SEBI in its Board Meeting held on 19 June, 2014, cleared new norms relating to offer for sale mechanism, as a part of its measures aimed at revitalizing the primary market. The modifications seek to enhance retail participation and enable large shareholders including non-promoters to use the route to exit. SEBI has mandated that minimum 10% of the offer size shall be reserved for retail investors i.e. for investors bidding for amounts below Rs. 2 lakh. Further the seller of shares may offer a discount to retail investors as per the framework specified from time to time. Non-promoter shareholders holding over 10% or such percentage as specified by SEBI shall be eligible to utilize OFS. The range of companies to whom the OFS mechanism is available has also been broadened. Such OFS mechanism shall be made available for shareholders of top 200 companies by market capitalization, instead of the earlier mandate of top 100 companies. Though allowing the top-200 companies and including non-promoters are commendable measures so far as changes in the OFS rules are concerned, the requirement of 10% shareholding of a non-promoter seller may limit this to only a few situations. A lower holding limit (like 5%) would have enabled more number of investors to resort to the route. Overall, the relaxations in the share-sale norms and increase in their scope will enable companies to sell their shares with greater ease and raise money from the public, enhance liquidity in the market and bring in more transparency. Further, the Board approved the proposal to allow bonus shares issued a year before filing of the draft offer document to be offloaded through OFS, provided that such shares were issued out of the free reserves or share premium of a company.

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Date:September 28, 2015