growth capital for companies.

This shift highlights how IPOs are evolving from financing future growth benefiting new investors to facilitating exits for promoters and private investors, the report said.

Kela also said that the composition of the Nifty 50 index has changed over the years. He added that of the 50 companies that made up the Nifty 50 index 25 years ago, only 17 remain today, showing how leadership has changed over time.

Over the next decade, the composition of the Nifty 50 is likely to look very different, and with the nature of IT (a key component of the index) likely to change, traditional IT companies may be replaced by new-age tech firms, blurring the boundaries of what an IT company is, Kela added.

As of today, financial services account for 37% of the Nifty 50, followed by IT at 11% and oil and gas at 10.2%.

Kela said continued inflows into small- and mid-cap funds despite weak stock performance were a sign of clarity, not confusion. He added that retail investors who continue to invest are the biggest wealth creators and continued inflows into these funds reflect maturity and discipline rather than being a cause for concern.

Assets under management (AUM) for small-cap mutual fund schemes ₹3.69 trillion as of November, an increase of 13.3% in the last year, according to data from the Association of Investment Funds in India (AMFI). Nifty small-cap 250 index lost 5.5% between November 2024 and November 2025.

in crypto

While talking about crypto investment, Kela said, “I must honestly, wholeheartedly admit that I do not invest in crypto.” he said.

He quickly added that he should at least evaluate the area. “After the evaluation, forget it; it wouldn’t have been a problem if we didn’t participate,” he said, adding: “But we didn’t even evaluate.”

He noted that the reality today is completely different; Crypto has turned into a trillion-dollar industry. So while he doesn’t allocate money to it, the takeaway for investors is clear: No one should ignore any new asset class outright, he said.