Expanding the framework of Offer for Sale (OFS) of
Shares through Stock Exchange Mechanism
Circular, CIR/MRD/DP/24/201,
dated 08th August, 2014
1.
Comprehensive guidelines on sale of shares through Offer for Sale mechanism
were issued vide circular no CIR/MRD/DP/18/2012 dated July 18, 2012. These
guidelines have been modified vide circulars dated CIR/MRD/DP/04/2013 dated
January 25, 2013 and CIR/MRD/DP/17/2013 dated May 30, 2013.
2.
While the OFS mechanism has been successfully used to divest promoter stake,
market feedback indicated that there is a need to take measures to encourage
retail participation in OFS, enable other large shareholders to use the OFS
mechanism and expand the universe of companies to use this framework.
3.
Accordingly, the OFS framework shall be modified as under.
3.1.
The OFS mechanism shall be available to top 200 companies by market
capitalization in any of the last four completed quarters.
3.2.
Any non-promoter shareholder of eligible companies holding at least 10% of
share capital may also offer shares through the OFS mechanism.
3.3.
In case a non-promoter shareholder offers shares through the OFS mechanism, promoters/
promoter group entities of such companies may participate in the OFS to
purchase shares subject to compliance with applicable provisions of SEBI (Issue
of Capital and Disclosure Requirements) Regulations, 2009 and SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 2011.
3.4.
Minimum 10% of the offer size shall be reserved for retail investors. For this
purpose, retail investor shall mean an individual investor who places bids for
shares of total value of not more than Rs.2 lakhs aggregated across the
exchanges. If the cumulative bid value across exchanges exceeds Rs.2 lakhs in
the retail category, such bids shall be rejected.
3.5.
Individual retail investors shall have the option to bid in the retail category
and the general category. However, if the cumulative bid value of such
investors exceeds Rs.2 lakhs, the bids in the retail category shall become
ineligible.
3.6.
The cut off price i.e. the lowest price at which the entire offer gets sold,
shall be determined based on all valid bids. The cut off price shall be
determined separately for bids received in the retail category and for bids
received in the non-retail category.
3.7.
Upon determining the cut-off price, the offer size reserved for retail
investors shall be allocated to eligible bids of retail investors. Any
unutilized portion shall be offered to non-retail category of investors. In
case of excess demand in retail category at the cut-off price, allocation shall
be on proportionate basis.
3.8.
Indicative price for retail and non-retail portion shall be displayed
separately.
3.9.
Seller shall announce intention of sale of shares latest by 5 pm on T-2 day (T
day being the day of the OFS) to the stock exchange. Stock exchanges shall
inform the market immediately upon receipt of notice.
3.10.
In case of disclosure of the floor price, seller shall disclose the floor price
latest by 5 pm on T-1 day to the stock exchange. Stock exchanges shall ensure
that the same is informed to the market immediately.
3.11.
Seller may offer discount to retail investors. The details of discount and
percentage of reservation for retail investors shall be disclosed upfront in
the notice of OFS to the exchange.
3.12.
Discount to retail investors may be offered as follows:
Multiple
Clearing price OFS-
3.12.1.
Retail investors may be allocated shares at a discount to the cut-off price
determined in the retail category, irrespective of the bid price entered by
them. Or
3.12.2.
Retail investors may be allocated shares at a discount to the bid price entered
by them.
Single
clearing price OFS-
3.12.3.
Retail investors shall be allocated shares at a discount to cut off price
determined in the retail category.
3.13.
In case of both of the above methodologies, the discounted price which shall be
the final allocation price to the retail investors may be below the floor
price.
4.
Para 1, 2, 5 and para 7 of OFS circular dated July 18, 2012 stand accordingly
modified. All other conditions for sale of shares through OFS framework
contained in the circulars CIR/MRD/DP/18/2012 dated July 18, 2012,
CIR/MRD/DP/04/2013 dated January 25, 2013 and CIR/MRD/DP/17/2013 dated May 30,
2013 remain unchanged.
5.
Stock Exchanges are advised to:
5.1.
take necessary steps and put in place necessary systems for implementation of
above within three weeks from the date of this circular.
5.2.
take steps to implement para 3.9 and 3.10 above with immediate effect.
5.3.
make necessary amendments to the relevant bye-laws, rules and regulations for
the implementation of the above decision.
5.4.
bring the provisions of this circular to the notice of the member brokers of
the stock exchange to also to disseminate the same on their website.
6.
This circular is being issued in exercise of powers conferred under Section 11
(1) of the Securities and Exchange Board of India Act, 1992 to protect the
interests of investors in securities and to promote the development of, and to
regulate the securities market.
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