Offer for Sale (OFS) is a simple and fast way for promoters (owners) of a listed company — like the government or big shareholders — to sell their shares to the public through the stock exchange.
It’s mainly used to:
- Reduce the promoter’s stake (as per SEBI rules), and
- Increase public shareholding.
In simple words, in an OFS, the owner of a company (like the Government of India in LIC) offers to sell part of their shares to regular investors through the stock market platform, like NSE or BSE. Unlike an IPO (Initial Public Offering), no new shares are created. Instead, existing shares are sold.
Key Features of OFS:
| Feature | Details |
|---|---|
| Who can sell? | Promoters or major shareholders of listed firms |
| Who can buy? | Institutions, retail investors, mutual funds, etc. |
| Platform used | Stock exchanges (BSE, NSE) |
| Time taken | Fast — usually opens for just 1 trading day |
| Purpose | To comply with SEBI’s minimum public shareholding rule or raise money by selling promoter’s stake |
Example:
Suppose the Government holds 96.5% stake in LIC. SEBI rules say that listed companies must have at least 25% public shareholding. So, the government decides to sell 2% of its LIC shares via OFS. Investors can buy these shares directly on the stock exchange.
Why is OFS Popular?
OFS is popular because it offers following features:
- Quick and Transparent Process
- No involvement of middlemen
- Retail investors often get a discount
? How this OFS method is used for privatisation and decrease in stake in banks and insurance companies){kind=link}