Understanding Offer for Sale

Offer for Sale

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In the financial world, this term is quite commonly used. But if you are someone who doesn’t know what it is, but wishes to learn more, you are at the right place.

What is an Offer for Sale?

Offer for Sale or OFS is when the promoters ie. the owners of a listed company sell their shares to the general public. This is a transparent process that only takes place on the stock exchange.

It is, however, worth noting that any random company cannot put out an Offer for Sale. only the top 200 companies as per Market Capitalisation can initiate an offer for sale.

How can one participate in an OFS?

Any retail investor (basically an individual investor) can participate in an OFS. In order to do that, one needs to have a trading account and a Demat account. One can bid in an OFS directly through the online trading portal or can place a bid through the help of your dealer.

Unlike an IPO, OFS does not require documents to bid in an OFS. All you need to provide is the quantity and price and that you are ready to pay for the OFS value.

Pros of Investing in an OFS

  • Minimal paperwork is involved in the process
  • Discounted price for retail investors
  • A cost-effective way of investing as there are no additional charges applicable on this

Cons of Investing in an OFS

  • There are limited reservations for retail investors
  • Limited bidding window

Things you must know before investing in Offer for Sale

Some know-hows and what never harmed, right?

  • You can invest in an offer for sale only through a broker. Having a Demat account, therefore, becomes mandatory before investing in an offer for sale.
  • Investors must have the entire bid amount in their trading account to qualify for bidding.
  • One can apply for an offer for sale through multiple brokers. However, if the overall bid value crosses Rs 2 lakhs, then you cannot bid as a retail investor
  • Offer for sale can be placed only between 9:15 am to 3:00 pm. No OFS can be placed or modified post 3 pm
  • It is worth noting that while applying for OFS, you can only place limited orders. Market Orders are not allowed 
  • Shares of successful bidders are credited in the Demat account in T+2 days

Wrapping it up

OFS can be tricky and often requires thorough research before one gets into it. An Offer For Sale is, though a hassle-free and cost-effective way for a retail investor to buy shares from listed companies, it requires prudence on one’s end to actually get benefits from the shares in the long run.

The long run is where it all matters, in the end, as every investor is an investor just because they intend to get something out of it for big goals.

OFS can benefit promoters too as it is a simple and convenient method for promoters too as it is a simple and convenient method to dilute their stakes in a listed company, thereby reducing overall risk, if any. 

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