Revising its OFS regulations, in line with board approval in June, Sebi said that the OFS mechanism would now be available to top 200 companies by market capitalisation in any of the last four completed quarters. So far, top-100 companies were allowed to tap this fast-track route, while only promoter shareholders could sell their shares.
Following the changes, any non-promoter shareholder with at least 10 per cent stake in eligible companies would be allowed to offload shares through OFS route.
Sebi had first introduced the OFS mechanism in July 2012 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.
"While the OFS mechanism has been successfully used to divest promoter stake, market feedback indicated that there is a need to take measures to encourage retail participation in OFS, enable other large shareholders to use the OFS mechanism and expand the universe of companies to use this framework," Sebi said in a circular.
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.
Minimum 10 per cent of the offer size will be reserved for retail investors. For this purpose, retail investor would mean an individual who places bids for shares of total value of not more than Rs 2 lakh aggregated across the exchanges.
Individual retail investors will have the option to bid in the retail category and the general category as well. However, if the cumulative bid value of such investors exceeds Rs 2 lakh, the bids in the retail category will become ineligible.
The cut-off price, or the lowest price at which the entire offer gets sold, would be determined based on all valid bids. The cut-off price would be determined separately for bids received in the retail category and for bids received in the non-retail category.
Upon determining the cut-off price, the offer size reserved for retail investors would be allocated to eligible bids of retail investors. Any unutilized portion would be offered to non-retail category of investors.
In case of excess demand in retail category at the cut-off price, allocation would be on proportionate basis.
The seller would have to announce intention of sale of shares latest by 5 pm two days before the day of the OFS, while the floor price disclosure would need to be made one day in advance by 5 pm.
The seller would also be allowed to offer discount to retail investors. The details of discount and percentage of reservation for retail investors would be disclosed upfront in the notice of OFS to the exchange.
As a discount, retail investors can be allocated shares at a discount to the cut-off price determined in the retail category, irrespective of the bid price entered by them. Otherwise, the retail investors may also be allocated shares at a discount to the bid price entered by them.
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.