Market regulator SEBI (Securities and Exchange Board of India) has issued guidelines for promoters seeking to offload stake through offer-for-sale (OFS). The guidelines incorporate all the feedback and comments received from marketmen.
The guidelines—issued on 19th July on OFS—replace all the three SEBI circulars dated February 1, February 23 and February 27. SEBI has mandated that the OFS facility would be available only on the NSE (National Stock Exchange) and the BSE (Bombay Stock Exchange).
OFS can be used by promoters of companies who wish to attain minimum public shareholding of 25% by June 2013. Eligible promoters should not have bought or sold the company shares 12 weeks before and should not buy or sell shares 12 weeks after the OFS. In this cooling off period of plus-12 weeks, promoters can offer their shares only through OFS/institutional placement programme (IPP) with a gap of two weeks between successive offers.
This is also applicable to promoters who had already offered shares through OFS/IPP. All non-promoter entities are eligible to buy under the OFS. The size of the offer shall be a minimum of Rs. 25 crore. However, size of offer can be less than Rs. 25 crore so as to achieve minimum public shareholding in a single tranche.
The advertisement and offer expenses related to the OFS shall be borne by the seller (promoter). 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 duration of the OFS shall be as per the trading hours of the secondary market and shall not exceed one trading day. The placing of orders and funds on the exchange system shall take place only during trading hours.
OFS can be withdrawn before opening and another offer can be made by the promoter only after a cooling off period of 10 trading days. The seller cannot cancel the offer when bidding is on. In case of insufficient demand at or above the floor price, the seller has the choice to either conclude the offer or cancel it in full.
The seller may also choose to conclude or fully cancel the offer in case of default in settlement. Floor price is the minimum price at which the seller wishes to sell a share. SEBI has directed exchanges to amend by-laws rules and regulations; notify member brokers and disseminate the circular on their Web sites.