What is OFS?

The OFS (offer for sale) is a way that listed companies can sell shares on the exchange platform. In 2012, the Securities and Exchange Board of India introduced the OFS method to make it easier for promoters of listed forms to reduce their stake. These shares can be purchased by anyone, whether they are foreign institutional investors, retailers investors, or companies.

Before you start asking how to apply for an offer for sale, it is important to know that OFS is only available for the 200 largest companies on the share market based upon market capital. The OFS would also require the company to inform the stock exchanges at least two days before the sale. SEBI also stipulates that at least 25% of the shares must be allocated to mutual fund and insurance firms in an offer for sales procedure. A 10% reserve is made for retail buyers/investors.

How do I apply for OFS ?

To learn about applying for OFS shares , continue reading

To invest in an OFS, you would need a trading and demat account.

If the total bid value is less than Rs 2 lakh, retail investors can apply for OFS. It is not eligible for OFS if it exceeds Rs 2 lakh.

If you have an account online, you can place your bids through your trading portal. Or you can go offline and get assistance from your dealer to place your bids.

Investors can place orders at the floor price or higher. This is the price sellers would need.

To bid on an offer for sale, you don't have to provide any documentation. Only the price and number of shares you're willing to pay will be required.

Your OFS shares are allocated at a single clearing price or multiple clearing prices. Each investor will be allocated shares at one price in a single clearing price. Shares are assigned based on the price of the share in a multiple clearing price. If an X company has OFS allocation at multiple clearing prices, then the highest bidder for shares is 250. Next are 220, 215, 210, 200 and so on. The person who placed the bud at $250 will have priority for allotment.

- Investors can also choose to apply for shares at a cut-off rate without worrying about discovering the price during bidding.

What's the difference between an OFS or IPO/FPO?

You may be asking yourself how to apply for OFS. An IPO is a non-listed company that issues shares and goes public. The company is then listed and issues shares to existing shareholders. After the IPO route is taken, the FPO process takes place. The OFS, however, is about enabling the dilution or ownership of promoters in companies that are listed. An OFS does not allow for the creation of new shares.

The IPO and FPO are long and complicated processes that involve issuing prospectus, receiving applications, and finally allotment shares. An OFS is done quickly, i.e. in a single trading session.

What are some of the benefits of an OFS?

- Now that we have answered the question about how to apply to OFS shares, let's turn our attention to the benefits of OFS. Of course, retail investors will receive a discount on the floor price when they apply for OFS shares. Retail buyers who choose to invest via OFS could receive a discount of up to 5%.

- OfS is also a time-saving option for retail investors.

You may be curious about the charges associated with applying for an offer for sale. There are no additional charges for equity investments, except for the regular STT and securities transaction charges.

Conclusion

A retail investor can buy shares from a listed company by placing an offer for sale. This is a simple, hassle-free, cost-effective, and more efficient way to purchase shares. It is also a convenient and easy way for promoters to reduce their stake in a listed business.