Expanding the framework of Offer for Sale (OFS) of Shares through stock exchange mechanism
Summary
This circular modifies the Offer for Sale (OFS) framework to encourage retail participation and expand eligibility to top 200 companies by market capitalization. It mandates a minimum 10% reservation for retail investors, defined as those bidding up to Rs. 2 lakhs, and allows sellers to offer discounts to this category. Stock exchanges are instructed to implement these changes within three weeks and update their bye-laws accordingly.
Text
The OFS mechanism shall be available to top 200 companies by market capitalization in any of the last four completed quarters.
Any non-promoter shareholder of eligible companies holding at least 10% of share capital may also offer shares through the OFS mechanism.
In case a non-promoter shareholder offers shares through the OFS mechanism, promoters/ promoter group entities of such companies may participate in the OFS to purchase shares subject to compliance with applicable provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
Minimum 10% of the offer size shall be reserved for retail investors. For this purpose, retail investor shall mean an individual investor who places bids for shares of total value of not more than Rs.2 lakhs aggregated across the exchanges. If the cumulative bid value across exchanges exceeds Rs.2 lakhs in the retail category, such bids shall be rejected.
Individual retail investors shall have the option to bid in the retail category and the general category. However, if the cumulative bid value of such investors exceeds Rs.2 lakhs, the bids in the retail category shall become ineligible.
The cut off price i.e. the lowest price at which the entire offer gets sold, shall be determined based on all valid bids. The cut off price shall be determined separately for bids received in the retail category and for bids received in the non-retail category.
Upon determining the cut-off price, the offer size reserved for retail investors shall be allocated to eligible bids of retail investors. Any unutilized portion shall be offered to non-retail category of investors. In case of excess demand in retail category at the cut-off price, allocation shall be on proportionate basis.
Indicative price for retail and non-retail portion shall be displayed separately.
Seller shall announce intention of sale of shares latest by 5 pm on T-2 day (T day being the day of the OFS) to the stock exchange. Stock exchanges shall inform the market immediately upon receipt of notice.
In case of disclosure of the floor price, seller shall disclose the floor price latest by 5 pm on T-1 day to the stock exchange. Stock exchanges shall ensure that the same is informed to the market immediately.
Seller may offer discount to retail investors. The details of discount and percentage of reservation for retail investors shall be disclosed upfront in the notice of OFS to the exchange.
Discount to retail investors may be offered as follows: Multiple Clearing price OFS- Retail investors may be allocated shares at a discount to the cut-off price determined in the retail category, irrespective of the bid price entered by them. Or Retail investors may be allocated shares at a discount to the bid price entered by them. Single clearing price OFS- Retail investors shall be allocated shares at a discount to cut off price determined in the retail category.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Expanding the framework of Offer for Sale (OFS) of Shares through stock exchange mechanism. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.