Online Investment & Trading, Stock Broking in India | Investmentz.com by Asit C Mehta Investment Interrmediates Ltd.

Offer for Sale
(OFS)

Offer for sale (OFS) enables stakeholders of a company to sell their shareholdings. OFS is a relatively new mechanism, where sellers use a separate one day window provided by Stock exchanges for selling the stake. The government of India is using the OFS option to offload its shares in public sector companies Under its disinvestment programme.

Who Can Participant in Offer for Sale

Below market participate can bid on the OFS process

Participants of derivatives trading in India can be categorized under three groups:

Retail investor
Mutual Fund
Foreign Institutional Investors (FIIS)
Insurance companies
Corporate
HUF
Other Qualified institutional Bidders

Who is a Retail Investor?

Investors investing up to Rs. 2 lakh in an OFS are considered retail investors.

An investor applying in the OFS, must pay the entire application amount upfront, and should place the bid during market hours and state the quantity and the floor price.

The allocation is on a price priority basis. Those who bid with a higher amount will have a greater chance of getting an allotment.

Shareholders or promoters having 10% of the share capital in the company can offer shares through OFS. 25% of the offering is the maximum share allocation to the individual bidder. The shares are get allotted in T+1 day and the stocks are offered at a discounted price compared to the secondary market.

Offer for Sale application process

As an individual investor, you can apply under the retail category. The OFS bid limit should not exceed ₹2 Lac. By any means, if the bid limit exceeds ₹2 Lac, the investment will be categorized under the Non-institutional Investor (NII) category instead of retail.

To invest in OFS, an investor will require

DEMAT Account
Trading Account

There are certain OFS rules and regulations to look after

The top 200 companies are available for OFS in the stock market. These 200 companies are ranked based on the market cap.
10% of the OFS shares are reserved for retail investors.
25% of the OFS shares are reserved for mutual funds and insurance companies.
Shareholders with above 10% capital are eligible to offer shares via OFS such as UTI, Mutual funds, Banks, Financial institutions, etc.

Advantage of OFS over traditional Follow-On Public Offer

System based bidding platform
Quick bidding process
Convenient

How to Buy an OFS?

The company gives a band within which OFS bids should make. The investor can offer any price within the band or indicate that they are ready to offer to buy at an average price provided by all other bidders. Once the OFS bids are placed, shares get allocated to the buyers. OFS does not have any share limit to participate, which means a bidder can bid in the OFS even for a single share.

FAQs

Offer for Sale (OFS) and Initial public offering (IPO) must be similar but have different features.

Offer For Sale (OFS)	Initial Public Offering (IPO)
OFS is eligible for the top 200 companies based on the market cap.	IPO is eligible for any company that wants to raise capital for the company’s growth and expansion.
10% OFS shares are reserved for retail investors; 25% for mutual funds and insurance companies.	35% of the company shares are reserved for retail investors.
OFS can be completed in one single trading day.	IPO can remain open for three to four days.

OFS by government companies is suitable investments since these are old companies, though the government is aggressive in pricing the OFS. Some discounts are offered to retail investors.

In the case of OFS by other companies, one needs to study and decide if it is a good investment then only invest in OFS.

OFS shares are allocated in two significant ways-

Single Clearing Price: All the investors/ bidders are allocated the shares at the same price.
Multiple Clearing Price: All the investors/ bidders are allocated the shares based on the price priority.

Another option for the OFS investor, apart from the above two, is the cut-off option. It is the lowest price at which the investor/bidder is allocated shares during the OFS process. The cut-off price for the investor makes it easy to apply for OFS shares without finding out the price discovery during the bidding time.

Any OFS investor can modify or cancel the order under OFS only during the offer period. There will be no modification/ cancellation of the OFS shares bid allowed during the last 30 minutes of the offer duration.

Since the OFS companies are already listed, there is plenty of liquidity in selling OFS on stock exchanges. However, you can always check on the liquidity on exchange before investing.

Floor price is the minimum price to apply for the OFS. Investors can not apply for OFS below the floor price.

The offer price is disclosed by seller a day before the shares are offered. It is disclosed between the closure of trading hours and the end of business hours of the stock exchanges.

Investors will receive shares directly into their DEMAT accounts on the day of allotment, which is T+2. where T is the day of issue.

For Non allotted bid the exchange credit the money to Borker on T+2 basis. Once we get the same the same will be credit to client ledger on T+1 basis.

You can contact your relationship manger or our Customer service desk at HO.

For Non allotted bid the exchange credit the money to Borker on T+2 basis. Once we get the same the same will be credit to client ledger on T+1 basis.

Voluntary Freezing / Blocking of Trading Accounts:

Offer for Sale (OFS)

Who Can Participant in Offer for Sale

Who is a Retail Investor?

Offer for Sale application process

There are certain OFS rules and regulations to look after

Advantage of OFS over traditional Follow-On Public Offer

How to Buy an OFS?

FAQs

1. What is the difference between OFS and IPO?

2. How to select OFS?

3. What are the allocation methodologies for OFS?

4. Is it possible for an investor to cancel/modify the order under Offer for Sale (OFS)?

5. What is the liquidity option in OFS?

6. What is the meaning of floor Price under OFS ?

7. When will investors receive allotment?

8. How are refunds made on cancellation?

9. Whom should I contact for any other queries?

10. How are refunds made on cancellation?

Offer for Sale
(OFS)