Facility is available only on NSE and BSE

The Securities and Exchange Board of India has laid down comprehensive guidelines for promoters seeking to offload stake via offer-for-sale (OFS).

The guidelines incorporate all representations and suggestions received from marketmen.

Thursday’s OFS guidelines replace all the three SEBI circulars dated February 1, February 23 and February 27.

Norms

SEBI has mandated that the OFS facility would be available only on the NSE and the BSE.

OFS can be used by promoters of companies who wish to attain minimum public shareholding of 25 per cent by June 2013.

Eligible promoters should not have bought or sold the company shares 12 weeks before and should not buy or sell shares 12 weeks after the OFS.

Within this cooling off period of plus-12 weeks, promoters can sell through OFS or institutional placement programme (IPP) with a gap of two weeks between successive offers, said SEBI.

This is also applicable to promoters who had already offered shares through OFS/IPP.

All non-promoter entities are eligible to buy under the OFS. The offer size will be a minimum of Rs 25 crore or that amount which enables the promoter to achieve a minimum public shareholding of 25 per cent in a single tranche.

The advertisement and offer expenses related to the OFS shall be borne by the seller (promoter).

No part cancellation

OFS can be withdrawn before opening and another offer can be made by the promoter only after a cooling off period of 10 trading days.

The seller cannot cancel the offer when bidding is on. In case of insufficient demand at or above the floor price, the seller has the choice to either conclude the offer or cancel it in full.

The seller may also choose to conclude or fully cancel the offer in case of default in settlement.

Floor price is the minimum price at which the seller wishes to sell a share.

SEBI has directed exchanges to amend by-laws rules and regulations; notify member brokers and disseminate the circular on their Web sites.

(This article was published on July 19, 2012)
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