The central government has sought a relaxation from the Securities and Exchange Board of India (Sebi) on the mandated 12-week cooling-off period after any divestment through the newly-introduced offer for sale (OFS) route. “Once this request is accepted, we will be able to sell shares to employees of companies in which we divest stakes,” said a senior official of the department of disinvestment (DoD).
This latest demand adds to the pending requests with Sebi like extension of time for acceptance of bids and removal of the 25 per cent margin requirement, aimed at providing more flexibility so that the government’s disinvestment target is met successfully. In the current Sebi regulations, a promoter offering shares through an OFS is restricted from sale or purchase of shares for 12 weeks. During this period, they may sell further shares only through another OFS, with a gap of two weeks.
Last week, on the sidelines of an event when questioned on such relaxations, Sebi chairman U K Sinha had said, “There is no end to such demands. Asking for new changes just for the sake of it is not good enough…However, if the situation so demands, we will look at timing, margins and any other changes.”
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Relaxation of the 12-week cooling off period will allow companies such as NTPC and SAIL, in which the government has proposed to divest stakes, to allot shares to eligible employees immediately after the share-sale. According to sources, Sebi has already struck down the government’s request to provide a separate quota for employees during OFS. Instead, it has suggested shares be allotted to eligible employees through preferential allotment, spot contracts or employee stock option plans. The government, however, wants Sebi to enable it to make such allotments immediately after the OFS.
In June, Sebi made several modifications to the OFS framework. It brought down the margin requirement for institutions from 100 per cent to 25 per cent and also reduced the gap between two offers from 12 weeks to two weeks. On complete removal of margins, Sinha had said such a move could increase the risks of trades not getting settled.
The OFS route was introduced in January by the market regulator, to facilitate promoters to offload their holdings, primarily to meet the public shareholding requirement.
