SEBI tweaks Offer for Sale rules to provide more flexibility to promoters and large shareholders – know details here!

The Securities and Exchanges Board of India (SEBI) on Tuesday tweaked the Offer For Sale (OFS) framework to provide more flexibility to promoters and large shareholders planning to sell their shares through the mechanism.

Under the revised framework, the cooling-off period required between two OFS has been reduced to 2 weeks from 12 weeks.

Besides, retail investors have been allowed to bid for the unsubscribed portion of the non-retail segment, and unit holders of listed Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) have been allowed to offer their holdings through the OFS mechanism.

The new framework would come into force from February 10, as per capital markets regulator.

In a circular, Sebi said the minimum offer size should be at least Rs 25 crore for selling shares through the OFS mechanism by shareholders.

However, offer size can be less than Rs 25 crore by promoter(s) or promoter group entities so as to achieve minimum public shareholding in a single tranche.

This comes after the Sebi board in September decided to do away with the requirement of minimum 10 per cent shareholding for the non-promoter shareholders for offering shares through the OFS route.

Currently, promoters and non-promoter shareholders holding at least 10 per stake in a company and willing to offer shares worth at least Rs 25 crore are eligible to participate in the OFS mechanism.

The OFS mechanism is available to companies with a market capitalisation of Rs 1,000 crore and above.

With regard to the cooling-off period, Sebi said the existing period of +12 weeks for OFS has been reduced to a range of +2 weeks to +12 weeks based on the liquidity of securities of such eligible companies.

Notwithstanding the cooling-off period, the promoter or promoter group entities of companies whose shares are either liquid or illiquid can offer their shares only through OFS or Qualified Institutional Placement (QIP) with a gap of 2 weeks between successive offers.

With regard to allocation, a minimum of 25 per cent of the shares offered would be reserved for mutual funds and insurance companies, and at least 10 per cent of the offer size would be reserved for retail investors.

"In order to ensure that shares reserved for retail investors do not remain unallocated due to insufficient demand by the retail investors, the bids of non-retail investors shall be allowed to carry forward to T+1 day. Similarly, the unsubscribed portion of the non-retail segment shall be allowed for bidding in the retail segment," Sebi said.

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In case of default in pay-in by any investor, 10 per cent of the order value shall be charged as penalty from the investor and collected from the broker. This amount would be credited to the Investor Protection Fund of the stock exchange.

With PTI Inputs