Offer for Sale - Complete Guide

Offer for Sale (OFS) is a method used by a company’s existing shareholders to sell their shares to the public through a stock exchange. It is commonly used in stock markets like India and follows a transparent, exchange-based mechanism.

Below is a complete and structured explanation:

    1. Meaning of Offer for Sale (OFS)

        An Offer for Sale is a process where promoters or large shareholders of a listed company sell their existing shares directly to investors via the stock exchange platform.

• The company does not issue new shares

• The company does not receive money

• Ownership changes hands from existing shareholders to new buyers.

  2. Purpose of OFS

  OFS is mainly used to:

  • Reduce promoter shareholding

  • Meet regulatory requirements (e.g., minimum public shareholding)

  • Allow government or promoters to monetize their stake

  • Increase public participation in a company

    3. Who Can Use OFS?

    • Listed companies only

    • Promoters or shareholders holding at least 10% of share capital

    • Commonly used by:

      • Government (disinvestment in PSUs)

      • Promoters

      • Institutional investors

        4. How OFS Works (Process)

        1. Seller announces OFS details (price, quantity, date)

        2. OFS opens on stock exchange for one trading day

        3. Investors place bids through brokers

        4. Shares are allocated based on bidding

        5. Shares are credited and money is transferred to the seller

           5. Pricing in OFS

           • A floor price may be announced (minimum price)

           • Investors can bid:

             • At floor price

             • Above floor price

           • Final price is determined based on demand (cut-off price)

             6. Who Can Invest in OFS?

             • Retail investors

             • Institutional investors

             • Mutual funds

             • Foreign investors (subject to regulations)

             👉 Often, retail investors get a discount (e.g., 5%) on the cut-off price.

             7. Allocation of Shares

             • A certain percentage (usually 10%) is reserved for retail investors

             • Remaining shares are allocated to non-retail investors

             • If oversubscribed, shares are allotted proportionately

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             8. Advantages of OFS

             For Sellers

             • Fast and transparent process

             • Lower cost compared to IPO

             • Immediate liquidity

               For Investors

               • Opportunity to buy shares at a discount

               • Transparent exchange-based pricing

               • Lower risk than IPO (company already listed)

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               9. Disadvantages of OFS

               • Price may fall after OFS due to increased supply

               • Limited time to analyze (single-day offer)

               • No new funds for company growth

                 10. OFS vs IPO (Key Difference)

                 Aspect	OFS	IPO
                 Shares	Existing shares	New shares
                 Company receives funds	❌ No	✅ Yes
                 Applicable to	Listed companies	Unlisted companies
                 Time period	1 day	Several days
                 Objective	Stake sale	Capital raising

                 11. Example If a promoter holds 60% in a listed company and wants to reduce it to 55%, they may sell 5% through OFS. Investors buy these shares directly on the exchange. 12. Regulatory Authority (India) Regulated by SEBI Conducted through NSE / BSE