Mumbai: Easing the norms, SEBI Monday said retail investors can put in their bids at cut-off price for shares sold through the Offer for Sale (OFS) route.
OFS is one of the preferred routes for companies to offload their shares through the secondary market.
"To make it easier for retail investors to participate in OFS, it has been decided that seller may give an option to retail investors to place their bid at cut-off price in addition to placing price bids," Securities and Exchange Board of India (SEBI) said in a circular.
Bidding at cut-off price means that the bidder is willing to pay whatever is the final price arrived at for the share sale. Till now, only price bids could be placed by retail investors in OFS.
With the latest change, there would be more flexibility for retail investors who want to participate in OFS.
According to the circular, sellers should mandatorily announce the floor price latest by 5 pm a day before the OFS to stock exchanges.
"Exchanges will decide upon the quantity of shares eligible to be considered as retail bids, based upon the floor price declared by the seller," it noted.
Now, retail investors can enter a price bid or opt for bidding at cut-off price. Also, there would no indicative price for the retail portion.
"Margin for bids placed at cut-off price shall be at the floor price and for price bids at the value of the bid... Allocation to retail investors shall be made based on the cut-off price determined in the non-retail category," the circular said.
The seller can offer discount to retail investors on the cut off price.
According to SEBI, retail bids below the cut-off price would be rejected and those at cut-off price would be allocated on proportionate basis in case of over subscription.
"... In respect of bids in the retail category, clearing corporation shall collect margin to the extent of 100 percent of order value in cash or cash equivalents," the circular said.
SEBI had first introduced the OFS mechanism in July 2012 to help listed private companies comply with the minimum 25 percent public shareholding norm and state-owned firms to meet the requirement of a 10 percent public float.
