Benefits Of Investing In OFS For Investors

  • Posted By :
  • Thursday Sep 06, 2018

What Is OFS?

OFS i.e. Offer for Sale takes place when an already listed company sells new shares to raise money from the market or when its promoters want to reduce their shareholding in the company and offer shares for sale to the public. In other words, it enables the promoters to dilute their holdings in the listed company in a fair and transparent way thereby involving a wider participation of public through the exchange platform.

Who Can Invest In OFS?

Investors who can participate in the OFS are Retail investors, Non-resident Indians, Hindu Undivided Families (HUFs), Mutual Funds, Insurance Companies, Corporates, Qualified Institutional Buyers and Foreign Institutional Investors. Under the retail category, an investor can invest up to Rs. 2 lakhs in acompany’s OFS.

How To Invest In OFS Online?

You can invest in OFS either by using your online demat/trading account and placing your bids. Alternatively, you can register on the exchange website and apply for OFS. Online application does not require any physical documents to be submitted.

You could also invest in OFS with

  • Just logon to the website
  • Click on Equity
  • Next, click on OFS
  • Finally, choose the OFS you want to apply for

Benefits Of Investing In OFS

  • Cost Effective

Investment in OFS is cost effective because you do not have to pay any additional charges other than regular transaction charges and securities transaction tax.

  • Transparent

 OFS mechanism is very transparent with zero possibility of manipulation. This is because it is done on a real-time basis with a system based bidding platform.

  • Minimal paperwork

OFS process involves minimum paperwork, as you don’t have to fill in any application form since the system is based on an online application system.

  • Wealth of Information

 Since the company is already listed on the exchange, you can find all the information about the company, its competitors, customers, financial position, etc. This can help you take a better investment decision.

  • Multiple Bids

 Investment in OFS allows you to put multiple bids above the floor price set by the company. This facility is not available in FPOs and IPOs. You can even modify or cancel the bid during OFS market hours.

  • Less Time Consuming

 Investing in OFS is less time consuming as it is an online process and everything is automated. The shares can be alloted in T+1 day.

  • Discount

 Another major benefit of investing in OFS is that you are offered discounted stocks to buy as compared to the secondary market. The discount is around 5% on the floor price.

The Bottom Line

Fund raising through an Offer of Sale (OFS) route has seen a significat rise in the past three years. Going ahead, it is expected to continue, owing to the sharp run-up in Indian equities and issuance of relaxed OFS norms by Securities and Exchange Board of India (SEBI).

A number of government-owned companies are resorting to OFS route to divest its shareholding in public sector enterprises. Even private companies like L&T Finance Holdings, Bharti Infratel, Schneider Electric Infrastructure, etc. have opted for OFS route.

The primary reason to see a surge in OFS route is the faster and less complex way to sell the stake as compared to the Initial Public Offering (IPO) and Follow-on Public Offer (FPO).

Keeping these benefits in mind, buying shares in an OFS is quite easy and convenient. So, if the company issuing OFS, has a good potential and growth prospect, there is no reason to avoid participating in it.

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