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Capital market regulator Securities and Exchange Board of India (Sebi) has sought public comments for tweaking the offer for sale (OFS) framework, typically used by promoters for divesting their holdings.
Some of the proposals include suspension of trading on the day of OFS, allowing OFS on market holiday (Saturday) and imposing trading band on a stock ahead of an OFS.
Sebi has issued a seven-page discussion paper with at least five tweaks to the existing framework. The tweaks are based on the suggestions made by market participants.
The discussion paper proposes to suspend trading in a stock on the day of the OFS. The objective behind this proposal is to curb volatility in the stock during a share sale. Often investor demand in an OFS is hit if the share in the secondary market trading goes below the floor price for the share sale.
Earlier this year, the department of disinvestment (DoT) has written to Sebi with a similar request.
“A concern has been raised that due to volatility in the prices on the OFS day, investor participation in the OFS may be affected. As result of price volatility on OFS day, there may a possibility that secondary market price may trade below OFS floor price and this may impact the sale of shares through OFS,” said Sebi in the discussion paper.
Other suggestion includes, reducing the OFS intimation time to just one day compared to two days at present. Currently, a seller has to give a notice to the exchange about the OFS two trading days in advance. The paper has also proposed to provide retail investors the option of applying at cut-off price in all OFS.
Since its introduction in 2012, OFS has emerged as the preferred route for stake sales given.
“Till date 117 companies have utilised OFS mechanism to offload promoters shares in the market. OFS mechanism has greatly facilitated the speedy disinvestment of government of India shareholding in PSUs with full transparency and market wide participation,” said Sebi in the discussion paper.
The regulator has sought public accept comments before April 18.
