Offer for sale

Subject: Economy

Context:

With the stock market bouncing back in the latter part of 2020, promoters of companies have used this period to offload shares of their companies to the public in droves.

Concept:

• Offer for sale (OFS) is a simpler method of share sale through the exchange platform for listed companies.
• The mechanism was first introduced by India’s securities market regulator SEBI, in 2012, to make it easier for promoters of publicly-traded companies to cut their holdings and comply with the minimum public shareholding norms by June 2013.
• The method was largely adopted by listed companies, both state-run and private, to adhere to the SEBI order. Later, the government started using this route to divest its shareholding in public sector enterprises.
• Unlike a follow-on public offering (FPO), where companies can raise funds by issuing fresh shares or promoters can sell their existing stakes, or both, the OFS mechanism is used only when existing shares are put on the block. Only promoters or shareholders holding more than 10 per cent of the share capital in a company can come up with such an issue.