Offer for Sale (OFS): Offer for Sale is a separate window facilitated by stock exchanges wherein promoters/promoter group entities/non-promoters of an already listed company can sell their shares through an exchange-based bidding platform.
SEBI initially permitted this to enable promoters of listed companies to meet the minimum public shareholding requirements as per the Securities Contracts (Regulation) Rules by reducing/selling their stake in listed companies in a transparent manner. However, this section has now been extended to non-promoters of eligible companies holding at least 10% of the share capital of the company. Also, check Five types of mutual funds.
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Who is eligible to participate?
All market participants who are registered with the trading brokers of the stock exchange can participate/bid in the offer for sale. This includes:
| 1 | Retail Investors |
| 2 | Mutual Funds |
| 3 | Foreign Portfolio Investor (FPIs) |
| 4 | Insurance Companies |
| 5 | Qualified institutional Buyers (QIBs) |
| 6 | Non-Resident Indians (NRIs) |
| 7 | Trusts, HUFs, Body Corporates, Proprietary etc. |
Pricing of securities:
Interested participants have to submit bids to the trading member specifying the quantity and price they are willing to bid for a given issue. Also, retail investors can bid by selecting a cut-off price in the application form while placing a bid. The seller must inform the exchange of the floor price at least one day before the actual issue day.
Allotment under Offer for Sale:
Bids not less than the floor price specified by the seller are accepted by the exchange. All others are rejected. If a minimum lot has been specified by the sellers while announcing the OFS, the same will be disclosed by the exchange to the public, whose bids are accepted only if their order size is not less than the minimum lot size specified by the sellers. If the sellers specify no minimum lot size, one can bid even for a single share. Bids matching the cut-off price will be allotted shares proportionately and any excess amount will be refunded.
As per SEBI guidelines on offer for sale, it is mandatory for sellers to provide a minimum of 10% reservation for retail investors and 25% for insurance companies and mutual funds, subject to the allocation methodology. No single bidder other than mutual funds and insurance companies will be allotted more than 25% of the size of the OFS.
By the end of the open day of the OFS after closure, the exchange will share the allocation report with the trading members. Bidders may contact these members of the exchange to know their allocation statistics. Must read Best Mutual Funds to invest in 2024.
Payment
As per SEBI OFS guidelines, all investor bids must be supported by 100% cash upfront. Otherwise, the bids will not be accepted by the exchange. Refund orders will be raised for those allotted zero shares/partial allotment/discount/excess payment.
Discount for Retail Investors
As per SEBI guidelines on Offer for Sale, sellers may offer discounts to retail investors. Sellers intending to offer discounts to retail investors will mention the details in the OFS announcement notice. The discount will be either on the bid price or the final allotment price.
