Sebi obliges govt on disinvestment OFS, but only partly

Partly heeding to the government's request on Offer For Sale route for PSU disinvestment, Sebi today allowed the companies to disclose such plans two banking days prior to the share sale -- a move that may lead to most such share sales taking place on Mondays.
Currently, the companies are required to give an advance notice two trading days before the OFS, which the government has been saying gives scope for the speculators to beat down the share price of the disinvestment-bound PSU.
The tweaking in the norms, which were approved by Sebi's board today, would help reduce the gap between the disclosure of the OFS and the actual share sale in cases where the intermediate days include trading holidays when banks are open, such as Saturdays.

Giving an example, Sebi Chairman U K Sinha said that the notice for the OFS is currently required to be made on Thursday for a share sale taking place on Monday. However, the change in the norms to banking days, instead of trading days, would mean that the notice can be given on Friday evening as Saturday can be counted as an intermediate banking day.
As the notice can be issued on Friday evening, no trading can take place in the shares before the OFS begins on Monday morning, thus putting a check on any possible speculative trading that might take place.

However, there would be no material change in cases when the OFS takes place on days other than Mondays, barring some exceptions where banks are open on days closed for trading.

While the OFS rules are same for the public and private sector companies, the government has been of the view that the speculators tend to have a field day soon after an announcement is made about the share sale in a PSU and this was hampering the share sale prospects.
The government had asked Sebi to reduce the mandatory notice period to one day to cut down on speculation, but the markets regulator said it was necessary to give sufficient notice period to retail investors to arrange for funds.

"To ensure increased retail participation in the OFS process, the OFS notice shall be continued as per present practice that is latest by T-2 days. However, t-2 days shall be reckoned from banking days instead of trading days," Sebi Chairman U K Sinha told reporters after a board meeting.
To simplify the bidding process for retail investors, it would also be mandatory for the seller to provide the option to retail investors to place their bids at the cut off price (default option) in addition to placing the bids, Sinha said.
Sebi had floated a discussion paper earlier on the review of OFS through stock exchanges. This route acts as a fast-track process for the listed companies to raise funds and dilute promoter shareholding and has been preferred for many PSU disinvestments by the government.

Sebi said it considered all the comments and suggestions on the discussion paper before deciding on the changes that were announced today.