The Securities and Exchange Board of India (Sebi) has allowed non-promoter shareholders to offload their stake via the offer for-sale (OFS) route.
At present, only the promoters or promoter group entities are allowed to sell stake through OFS.
The minimum size of the offer will be Rs 25 crore, except for promoters or promoter group entities wanting to achieve minimum public shareholding in a single tranche.
This will enable large non-promoter shareholders to sell larger blocks of shares at a better price.
“So far, large institutional but non-promoter shareholders who were holding 5-8% of the equity could not avail the the OFS facility. This meant these non-promoter institutional shareholders had to rush to accelerated block deals via brokers, where they had to absorb deep discounts in selling prices,” said Jimeet Modi, founder & CEO, SAMCO Group.
He added that the move will also benefit retail investors. 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. This will change under the new regime.
Individual retail investors shall have the option to bid in the retail category and the general category (non-retail). To make it easier for retail investors to participate in OFS, sellers will allow retail investors to place their bids at cut off price in addition to placing price bids.
Minimum of 25% of the shares offered shall be reserved for mutual funds and insurance companies, subject to allocation methodology.
The seller will announce the intention to sell shares and disclose the floor price by 5 pm on T-1 day of the OFS. Allocation of shares will be either on a price priority or proportionate basis.
Clearing Corporation shall collect 100% margin in cash from non-institutional investors.
The OFS may be withdrawn prior to its proposed opening.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.
OFS for sale of units of REITs and InvITs by sponsor(s) or sponsor group entities, and other unitholders shall be permitted only in publicly issued and listed REITs and InvITs. The new rules will come into effect from February 9.