What is Offer for Sale (OFS)?
An Offer for Sale is a method in which promoters of listed companies can sell their shares through the bidding platform for the Exchanges and transparently reduce their holdings.
It’s an easier process for the promoter to dilute their stake with minimum compliance. OFS was introduced in 2012 by SEBI and available for top 200 companies in terms of market capitalization.
OFS process opted by the listed companies for the fulfillment of financial needs. Only promoters or shareholders holding more than 10 percent of the share capital can avail this issue. The minimum offer size is 25 crore.
Bidder Includes Companies, Individual, FII’s, and QIB’s.
In an OFS, a minimum of 25 percent of offer size is reserved for mutual funds (MFs) and insurance companies, and a minimum of 10 percent of the offered size is reserved for retail investors.
Process for Application, Bidding, and Allotment in OFS:
- The company has to inform stock exchanges atleast 2 days before the OFS.
- An individual can apply for OFS with the help of brokers with the bid value not exceeds Rs. 2 Lakh. And unlike to IPO an investor can put multiple bids and the bid can be modified or cancel any time during bidding hours.
- The company set a floor price, No allocation will be made below the floor price.
- The OFS is open for a single trading day with Bid timing is between 9.15 am to 2.45 pm.
- Settlement takes place T+1 day.
Difference between OFS and IPO/FPO
|Difference Keys||OFS||IPO / FPO|
|Offer Application||No application required.||Application required|
|Opening||Open for single Trading Session||Open for four to five days|
|Charges||Charges like Brokerage, STT and other charges||No Charges|
|About Company||Very known company||Not Much known|
|Fresh Capital||Not involve the raising of capital only change in ownership||For capital raising|
|Effect on EPS||Not EPS dilutive||EPS dilutive|