Capital markets regulator Securities and Exchange Board of India (Sebi) has sought industry feedback on revising certain...
Capital markets regulator Securities and Exchange Board of India (Sebi) has sought industry feedback on revising certain rules in the offer for sale (OFS) mechanism of the stock exchanges, including conducting trading halt or suspension of trading of OFS stocks in the secondary market on the date of the transaction. Sebi is also invited industry’s view to hold such share sales only on a Saturday.
Other suggestions include reducing the mandatory notice period for an OFS to one day, from two days currently, and to restrict trading in the concerned stocks within a price band on the day prior to the share sale.
Sebi has presented both ‘for’ and ‘against’ views on all the suggestions, and has invited public comments on or before April 18.
“Some concerns have been raised that due to volatility in the prices on the day of stake sale, investor participation in the OFS may be affected.
As a result of price volatility there may a possibility that secondary market price may trade below the OFS floor price and this may impact the sale of shares,” Sebi said in its discussion paper.
The move follows apprehensions raised by the government in the past, during some divestments through the OFS route, that the secondary market price could dip below the proposed OFS price and thus hamper the share sale process.
OFS is the easiest and fastest route for sale of shares in an already listed company and the government has also used this route for sale of its minority stakes in case of 13 PSUs so far.
“Recent experience with OFS has shown that some retail investors bid at high prices, on the assumption that they would get allotment at cut-off price. Therefore, it is suggested to make it mandatory for sellers to provide option to retail investors to place price bid or place bid at cut off price for better retail participation,” Sebi said.
Options before sebi
* Revising certain OFS rule, including suspension of trading of OFS stocks in the secondary market on the date of the transaction
* Holding such share sales only on a Saturday
* Reducing the mandatory notice period for an OFS to one day, from two days currently
* Restrict trading in the concerned stocks within a price band on the day prior to the share sale