What is Offer for sale – Eligibility, Pricing, Allocation, Payment, Discount

Offer for sale

Offer for sale (OFS): Offer for sale is a separate window facilitated by the stock exchanges wherein Promoter/Promoter Group Entities/ Non Promoters of an already listed company can sell their shares through an exchange based bidding platform.

This was initially permitted by SEBI to enable the Promoters of listed companies to meet the minimum public shareholding requirements in terms of Securities Contracts (Regulation) Rules by way of diluting/offloading their holding in listed companies in a transparent manner. However, now the segment has been extended to Non Promoters of eligible Companies holding at least 10% of share capital of the Company.

Who are eligible to participate?

All market participants who are registered with trading brokers of the stock exchange can take part/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.

Offer for sale

Pricing of the securities:

Interested participants will have to give bids to the Trading Member specifying the quantity and the price at which they are willing to bid for a given issue. Also, the retail investors can bid at cut off price by choosing the same in application form while bidding. The seller should inform the exchange of the floor price at least a day before the day of actual issue

Allocation under Offer for sale:

Bids that are not less than the floor price specified by the seller are accepted by the exchange. Rest all is rejected. If a minimum lot has been specified by the sellers while announcing the OFS, then the same will be disclosed by the exchange to the public whose bids are accepted only when their order size is not below the minimum lot. If there is no such minimum lost specified by the sellers, one can bid for even a single share also. Bids matching with the cut off price will be allotted the shares proportionally and any excess amount will be refunded.

As per the SEBI guidelines on offer for sale, it is mandatory for the sellers to provide at least 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 shall be allocated more than 25% of the size of OFS.

By the end of the OFS open day after closure, the Exchange will share the allotment report with the Trading Members. Bidders can get in touch with these members of the exchange to know the stats of their allotment.

Payment:

As per SEBI OFS guidelines, all investor bids must be backed by 100% cash up front. Otherwise, the bids will not be accepted by the exchange. Refund orders will be initiated for those having allotted nil shares/ partial allotment/discounts/excess payments.

Discount for Retail Investors:

As per the SEBI guidelines on offer for sale, the Sellers can offer discounts to retail investors. The Sellers intending to offer discount to retail investors will mention the details in the OFS announcement notice. The discount will be either on bid price or on the final allotment price.

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