OFS may emerge secondary share sale route of choice

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Sebi has expanded the scope of the offer for sale (OFS) route, which will help more promoters and for the first time non-promoter entities (like private equity) pare their holdings. The regulator has opened the share sale mechanism to the top 200 companies and private equity-type investors with holding of more than 10 per cent. Experts say OFS, a fast-track route for share sales, could emerge as the preferred route for secondary sale of existing shares. An alternative route for such investors is block transactions. However, experts say the OFS route helps in getting a more diversified set of investors. Typically, only one or two investors pick up shares in block transactions as opposed to the OFS route, where a large number of investors can participate. "Companies will now choose between a block deal, which is a one-to-one sale, and OFS, which is one-to-many. OFS will help a company diversify its investor base through a more transparent and efficient manner," says Gesu Kaushal, executive director, Kotak Investment Banking. To ensure the retail investor isn't left out if divestment through the OFS route picks up in a big way, Sebi has mandated 10 per cent reservation for retail investors and also permitted companies to offer discounts to them.