An offer for sale (OFS) is a method by which large existing shareholders, such as promoters or the government, sell some of their shares to the public through a separate, special trading window on the A regulated electronic marketplace in Mumbai where buyers and sellers trade shares and other securities at publicly visible prices. Read the full meaning of NSE (National Stock Exchange) or BSE Ltd, formerly the Bombay Stock Exchange, is a Mumbai based electronic exchange where shares and other securities are traded under SEBI oversight. Read the full meaning of BSE (Bombay Stock Exchange). The shares being sold have already been issued, and they belong to the seller until the sale is completed.
For investors trying to understand what is offer for sale OFS, the main point is who receives the money. The seller receives the amount from the sale, and the company does not receive any part of it. No new shares are created, so the total number of shares of the company remains the same as before.
How the two-day window runs
Non-retail investors bid on T. Retail investors, employees and the carried forward non-retail bids are taken up on T+1. Employees have a separate category since January 2024, and since June 2024 they bid at the cut off price of T day.
Non-retail bidders must deposit 100% of the bid value upfront, while a retail bid is capped at Rs 2,00,000.
As an illustration, if a seller fixes a floor price of Rs 100 and offers a retail discount of Rs 2, a retail investor will receive the shares at Rs 2 less than the price paid by the others.
The framework comes from a SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI circular of January 2023 and it now sits in the Master Circular of October 2023.
What it means for an investor
Shares in an OFS are sold in the window at the floor price or above it. A part of the offer is kept for retail investors, and a discount may be given to them.
The minimum shareholding requirement for sellers who are not promoters has been removed, so such shareholders can also use this route.
An OFS is often compared with an IPO or a fresh issue. In an OFS, the shares already exist and the proceeds go to the seller and not to the company.