NSE asks investors to keep funds ready for upcoming OFS issues

The OFS mechanism facilitates the promoters of listed companies to sell their existing shareholding through an exchange-based bidding platform

Buoyed by retail participation in recent Coal India divestment programme through OFS, India’s leading bourse NSE on Wednesday said brokerages and investors need to keep adequate funds ready to buy shares in such issues as they are announced in a short notice.

The offer for sale (OFS) mechanism facilitates the promoters of listed companies to sell their existing shareholding through an exchange-based bidding platform.

According to norms, a seller has to announce intention of sale of shares at least two days ahead of the trading day of the issue (T-2).

Noting that the government is likely to take the OFS route to divest its stake in various companies in the coming months, NSE Chief Business Development Ravi Varansai expressed concerns that timelines provided for retail investors under the mode were “extremely tight” and as such they should be prepared for such issues in advance.

The observations come against the biggest-ever stake sale in Coal India by the government recently.

According to Varanasi, as many as 80,000 retail investors took part in the Coal India share sale and their participation could be further increased in other OFS issues as well.

“Our lesson from Coal India has been...reach out to the investors, create awareness and make them ready well in advance because the announcements are going to be two days in advance,” Varanasi told reporters here.

Observing that a lot of retail investors would want to take the benefit from the OFS, Varansi said: “What we are telling investors and brokerages is that since good issues are coming and at a discount, keep whatever money you think you want to invest available in the bank account...the moment the issue is announced brokers need to reach out to the clients”.

Varanasi also said that government was in talks with market participants to see if the second tranche of CPSE Exchange Traded Fund (ETF) could be offered.

While the modalities have not been worked out, the second tranche could be expected by end of March, this year, he said adding that there was lot of scope for increased retail participation in the CPSE ETF as the feedback from the first tranche had been good.

The success of the first CPSE ETF, which was floated in March 2014, prompted the disinvestment department to tap the route once again. The previous UPA government had in March 2014 raised Rs 3,000 crore by way of CPSE ETF.