What is an offer for sale?


An offer for sale is open for only a single trading day. The company shares are sold in a single trading day and only during the normal trading hours

An offer for sale (OFS) is the way by which stakeholders of a company sell their holding. OFS enables promoters to dilute their holdings in listed companies in a transparent manner with a wider participation through exchange based bidding platform.

Capital market regulator SEBI (Securities and Exchange Board of India) in July 2012 allowed stock exchanges to set up a separate window — OFS — wherein promoters can sell their shares in listed companies.

The OFS window has been created to give promoters an easy option to comply with the minimum public shareholding requirement. The OFS route helps the promoters of an already listed company to sell their existing shareholdings through an exchange-based bidding platform.

Who are the participants?

The promoters of the company are sellers in the OFS process. They can only sell the shares and not buy them. The buyers include foreign institutional investors (FIIs), mutual funds, insurance companies, individuals and HUFs (Hindu Undivided Families) among others.

Offer price

An OFS is open for only a single trading day. The company shares are sold in a single trading day and only during the normal trading hours i.e. between 9:15 a.m. and 3:30 p.m. Cost effective

OFS process

OFS route involves fewer formalities. Unlike IPOs (initial public offerings) or FPOs (follow on public offers) companies are not required to file draft red herring prospectus (DRHP) in case of OFS. The DRHP process is usually a lengthy and time consuming process. However, you can view the details like name of the company, seller name, bidding date, period and floor price on the stock exchange website.

There is no need to get the application forms printed. This helps promoters save money on advertisement expenses.

Companies also don’t have to wait for days to receive applications from investors before the OFS is completed. Under OFS no forms are issued to apply for bids unlike IPOs/FPOs. This saves time for both promoters and investors.

To participate in an OFS, investors need to have a demat / trading account(s). The sellers are required to deposit the offered shares with the exchange before 11.00 a.m. on T-1 day, where ‘T’ is the day of OFS.

Investors can use their online trading accounts like ICICI Direct, Kotak Securities, HDFC Securities, AxisDirect, 5-Paisa.com, etc to place bids under the ‘OFS’ section of their respective broking websites.

Investors, who do not have online trading accounts, can direct their broker to place bid it on their behalf. Under OFS, there is no restriction on number of bids from single buyer.

Investors can modify or cancel their bids during the offer timings except in the last 60 minutes i.e. till 2:30 p.m.

With OFS, there is a “floor price”. As the name suggests, it is the minimum price at which you can bid for the shares under OFS.

The seller can disclose the offer price on the day before the shares are offered, but after the closure of trading hours and before the end of business hours of the stock exchanges.

Investors receive shares directly into their demat account on allotment on T+2, where ‘T’ is the day of issue.

Charges

The OFS process involve transaction charges such as brokerage, securities transaction tax (STT) and other charges, which the investors normally pay when they buy shares of a company in the cash market.



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