tag:blogger.com,1999:blog-3202774368551476669.post6781191055722450117..comments2023-09-15T16:21:31.980+05:30Comments on INDIAN CORPORATE LAW: Offer for sale by promoters through stock exchange mechanism (OFS) – A welcome moveUmakanth Varottilhttp://www.blogger.com/profile/12438677982004444359noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-3202774368551476669.post-67084136019195835912012-04-03T09:40:54.511+05:302012-04-03T09:40:54.511+05:30Business Standard yesterday (http://www.business-s...Business Standard yesterday (http://www.business-standard.com/india/news/share-auction-data-show-active-participation-by-retailinvestors/469813/) reported that, there was active participation by retail shareholders in the ONGC auction i.e. offer for sale through stock exchange mechanism.<br /><br />If it was not for "offer for sale through stock exchange mechanism", companies like Wipro and ONGC which have so far adopted the said route, would have probably resorted to other permissible routes under clause 40A(ii) of the equity listing agreement. <br /><br />ONGC had adopted the "offer for sale" route through filing an offer document with SEBI in March 2004 (http://www.sebi.gov.in/cms/sebi_data/attachdocs/1292999271205.pdf). [Those interested may specifically read the "SEBI disclaimer" on the cover page and page number 38 of the said document]. <br /><br />Needless to say that, diluting promoter shareholding (in a company which is already listed) pursuant to an "offer document" by filing the same with SEBI or through "Institutional Placement Program/IPP" route (not involving allotment), is time consuming, unlike "offer for sale through stock exchange mechanism", which is much faster. Even if assuming that, SEBI observations are not required on the draft offer document, the offer document still needs to be drafted by following a stringent due diligence process which is time consuming.<br /><br />The selling shareholder while adopting a particular route for dilution, also needs to be bear in mind the commercial implications. For example, the selling shareholder will get the STT (Securities Transaction Tax) benefit in case of "offer for sale through stock exchange route". In case of IPP (not being allotment), the sale is not on the floor of the stock exchange.<br /><br />As mentioned earlier, the key to success for any kind of offering is pricing of the securities being offered to the potential investors, irrespective of the mode being adopted.<br /><br />To reiterate, "offer for sale through stock exchange mechanism" is a welcome move.<br /><br />As far as the methodology of "offer for sale through stock exchange mechanism" is concerned the SEBI circular is self explanatory.<br /><br />Kind regards,<br />Yogesh ChandeAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-81224147230572281922012-04-02T22:08:26.718+05:302012-04-02T22:08:26.718+05:30I'm still waiting on the author's response...I'm still waiting on the author's response regarding my request for more insightful material.<br /><br />Good that more light has been shed on the IPP process though. Short post but quite sufficient to sum up the entire provisions of the process as such.Arjun Shivhttps://www.blogger.com/profile/04853237442064572873noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-39295772794570086772012-03-23T01:02:40.378+05:302012-03-23T01:02:40.378+05:30Is it necessary to have a Board resolution to sel...Is it necessary to have a Board resolution to sell promoter shares in the situation given here. A lady was one of those who received promoter shares in a public limited company over 50 years ago. When she died over 10 years ago she left some of the shares in a trust. For the trust to now divide the assets among the inheritors it is necessary to sell these shares which have been demateriaised. She was never a majority shareholder and the total amount of shares are not a material percentage in the overall share breakup of the company. Can these shares be sold using the OFS mechansm?Rauha (Peace)https://www.blogger.com/profile/07017221986842748794noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-72528117290124895422012-03-04T19:27:53.795+05:302012-03-04T19:27:53.795+05:30Could the author please suggest more reading mater...Could the author please suggest more reading material on the same?<br /><br />I am keen to know more on this topic and upto now I haven't come across many academic discussions on this.<br /><br />The ONGC sale seems to have invoked a lot of reactions but the methodology adopted has not been discussed in detail in various writings.Arjun Shivhttps://www.blogger.com/profile/04853237442064572873noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-79139686594348308132012-03-04T06:49:36.002+05:302012-03-04T06:49:36.002+05:30Cryptic Comment (intended to inviting serious thou...Cryptic Comment (intended to inviting serious thoughts)><br /><br />If read, from the point of view of 'the stakeholders' at large, and as a matter of common concern to one and all, be it direct or otherwise,one has a very great doubt as to what extent the reported circular could really be regarded to be a 'welcome move', as is the impression sought to be given.<br /><br />Especially, the poser is, - in order to be regarded a 'welcome move', even in its limited practical sense, should not one keep in view the true implications of the background (ref. opening paragraph), so also of the multitude of uncertainties as commonly conveyed by usages such as, IF, BUT, SUBJECT TO; despite the fact that such suggestive but intriguing words are not actually used, but from the 'diligence perspective' seem to be necessarily required to be read, in between lines.vswaminoreply@blogger.com