News on OFS "Offer for Sale”

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NEWS ON OFS The government expects to earn as much as Rs 43,000 crore by selling portion of the government's stake in various state-owned companies, The cabinet has already cleared stake sale in Coal India, ONGC and NHPC. The first OFS is likely to be a 5% sale in steel maker SAIL.

What is an Offer for Sale? When a company opts for an “Offer for Sale” (OFS), it means the promoters want to dilute their holdings in that particular listed company and it would be done through an exchange based bidding platform. Who can bid for these shares and how is the bidding done? Anyone who has a trading and Demat account can bid for these shares by placing a bid through their trading account. Which companies can hold an offer for sale? According to a recent SEBI (Securities and Exchange Board of India) circular the top 200 companies by market capitalization in any of the last four completed quarters can go the OFS way. Earlier, it was only available to the top 100 companies by market-cap. We are expecting more PSUs to go the OFS way as the government is getting ready to offload a portion of its stake in PSU companies as a means to increasing its revenue. How many shares can one investor buy in an offer for sale? An investor under the retail category is allowed to place a bid upto Rs. 2 lakhs. To encourage retail participation in OFS, SEBI guidelines also state that in any OFS issue a minimum of 10% reservation has to be for retail investors. PSUs may offer up to 20% participation to retail investors. If an investor buys shares through an OFS, does he get a discount? Retail investors are generally offered a discount on the floor price, especially in OFS of PSU companies. The discounted price is one of the key reasons to buy shares during an offer for sale and not from the secondary market. .

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