200 top firms allowed OFS to raise money

Tags: Companies

Retail investors’ participation key to success of mechanism

Retail investors can participate in offer for sale (OFS) mechanism of selling shares through the stock exchange platform, which has been expanded to top 200 companies. This would help government’s disinvestment programme.

Last week, Securities and Exchange Board of India (Sebi) expanded the scope of OFS mechanism of selling shares through the stock exchange platform to top 200 companies and also allowed retail participation in future OFS to be taken up by companies by modifying the existing framework.

Asked whether retail participation will see traction under the OFS framework, Prithvi Hal-dea, chairman & managing director, Prime Database and member of Sebi’s primary market committee told Financial Chronicle, "It will take some time. Brokers have to do lot of handholding and educate retail investors, then they will start participating. Initially, response may not be good as it's an online mechanism of share bidding on the stock exchange platform.

"But it's a good mechanism. Gradually, retail investor participation will pick up," Haldea said.

Kishore P Ostwal, CMD of CNI Research said, "It is difficult to say anything about retail participation. The market may have reached an all-time high but retail participation is missing. It all depends on quality of stock and pricing and how the market behaves. If something is left on the table in terms of pricing in the OFS, then retail might look at participation."

The targeted Rs 58,425 crore government disinvestment from the domestic market this year from sale of shares in state-owned companies will see a large number of OFS on stock exchanges.

The OFS mechanism had proved helpful in 2012-13, enabling both private and PSU companies to meet minimum public shareholding (MPS) requirement mandated by Sebi within a strict deadline.

The disinvestment target set by finance minister Arun Jaitley in his budget this year is the most ambitious in the past two decades since the government started selling PSU shares to raise resources for meeting its expenditure needs. FY 2014-15 disinvestment target almost matches the actual amount realised from share sale in the past three years.

A Sebi circular issued on Friday on modifications introduced in existing OFS framework said, "Now in every OFS minimum 10 per cent of the offer size will be reserved for retail investors. “For this purpose, retail investor will mean an individual investor who places bids for shares of total value of not more than Rs 2 lakh aggregated across the exchanges,” Sebi said.

“The cutoff price will be determined separately for bids received in the retail category and for bids received in the non-retail category,” Sebi said.

Also now, OFS scope has been widened to more companies.

“The OFS mechanism will be available to top 200 companies by market capitalisation in any of the last four completed quarters. Earlier, OFS framework was available only to top 100 companies," Sebi's circular said.

Sebi has also allowed companies to offer discount to the retail investors in OFS saying, “Discount to retail investors may be offered.”

Any non-promoter shareholder of eligible companies holding at least 10 per cent of share capital may also offer shares through the OFS mechanism, Sebi said.

In case a non-promoter shareholder offers shares through the OFS mechanism, promoters/ promoter group entities of such companies may participate in the

OFS to purchase shares subject to compliance with applicable provisions of Sebi (Issue of Capital and Disclosure Requirements) Regulations, 2009 and Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, Sebi said.


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