Offer For Sale (OFS): How Does it Work and Eligibility Criteria
16 December, 2024
Synopsis
- Offer For Sell (OFS) is a great way to sell shares for publicly listed companies.
- Both retail and institutional investors are eligible to invest in an OFS.
- It is mandatory to have a Demat account before investing in an OFS.
Companies aiming for growth come up with initial public offerings (IPOs) where they issue new shares and raise capital. An Offer for Sale (OFS) is one where existing shareholders of a company sell their shares to the general public through a public offering.
Here’s exploring what is an Offer For Sale is, how an OFS works, the eligibility criteria and other important considerations.
What is an Offer For Sale (OFS)?
OFS was introduced by the Securities and Exchange Board of India (SEBI) in 2012 to help corporations reduce their stakes and meet minimum public shareholding standards. In a typical OFS, the company promoters choose to dilute their holdings, thereby selling their stake to retail investors, Foreign Institutional Investors (FIIs) and Qualified Institutional Buyer (QIBs).
How Does an Offer For Sale Work?
An OFS is a limited-hour auction (24 hours only) with four distinct stages.
Announcement: The Seller announces the floor price or the price band for the OFS on the exchange platform.
Submission of orders: Investors start placing bids either at or above the floor price or within the price band.
Share allocations: Seller starts bid evaluation and share allocations according to the number of bids and price offered.
Settlement: The particular shares are credited to the demat and trading account of bidders, and the payment is subsequently debited.
For being able to bid for shares in an OFS, the following is needed:
A potential investor must have a Demat & trading account.
The trading account of an investor must have the entire amount before placing the order.
All offer-for-sale orders are to be placed and modified between 9.15 AM and 3.00 PM. No order placing or modification is allowed after 3 PM.
The minimum duration for the shares of successful bidders to be credited to their Demat account is T+1 days (one business days after allotment of shares).
Open a Demat & Trading Account in 10 mins*
*Disclaimer: Terms and conditions apply. This is an information communication from HDFC Bank and should not be considered as a suggestion for investment. Investments in securities market are subject to market risks. Read all the related documents carefully before investing.
