Offer for sale (OFS) has emerged as the most popular route for listed companies to sell shares to investors. So far in 2012, as many as 21 companies have sold shares worth about Rs 23,000 crore through OFS, with the government leading the way.
Share sale of state-owned companies to the tune of over Rs 19,000 crore has been part of the government’s disinvestment drive. The rest was raised by companies, which scurried to cut promoter shareholding to below 75 per cent to meet the minimum public shareholding requirements by the June 2013 deadline.
Eros Worldwide was the last to sell shares in its subsidiary Eros International through the OFS route. The 2.57-million share issue, which was conducted on the Bombay Stock Exchange (BSE) on Thursday, was oversubscribed by four times. The promoters of Adani Group are set to sell 23 million shares of Adani Enterprises through OFS on Friday. The floor price of the issue has been set at Rs 282 a piece.
| PREFERRED ROUTE | ||
| Share sale routes in 2012 | Amount raised (Rs cr) | No of issues |
| OFS* | 23,000 | 21 |
| Rights issue | 7,000 | 16 |
| Overseas (equity+convertible bonds) | 5,000 | 13 |
| Qualified institutional placements | 4,600 | 10 |
| IPOs*# | 6,200 | 23 |
| Source: Prime Database & BS Research Bureau * OFS and IPOs data includes issues in Dec # IPOs not comparable with OFS because issuers are unlisted | ||
“This is an easy way to cut promoter shareholding without too many regulatory hassles. If priced well, it is the easiest way for share sales,” said the senior official of a foreign investment bank.
On Wednesday, the Anil Ambani Group sold 5.52 per cent stake in Reliance Power through an OFS, which was subscribed 1.6 times. This is the first time since Reliance Power’s high-profile initial public offering (IPO) in 2008 that the promoters are selling their stake in the company.
According to investment bankers, more companies would be encouraged to use the OFS route to cut the promoter shareholding following the success of the recent share sales.
Estimates show about 150 companies may sell stakes by June 2013 if they decide to comply with the minimum public shareholding norm mandated by the Securities and Exchange Board of India (Sebi). The total value of such share sales would be around Rs 30,000 crore, according to various estimates.
This is in addition to the approximate Rs 23,000 crore that the government plans to raise through the disinvestment process by March 2013. The disinvestment target for 2012-13 is Rs 30,000 crore.
Analysts said some companies may opt for other routes to bring promoter shareholding down to less than 75 per cent. Mumbai-based Gammon Infrastructure Projects is taking the bonus issue route to achieve the 25 per cent public shareholding requirement. The company will issue around 5.24 million new shares through bonus to its public shareholders. Gammon Infra will issue one bonus share for every 34 shares held by the minority investors of the company.
