OFFER FOR SALE (OFS)

OFFER FOR SALE

Offer for sale (OFS)

enables
stakeholders
company

to

of

a
sell

their shareholdings.

OFFER FOR SALE

OFS is a relatively new mechanism, where sellers use
a

separate

one

day

window

provided

by

stock

exchanges for selling the stake.

The government of India is using the OFS option to
offload its shares in public sector companies under its
disinvestment programme.

What are the main

advantages of
OFS?

OFFER FOR SALE

Convenient as compared to traditional mechanism of
Follow-on Public Offer (FPOs)

Involves less paper work since it is a system based

bidding platform

Consumes less time as its an automated process

Minimum

time

involved

between

application

&

allotment of shares

Cost effective; usually companies offer discount on

floor price to retail investors which is one of the key
reasons for retail investors to participate

OFFER FOR SALE

How can one

participate in OFS?

Any investor with a

trading

and

demat

account
participate in OFS.

can

CURRENT
ACCOUNT
DEFICIT
OFFER
FOR SALE
Let us see the formula of the Current Account Balance (CAB)
CAB = X - M + NI + NCT
X = Exports of goods and services
M = Imports of goods and services
NI = Net income abroad

[Salaries paid or received,

credit / debit of income from
All
market
participants like
FII &
FDI etc.]

mutual
funds,
NCT = Net current transfersindividuals,
[Workers'
Remittances
foreign (unilateral),
institutional
Donations,
Aids &
Assistance and

investors
(FIIs),
insurance
Grants,
Official,
companies,
corporates,
Pensions
etc]
other qualified institutional
bidders (QIBs), HUFs, etc.

OFFER FOR SALE

Who is a retail investor and how to apply?

Any individual investing up to Rs. 2 Lakhs in an OFS is

considered a retail investor.

An investor applying in the OFS, must pay the entire

application amount upfront. And should place the bid
during market hours and state the quantity and the
floor price.

The allotment will be done on a price priority basis,

which means those bidding with a higher amount have
a greater chance of getting allotment.

OFFER FOR SALE

What is the meaning of
floor price under OFS?

OFFER FOR SALE

Floor price can be defined as minimum price at which an

investor can apply under OFS. Any order below the floor
price will not be accepted.

The seller can disclose the offer price on the day before
the shares are offered, but after the closure of trading
hours and before the end of business hours of the stock
exchanges.

Follow-on Public
Offer & Offer for
Sale

OFFER FOR SALE

The OFS process is quite similar to the FPO wherein
stakeholders approach the market to either

Sell their own holding in the company or

Issue fresh capital

OFFER FOR SALE

However, one of the biggest advantages of OFS over
FPO is that companies do not have to go through the
lengthy process of issuing the prospectus and wait to
receive applications from investors before the issue
is completed. OFS saves time for both stakeholders
and investors.

Offer for Sale &

Initial Public Offer
(IPO)

OFFER FOR SALE

An IPO involves lengthy process of documentations &
approvals from regulators.
In an IPO, a company may either

Issue

fresh shares to the investors to widen their

shareholder base or

Sell shares of existing investors through OFS or

Both

OFFER FOR SALE

In case of fresh issues of shares, the funds are used to
expand the existing business of the company.
However, when existing investors sell shares in an issue,
both during an IPO or later through the OFS mechanism,
this simply results into shift of ownership from the old
investors to the new investors.
This will not have any impact on the business of the
company in monetary terms as money does not go to the
books of the company.

CURRENT
ACCOUNT
DEFICIT
OFFER
FOR SALE
Let us see the formula of the Current Account Balance (CAB)
CAB = X - M + NI + NCT
X = Exports of goods and services
M = Imports of goods and services
NI = Net income abroad

[Salaries paid or received,

credit / debit of income from
FII & FDI etc.]

NCT = Net current transfers

[Workers' Remittances
(unilateral), Donations,

Aids &
Assistance and

Hope you have understood

Grants, Official,

the concept of Offer For

Pensions etc]

Sale (OFS).

Please give us
your feedback at
professor@tataamc.co
m

DISCLAIMER
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and do not construe to be any investment, legal or taxation advice.
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