The Securities and Exchange Board of India (Sebi) on Tuesday introduced the revised framework for share sales through offer for sale (OFS), paving the way for non-promoters to use this route.
In a circular issued on Tuesday, the capital market regulator said the OFS mechanism would also be available to companies with a market capitalisation of Rs 1,000 crore or more. A separate window would be created for sale of shares through OFS and, under the new mechanism, aligned to the secondary market timings.
The minimum size for an OFS has been kept at Rs 25 crore. But in case an OFS is being launched to comply with the regulator’s minimum public shareholding norm, the offer size can be less than Rs 25 crore. Sebi mandates a minimum of 25 per cent public shareholding in listed companies.
Industry experts are of the opinion that these relaxations can make OFS the relatively preferred route over bulk deals by offering more pricing flexibility and transparency.
The seller would have to disclose the floor price by 5 pm on the day before the OFS opens.
Furthermore, it would be able to offer a discount to retail investors, details of which would have to be disclosed upfront to exchanges.
Only non-retail investors would be permitted to place bids on the first day of OFS (T day), while retail investors could bid the following day. The cut-off price shall be determined based on the bids received on T day, based on the extant guidelines.
“Exchanges will decide on the quantity of shares eligible to be considered as retail bids, based on the floor price declared by the seller,” said Sebi. If the seller fails to get sufficient demand from the non-retail segment at the floor price, it may choose to cancel the offer.
A minimum of 25 per cent of the shares offered would be reserved for mutual funds and insurance companies, while 10 per cent would be reserved for retail investors.
The regulator has also reduced the cooling-off period between two OFSes to two weeks. In case an OFS is withdrawn, there will be a gap of 10 trading days before another offer is made.
The new framework would be effective in the next 30 days.