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Offer for Sale

Offer for Sale Current Issues (OFS)

In order to facilitate the promoters to dilute/offload their holding in listed companies in a transparent manner with wider participation, the Securities and Exchange Board of India (SEBI) has introduced Offer for sale (OFS) mechanism. A separate window i.e. apart from the existing trading system for the normal market segment, is being provided by the Exchange for the same.

Eligible Sellers

  • All promoter(s)/ promoter group entities of such companies that are eligible for trading and are required to increase public shareholding to meet the minimum public shareholding requirements.
  • Any non-promoter shareholder of eligible companies holding at least 10% of share capital
  • 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.
  • All promoters/promoter group entities of top 200 companies by market capitalization in any of the last four completed quarters, market capitalization being calculated as average market capitalization in a quarter.

Eligible Buyers

  • All investors registered with the brokers of the eligible stock exchanges other than the promoter(s)/ promoter group entities.
  • 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.
  • Single Clearing Price is the price at which the shares are allocated to the successful bidders in a proportionate basis methodology.
  • Multiple Clearing Prices are the prices at which the shares are allocated to the successful bidders in a price priority methodology.
  • Indicative Price is the volume weighted average price of all the valid bids.
  • Floor Price is the minimum price at which the seller intends to sell the shares.

The size of the offer shall be a minimum of Rs. 25 crores. However, size of offer can be less than Rs. 25 crores so as to achieve minimum public shareholding in a single tranche.

Advertisements about the offer for sale of shares through stock exchange(s) , if any, shall be made after the announcement/ notice of the offer for sale of shares to the stock exchanges in accordance with para 5 (b) below and its contents shall be restricted to the contents of the notice as given to the stock exchange under Para 5 (b) of SEBI Circular no. CIR/MRD/DP/ 05/2012 dated February 1, 2012.

  • Appointment of Selling Broker- The Seller(s) will appoint broker(s) for this purpose. The Seller's broker(s) may also undertake transactions on behalf of eligible buyers.
  • Contents of the announcement/ Notice of the Offer for sale of shares- Seller(s) shall announce the intention of sale of shares at least one clear trading day prior (on T-2 day, T being the day of OFS issue) to the opening of offer latest by 5 pm, along with the information mentioned under Para 5 (b) of SEBI Circular no. CIR/MRD/DP/ 18/2012 dated July 18, 2012, SEBI Circular no. CIR/MRD/DP/17/2013 dated May 30, 2013
  • Floor price- The Sellers shall mandatorily announce floor price latest by 5 pm on T-1 day to stock exchange (T day being the day of the offer for sale)
  • Timelines- Orders shall be placed during trading hours.
  • Order Placement- A separate window for the purpose of sale of shares through OFS shall be created. The following orders shall be valid in the OFS window:
  • Every bid/order for an Institutional Investor should be backed by 100% (Upfront) Cash Margin of the bid amount or 0% Margin (No Margin).
  • Every bid/order for a Non Institutional Investor (NII) should be backed by 100% (Full) Cash Margin
  • Every bid/order for a Retail Investor (RI) should be backed by 100% Upfront in the form of Cash or Cash Equivalents (Fixed Deposit Receipts(FDR) & Bank Guarantees (BG)
  • 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 (RI) and the Non-Retail category i.e Non Institutional Investor (NII). However, if the cumulative bid value of such investors exceeds Rs.2 lakhs, the bids in the retail category shall become ineligible.
  • Every order/ bid placed for 100% (Upfront) Cash Margin shall be validated against the cash deposit in OFS segment.
  • Indicative price for Non-Retail portion shall be displayed, further there will be no display of indicative price for the retail portion of OFS
  • If the security has a price band in the normal segment, the same shall not apply for the orders placed in the offer for sale. Stock specific tick size as per the extant practice in normal trading session shall be made applicable for this window.
  • In case of shares under offer for sale, the trading in the normal market shall also continue. However, in case of market closure due to the incidence of breach of 'Market wide index based circuit filter', the offer for sale shall also be halted.
  • Limit orders are permitted only on T day for Non-Retail Category.
  • Multiple orders from a single buyer shall be permitted.
  • Orders/ bids below floor price shall not be accepted.
  • Seller’s undertaking

Seller's undertaking to be executed on Non-Judicial stamp paper of Rupees 300/-

  • Clearing Corporation shall collect 100% margin in cash from non-institutional investors. In case of institutional investors who place orders/bids with 100% of margin upfront, custodian confirmation shall be within trading hours. In case of institutional investors who place orders without upfront margin, custodian confirmation shall be as per the existing rules for secondary market transactions. The funds collected shall neither be utilized against any other obligation of the trading member nor co-mingled with other segments.
  • In case of order/bid modification or cancellation, such funds shall be released/ collected on a real time basis by clearing corporation.
  • The seller(s) shall deposit the entire quantity of shares offered for sale including the additional shares disclosed at Para 5(b)(vi) of SEBI Circular, as pay-in with the clearing corporation/clearing house of Designated Stock Exchange prior to the commencement of the offer. No other margin shall be charged on the seller(s).
  • Minimum of 25% of the shares offered shall be reserved for mutual funds and insurance companies, subject to allocation methodology. Any unsubscribed portion thereof shall be available to the other bidders.
  • The orders shall be cumulated by the Designated Stock Exchange immediately on close of the offer. Based on the methodology for allocation to be followed as disclosed in the notice, the Designated Stock Exchange shall draw up the allocation. i.e. either on a price priority (multiple prices) basis or on a proportionate basis at a single clearing price.
  • No single bidder other than mutual funds and insurance companies shall be allocated more than 25% of the size of offer for sale.
  • The allocation details shall be shared by the Designated Stock Exchange with the other exchange after the allocation is crystallized.
  • Minimum 10% of the offer size shall be reserved for retail investors.
  • The allocation and the obligations resulting thereof shall be intimated to the brokers on T day.
  • Settlement shall take place on trade for trade basis. For non-institutional orders/bids and for institutional orders with 100% margin, settlement shall take place on T+1 day. In case of orders/bids of institutional investors with no margin, settlement shall be as per the existing rules for secondary market.
  • Funds collected from the bidders who have not been allocated shares shall be released after the download of the obligation.
  • On T+1 day, to the extent of obligation determined, the clearing Corporation/ Clearing house of Designated Stock Exchange shall transfer such number of shares to the clearing corporation/clearing house of the other stock exchange, without consideration of money. Excess shares, if any, shall be returned to seller broker(s).The direct credit of shares shall be given to the demat account of the successful bidder provided such manner of credit is indicated by the broker/bidder.
  • With an objective to facilitate orderly use of Offer for Sale of Shares by promoters / non-promoters "herein after term as OFS facility" on Exchange platform and to make various conditions and /or requirements governing the use of OFS facility in a transparent manner and to have its due and strict compliance, the scheme containing various terms / conditions is formulated as under:
    • Settlement shall take place on trade for trade basis.
    • The settlement schedule shall be as follows:
      • General Category bids
        Order Type Order Date Settlement Date
        Bids without upfront margin T Day T+2
        Bids with 100% upfront margin T Day T+1
      • Retail Category and Carried Forward General Category Bids
        Order Type Order Date Settlement Date
        Retail T+1 Day T+3
        Bids without upfront margin NA T+3
        Bids with 100% upfront margin NA T+2
    • The settlement of funds and securities shall be effected through the existing settlement bank accounts and securities pool accounts of capital market segment. There shall be no netting of settlement.
    • The direct credit of shares shall be given to the demat account of the successful bidder provided it is indicated by the broker/bidder. For the same, the existing facility of client direct payout in the Cash Market Segment shall be available.
    • The applicable Securities transaction tax (STT) shall be collected on the respective settlement day from the primary settlement account of the member maintained with the clearing bank.
    • Excess pay-in of shares shall be released to the selling member on T+2 day.
    • Funds payout shall be made to the selling member after completion of pay-in on the respective settlement day. The amount so credited shall be after deduction of applicable STT.
    • The following reports shall be downloaded to all Members / Custodians:
      • Order Status Report (Allocation report) giving bid wise confirmation and allocation status shall be downloaded on T day after custodian confirmation.
      • Final obligation report for settlement shall be downloaded on T day after custodial confirmation.
      • Securities Transaction Tax (STT) report shall be downloaded on T day after custodian confirmation.
      • Retail bid rejection report which shall contain the list of bids not considered for allotment due aggregate value of bids at PAN level exceeding 2 lacs across exchanges.
    • Handling of default in pay-in:
      • In case of default in pay-in by any investor, 10% of the bid value shall be charged as penalty from the investor and collected from the broker. This amount shall be credited to the Investor Protection Fund of the stock exchange. In such a case, on the Settlement day the Custodian / Trading member shall be required to inform MCCIL by way of fax / e-mail on the shortage details

The brokers shall be required to issue contracts note to its clients based on the allotment price and quantity in terms of conditions specified by the exchange.

The offer for sale may be withdrawn 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(s) shall suitably disseminate details of such withdrawal.

Cancellation of offer shall not be permitted during the bidding period. If the seller(s) fails to get sufficient demand at or above the floor price, he may choose to either conclude the offer or cancel it in full. The seller may also choose to conclude the offer or cancel it in full, in case of defaults in settlement obligation.

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