Offer for sale (OFS) through the exchange

What an OFS is

An offer for sale through the stock exchange mechanism lets existing shareholders of a listed company, often the promoters or the government, sell a block of shares to the public through a special window on the exchange. No new shares are created, and the money goes to the seller, not the company.

It is different from the "offer for sale" part of an IPO. An OFS through the exchange is for companies already listed, and it is usually open for two trading days.

The two days

The seller announces the OFS at least one trading day before. Bidding happens in a separate window on the exchange during market hours.

• T day: only non-retail investors (institutions and other investors bidding more than ₹2 lakh) can bid.
• T+1 day: retail investors bid. Non-retail investors who chose to carry forward their unallotted bids from T day can also take part on T+1.

Floor price

The seller sets a floor price, the lowest price at which bids are accepted. It is announced by the evening of the day before the OFS opens. Bids below the floor are not valid.

Retail investors can bid at the cut-off price, which means accepting the price at which the offer is finally allotted. Some sellers offer retail investors a discount to the price they pay.

The retail portion

Under SEBI’s framework, at least 10% of the shares on offer are kept for retail investors, meaning individuals bidding for up to ₹2 lakh. If retail bids do not use up this portion, the unsubscribed shares can be allotted to non-retail investors who carried forward their bids.

Shares are allotted on a price-priority basis. Where bids at the lowest accepted price exceed the shares left, allotment at that price is in proportion.

Settlement and where to find details

Retail bids in an OFS are placed through a broker, like an ordinary trade, but in the OFS window. Money and shares settle through the exchange’s clearing system.

The exchanges publish a notice for each OFS with the seller, the number of shares, the floor price, the dates and the retail portion. SEBI’s comprehensive OFS framework of January 2023 sets out the rules in full.