Sebi tweaks OFS norms; abolishes 25% margin requirement

Jan 18 2013, 20:58 IST
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Sebi Sebi
SummarySebi has said that indicative prices during Offer for Sale or auction route, should be disclosed throughout the trading session.

To make it easier for companies to comply with public shareholding norms, Sebi today decided to abolish the 25 per cent margin money requirement for entities bidding through the auction route.

The market regulator has also said that indicative prices during Offer for Sale (OFS) or auction route, should be disclosed throughout the trading session.

Sebi said these decisions would make the OFS mechanism "more economical, efficient and transparent".

"We have provided now that in today's meeting that earlier requirement of 25 per cent margin will be removed. It won't be a requirement mandatorily," Sebi Chairman U K Sinha said here.

Speaking to reporters after Sebi board meeting, he said that people or institutions can come without any upfront margin but they have to follow certain conditions.

"One is they cannot revise it downwards and they cannot withdraw this bid. In all these cases, the rules of secondary market will be followed," Sinha said.

OFS route is being introduced because many participants have expressed their difficulty in following 25 per cent minimum margin requirement at the bidder stage, he added.

Sebi said that institutions may place orders/bids with 100 per cent upfront margin and modification/cancellation of such orders/bids shall be permitted.

"Custodian confirmation shall be within the trading hours. However, the settlement of funds and securities shall take place on T+1 (next day after transaction) day," it added.

Further, institutions can place orders without upfront margin in line with secondary market practice. "However such bids/orders cannot be modified /cancelled, except upward revision in the price or quantity," Sebi said.

"Indicative price shall be disclosed to market throughout the trading session. The indicative price shall be calculated based on all bids/orders," Sebi said.

Sebi noted that OFS mechanism has been found to be useful by market participants and popular for offloading shares of promoters in listed companies to achieve minimum public shareholding.

Regarding OFS, the regulator said that cumulative bid quantity of 100 per cent margined orders as well as non-margined but non-cancellable orders would be made available to the market throughout the trading session.

The order book shall display two sets of orders -- cumulative orders/bids with 100 per cent margin and cumulative orders/bids without margin.

"Indicative price shall be disclosed to market throughout the trading session. The indicative price shall be calculated based on all bids/orders," Sebi said.

Earlier, the Finance Ministry had written to Sebi to do away with the 25 per cent margin money requirement for institutions bidding during the PSU stake

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