Retail investors to have 10 per cent reservation in an Offer for Sale

Retail investors will now get a 10 per cent reservation in an offer for sale (OFS) by listed companies and they may also be given discounts by entities selling shares through this mechanism.

Besides, non-promoter shareholders with more than a 10 per cent stake can sell their shares through an OFS, according to a proposal cleared on Thursday by the Securities and Exchange Board of India (Sebi), which also allowed a larger set of firms to tap this route.

The offer-for-sale route was introduced in February 2012 as a faster way for promoters to sell shares and has been found to be a very successful mechanism. More than 100 companies have sold shares through OFS to mop up almost Rs 50,000 crore since it was introduced.

Sebi introduced the OFS mechanism to help listed private companies comply with the minimum 25 per cent public shareholding norm and state-owned firms to meet the requirement of a 10 per cent public float.

The Sebi board approved a proposal to reserve a minimum 10 per cent of the issue size in an OFS for retail investors (those bidding for less than Rs 2 lakh). In case this portion is not fully purchased, it may be offered to other investors.

Besides, sellers of shares may offer a discount to retail investors.

Non-promoters of listed firms will be allowed to sell their stake through OFS, which involves an auction of shares on stock exchanges during market hours.

The OFS route would be made available to the top 200 listed firms by market capitalisation, compared with the top 100 listed companies currently.