NSE seeks higher retail participation in OFS

The National Stock Exchange (NSE) is hoping for more retail participation in upcoming offers for sale (OFS). The recent Coal India OFS got a lukewarm response with the retail portion remaining undersubscribed with allocated portion of 12,63,27,288 shares getting less than 50 per cent subscription. The issue, however, was oversubscribed 1.23 times.

Speaking at a press meet in the national capital on OFS issues on Thursday, Ravi Varanasi, chief business development officer, National Stock Exchange, said, "There is need to spread more awareness about OFS so that we could see more subscription from retail investors." Around 80,000 retail investors participated in Coal India OFS. The issue raised around Rs 22,600 crore for the government.

Prior to Coal India, equity market has seen OFS of Steel Authority of India which got a healthy response from the retail category with subscription of 2.66 times. Market is likely to see a series of divestments by public sector companies in February and March as the government has a divestment target of over Rs 58,000 crore which is not yet met. The government has plans to divest 5% in Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) in 2014-15.

Under OFS, there is no restriction on the number of bids from a single investor. However, all bids by investors other than bids by mutual funds and insurance companies shall be restricted to 25 per cent of OFS. In case of retail investors, all bids will get rejected if the bid values across all exchanges exceed Rs 2 lakh.

Offer for sale facilitates the promoters of an already listed company to sell or dilute their existing shareholdings through an exchang-based bidding platform to meet the minimum public shareholding requirement in terms of Securities Contracts Rules. Any non-promoter shareholder of eligible companies (top 200 companies by market capitalisation) holding at least 10 per cent of share capital may also offer to sell their stake through OFS mechanism.