In line with the decisions taken by SEBI, in their Board Meeting held on 3rd January 2012, SEBI, vide its Circular No. CIR/MRD/DP/05/2012 dated 1st February 2012, has issued detailed Guidelines for Offer for Sale Of Shares by Promoters through a Separate Window by the Stock Exchange Mechanism. Any Offer for Sale made by the Promoters of any listed Company, with the intent to comply with the requisites of minimum Public holding in the company, has to be in compliance of these Guidelines.
A brief synopsis of the key provisions of the said Circular is given herein below:
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Eligibility : |
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1.1 |
Exchanges: |
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1.1.1 |
To begin with, this facility of offer for sale of shares shall be available only on BSE & NSE, who shall be providing a separate window for such Offer for Sales. |
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1.1.2 |
It has also been provided that in case the Orders are to be placed on both BSE & NSE, one of these Exchanges shall be declared as the Designated Stock Exchange (DSE). |
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1.2 |
Sellers: |
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1.2.1 |
All promoter(s)/ promoter group entities of such companies that are eligible for trading and are required to increase public shareholding. That is, this Mechanism shall not be available to companies whose trading is under suspension. |
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1.2.2 |
Further, apart from the above, even the promoter(s)/ promoter group entities of top 100 companies based on average market capitalization of the last completed quarter, shall also be eligible for availing this Mechanism. |
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1.2.3 |
A very crucial condition that has been casted on the Sellers, as specified at (i) and (ii) above, the promoter/promoter group entities should not have purchased and/or sold the shares of the company in the 12 weeks period prior to the offer and they will have to undertake not to purchase and/or sell shares of the company in the 12 weeks period after the offer. |
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1.3 |
Buyers: |
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1.3.1 |
All investors registered with the brokers of the aforementioned stock exchanges other than the promoter(s)/ promoter group entities. |
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Definitions: The Guidelines have also defined prices like Single Clearing Price, Multiple Clearing Prices, Indicative Price and Floor Price. |
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Size of Offer for sale of shares: |
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3.1 |
The size of the offer shall be atleast 1% of the paid-up capital of the company, subject to a minimum of Rs 25 Cr. |
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3.2 |
However, in respect of companies, where 1% of the paid-up capital at closing price on the specified date is less than Rs 25 Cr, dilution would be atleast 10% of the paid-up capital or such lesser percentage so as to achieve minimum public shareholding in a single tranche, shall be the Issue Size. |
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Advertisement-its contents, timelines and other modalities: |
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4.1 |
Seller(s) shall announce the intention of sale of shares atleast 1 (one) clear trading day prior to the opening of the offer. |
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4.2 |
After the above mentioned announcement/ notice of the offer has been made to the stock exchanges, Advertisements about the offer shall be made. However, the medium of advertisements have not been mandated/ prescribed by the Circular. |
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4.3 |
The said Advertisements shall contain the basic information about the Offer, like name of the sellers, name of the company, brokers, exchanges, date & time of opening, allocation methodology, number of shares being offered, floor price etc. |
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4.4 |
It has also been mandated that all expenses relating to offer for sale of shares shall be borne by the seller(s). That is to say, the expenditure cannot be passed on to the Company. |
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4.5 |
The Seller(s) would have to appoint Sellers broker(s) for this purpose. |
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4.6 |
The duration of the offer shall not exceed one trading day. |
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4.7 |
At specific time intervals, the Exchanges shall make available online the Indicative Price and Cumulative orders/ bid quantity information. |
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4.8 |
No price bands shall be applicable for the orders/ bids placed in the offer for sale. |
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4.9 |
The settlement shall take place similar to trade for trade basis and shall be completed latest by T + 2 day. |
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4.10 |
The offer may be withdrawn prior to its proposed opening, but there has to be a cooling off period of 10 trading days from the date of withdrawal before an offer is made once again. |
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4.11 |
Cancellation of offer shall not be permitted during the bidding period. If the seller(s) fails to get sufficient demand at or above the floor price, he may choose to either conclude the offer or cancel it in full. |
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4.12 |
Modification/ Cancellation of orders/ bids will be allowed during the offer period, except during the last 30 minutes of the duration of the offer. |
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Floor price: |
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5.1 |
As per the Guidelines, the Sellers have the option to either declare a floor price in the announcement/ notice or not to publicly disclose the floor price. |
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5.2 |
In case the sellers choose the latter option, they shall give the floor price in a sealed envelope to the DSE before the opening of the offer. In such a scenario, the floor price, so informed to the DSE, shall not be disclosed to anybody, including the selling broker(s). |
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5.3 |
The Sealed envelope shall be opened by the DSE after the closure of the offer for sale and the floor price suitably disseminated to the market. |
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5.4 |
In case floor price is disclosed, orders/ bids below floor price shall not be accepted. |
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Risk Management: SEBI has attempted to make the said Offers well covered, by mandating following key pre requisites: |
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6.1 |
Stock Exchange shall collect 100% of the order value in cash, at the order level. |
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6.2 |
The sellers shall deposit the entire quantity of shares offered for sale as payin with the clearing corporation/ clearing house or the DSE prior to the commencement of the offer. |
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Allocation of the Offer: |
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7.1 |
Minimum 25% of the shares offered shall be reserved for mutual funds and insurance companies. Any unsubscribed portion thereof shall be available to the other bidders. |
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7.2 |
The orders shall be cumulated by the DSE immediately on close of the offer. Based on the methodology for allocation to be followed as disclosed in the notice, the DSE shall draw up the allocation i.e. either on a price priority (multiple prices) basis or on a proportionate basis at a single clearing price. |
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7.3 |
No allocation will be made in case of order/ bid is below floor price. Funds collected from the bidders who have not been allocated shares, shall be released after the download of the obligation. |
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7.4 |
No single bidder other than mutual funds and insurance companies shall be allocated more than 25% of the size of offer for sale. |
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7.5 |
The direct credit of shares shall be given to the demat account of the successful bidder provided it is indicated by the broker/ bidder. |
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