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What is An Offer for Sale? Can Retail Investors Participate In Such A Sale?
A few years back, the Securities and Exchange Board of India (SEBI) had asked promoters to bring down their stake sale in companies to the 75 per cent level, if the stakes were higher then these.
Many companies rushed to reduce their stakes through the offer for sale route. What an Offer For Sale (OFS) does that it facilitates promoters to sell their stake in a company.
Interestingly, retail investors along with mutual funds, foreign institutional investors, insurance companies, mutual funds, high networth individuals etc., can participate in such an offer.
The subscription through such an offer is also opened to Non Resident Indians.
How Do You Know There Is An Offer For Sale?
The Securities and Exchange Board of India (SEBI) has made it clear that companies that propose to engage in such an offer have to inform the stock exchanges two days before the offer.
The exchanges will then place them on their website and investors can regularly check the NSE website to see if there are any new OFS.
How To Buy Shares In An Offer For Sale?
You will first have to open an account with a broker of the NSE and the BSE. Once you have done so you can place an order through a broker with the bid price and the quantity for the same.
The seller can also provide the buyer with a cut-off price during the process.
It is also important to remember that opening an account with a broker is compulsory if you want to buy shares through an OFS.
Interestingly, you can buy as low as one share through the platform. Every OFS ensures that there is a minimum amount of 10 per cent that is reserved for the retail investor. This enures retail participation in the offer.
A retail investor for the purpose is defined as an investor applying for a sum that is less than Rs 2 lakhs. Investors will get to know the amount of shares that have been allotted by the end of the day.
It's also important to note for retail investors that the entire amount has to be backed by cash or similar equivalents when bidding for the shares.
There would also be a Security Transaction tax that would be applicable like that for shares we buy from the open or secondary market.
Its also important to know that normal trading in the stock would continue even as the offer for sale is happening on the same day.
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