SEBI lays down a framework for ‘Offer for Sale’ of shares through stock exchange mechanism
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- Last Updated on 12 January, 2023
Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/10, Dated 10.01.2023
Based on the feedback received from various market participants, discussions with Stock Exchanges, Clearing Corporations and deliberations in the Secondary Market Advisory Committee (SMAC), SEBI has decided to modify certain provisions of the existing OFS framework through the Stock Exchange Mechanism.
Accordingly, the SEBI has issued a framework for relaxing the provisions for the ‘Offer for Sale’ of shares through a stock exchange mechanism. The facility of OFS of shares shall be available on the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Metropolitan Stock Exchange of India (MSEI). Some of the major highlights are summarised hereunder –
1. Who are eligible sellers to offer shares through an OFS mechanism?
All the promoters, promoter group entities, or non-promoter shareholders of the companies that are eligible for trading and are required to increase public shareholding to meet the minimum public shareholding requirements are eligible sellers to offer shares through the OFS mechanism.
The Sellers may also offer discounts to retail investors. The details of the discount and percentage of reservation for retail investors shall be disclosed upfront in the notice of OFS to the exchange.
2. What is the market Capitalization threshold for companies eligible for an offer for sale?
OFS mechanism shall be available to companies with a market capitalization of Rs 1,000 Cr. and above, with the threshold of market capitalization computed as the average daily market capitalization for six months period prior to the month in which the OFS opens.
3. Who are eligible buyers under the OFS mechanism?
All investors registered with the brokers of the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and Metropolitan Stock Exchange of India (MSEI), other than the promoter(s) or promoter group entities shall be eligible to buy shares under OFS.
4. What is the cooling off the period for the offer for sale transaction?
The cooling-off period for OFS transactions (i.e. purchase or sale prior to and after the offer) in the shares of the company for the promoter(s) or promoter group entities and non-promoter shareholders shall be based on the liquidity of the shares on exchanges. It can be categorized as:
- For most liquid shares: +2 weeks
- For liquid shares: +4 weeks and
- For illiquid shares: +12 weeks
5. Size of Offer for Sale of shares
The minimum size of the offer shall be Rs 25 Cr. However, promoters or promoter group entities may, make an offer of less than Rs 25 Cr. in order to obtain the minimum public shareholding in a single tranche.
6. Operational Requirements for Offer for Sale of shares
The operational requirements for the offer for the sale of shares are as follows –
(a) Appointment of a broker to undertake transactions on behalf of the eligible buyers;
(b) Announcement by a seller of an intention to the sale of shares latest by 5 pm on T-1 days to the stock exchange. The stock exchange, however, may allow, on a case to case basis based on the request of the seller, the extension of this time up to 6 pm by recording reasons for granting such an extension.
(c) Disclosure of the floor price by seller 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.
(d) The duration of the OFS shall be as per the trading hours of the secondary market. Orders shall be placed during trading hours.
7. Withdrawal & Cancellation of Offer For Sale (OFS)
The OFS may be withdrawn only prior to its proposed opening. In such a case, there will be a cooling-off period of 10 trading days from the date of withdrawal before an offer is made once again. The stock exchange shall disseminate details of such withdrawal.
Whereas, cancellation of the offer shall not be permitted during the bidding period. If the seller fails to get sufficient demand from non-retail investors in T day, then the seller may choose to cancel the offer, post bidding, in full (both retail and non-retail) on T day and not proceed with the offer to retail investors on T+1 day. The stock exchange(s) shall suitably disseminate details of such cancellation.
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