SEBI Tweaks Offer For Sale Rules To Make It Retail Investor-Friendly
Retail investors can now bid for the unsubscribed shares in the non-retail segment of an offer for sale, according to the latest circular issued by the Securities and Exchange Board of India.
The move is in line with the regulator's decision in its September board meeting.
The present framework allows unsubscribed portion of shares in retail segment to be carried forward to the non-retail segment but not vice versa.
SEBI has now amended that to increase retail participation after its Secondary Market Advisory Committee pointed out that retail participation has always lagged behind the non-retail bids in terms of number of times subscribed.
Other major changes include:
Higher Flexibility For Non-Promoters
Currently, non-promoter shareholders holding at least 10% stake and willing to offer shares of at least Rs 25 crore are eligible to offer the shares through the OFS mechanism. Now, SEBI has done away with the requirement of minimum 10% shareholding.
This threshold creates inconsistencies, SEBI's Secondary Market Advisory Committee had noted in its suggestions. For instance, a non-promoter shareholder with 5% stake valued at Rs 100 crore in a company would not be able to make use of the OFS option. Whereas a non-promoter in another company with 10% stake valued at Rs 30 crore would be able to avail of the OFS mechanism.
The minimum offer size requirement is more substantive than the shareholding criteria, since the guiding principle of OFS is that a large order should not distort the market/price discovery mechanism, the committee highlighted.
In line with this suggestion, SEBI has made way for non-promoters to offer their shares as long as they meet the minimum offer requirement. This is a positive move, according to Nikhil Naredi, partner at Shardul Amarchand Mangaldas and Co.
The expanded scope under this circular will go a long way in broadening the investor base in such secondary transactions, facilitate better price discovery and ensure more transparent deal-makingNikhil Naredi, Partner, Shardul Amarchand Mangaldas and Co.
Offer Size Exemption
While the minimum offer size has been retained at Rs 25 crore, it need not be complied with if the aim is to meet the minimum public shareholding requirements in a single tranche, the regulator's circular says.
SEBI regulations mandate a minimum of 25% public shareholding in all listed companies.
Cooling-Off Period
The regulator has also made changes to the cooling-off period, i.e. the period between an OFS and subsequent purchase or sale. The regulator has now laid down different cooling-off period requirements based on the liquidity of the shares.
For highly liquid stocks, the cooling-off period has to be two weeks. It must be 12 weeks for illiquid stocks. The present framework provides for a cooling-off period of 12 weeks, regardless of the liquidity of shares.
The new rules will come to effect in a month.
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