A privately owned business dispatches an Initial Public Offering (IPO) for extra funding. The organization sells shares to outside financial specialists with the goal that it can access funds for different purposes. This incorporates development and expansion of the organization.
In any case, the organization's monetary issues don't end with an IPO. Some of the time, an organization may require extra cash-flow to meet its objectives. That is the time such organizations can select to go for an Offer For Sale (OFS).
In an OFS, promoters of an organization weaken their stake by selling their shares on an exchange platform. Anybody including retail financial specialists, organizations, Foreign Institutional Investors (FIIs) and Qualified Institutional Buyers (QIBs) can offer on these shares.
In an OFS, a purchaser needs to give a bid to obtain the shares. The organization sets a 'floor price.' Buyers can't bid at a cost below the floor price. When the bids are offered, shares are assigned to the various purchasers. There is no base breaking point to take an interest in an OFS. A buyer can offer for even one share in the OFS process.
As an individual financial specialist, you can apply in the retail classification of the OFS. With total value of Rs 2 lakhs, the bid value does not exceed in this category. Else, it gets ineligible. You likewise require a Trading & Demat account to partake in an OFS. In the event that you are a disconnected financial specialist, you can in any case put your offers through your assigned dealer.
Organizations utilize the OFS trick to raise extra capital and weaken advertisers' property. This is a lot more straightforward cycle contrasted with different types of fund-raising.
It is ideal to put resources into an OFS if the organization has a decent standing and future development potential.
a) This office is accessible just to the best 200 organizations in the stock market. The positioning depends on market capitalization.
b) Non-advertiser investors with over 10% of share capital are likewise qualified to offer offers through an OFS.
c) The organization needs to illuminate the stock trades at any rate two days before the OFS.
d) SEBI has ordered that at any rate 25% of shares in an OFS should be held for Mutual Fund and insurance Companies.
e) Moreover, a 10% reservation is made for retail purchasers.
OFS and follow-on Public Offering (FPO) are two different ways an organization can raise capital by selling extra offers. In any case, there are contrasts between these two techniques. Let us tell you how…
A FPO is a lengthy cycle. The organization is needed to give new prospectus, which is then submitted to the Securities and Exchange Board of India (SEBI). Following that, the organization has to hire managers to manage the deal. The sale of shares can last anywhere somewhere in the range of three to five days.
Then again, an OFS is a lot easier. There is no necessity for the organization to record any conventional administrative work. Also, the offer of offers ordinarily takes just a single trading day.
