The market regulator Sebi has issued fresh modifications in the provisions of the existing offer for sale (OFS) through stock exchanges (SEs).
As Mint reported earlier, Sebi has now allowed non-promoter shareholders to sell their equity shares in a company through OFS. However, OFS is available to companies with a market capitalization of ₹1,000 crore and above.
All investors registered with the brokers of stock exchanges other than promoters are eligible to participate under the OFS to buy shares. In the case of non-promoter shareholders offering shares through the OFS mechanism, Sebi said, "promoters or promoter group entities of such companies may participate in the OFS to purchase shares, the Mint report said.
According to the new rule, in case the shares are undersubscribed in the OFS and if the original OFS is made for compliance with Minimum Public Shareholding (MPS) norms, then promoter or promoter group entities are allowed to offer the unsubscribed portion of the OFS in the open market with a gap of two weeks from the closure of the OFS, Mint reported.
The size of the offer for sale will be a minimum of ₹25 crore. However, the size of the offer can be less than ₹25 crore by promoter or promoter group entities to achieve minimum public shareholding in a single tranche.
Jimeet Modi, Founder & CEO of SAMCO Group pointed out that the fundamental change is that non-promoter shareholders who want to sell stakes valuing more than ₹25 crore can also use the OFS window of the SEs, which was so far available only to the promoters.
Modi said this amendment in OFS rules is expected to have two significant implications largely.
"One, so far large institutional but non-promoter shareholders, who were holding say 5-7-8 percent of the equity, could not avail the facility of this OFS mechanism. They had to rush to accelerated block deals via brokers, where they had to absorb deep discounts in selling prices. So, the first benefit that will accrue to the large non-promoter shareholders who will be able to sell larger blocks of shares at a better price," said Modi.
Second, this move will also help retail investors in a big way, Modi said.
"So far, when institutional investors were selling through negotiated blocks via brokers, retail investors had no way to participate and buy such stocks even though it was available at a discount. As these deals with discounts were executed through block window, it was not available to retail investors in the earlier set-up, but now the field has been levelled and if retail investors wish to participate in such deals, they will not miss the bus of a discounted price," said Modi.