Cos need to disclose OFS plans 2 banking days in advance: Sebi

Market regulator Sebi today asked companies to disclose their Offer-for-Sale (OFS) plans two banking days in advance, a move that may help in the government's disinvestment drive but could lead to most such offers taking place on Mondays.
Currently, the companies are required to give an advance notice two trading days before the OFS, which the government has been saying gives scope for the speculators to beat down the share price of the disinvestment-bound PSUs.
The tweaking in the norms, notified today, would help reduce the gap between the disclosure of the OFS and the actual share sale in cases where the intermediate days include trading holidays when banks are open, such as Saturdays.

A decision in this regard was taken by Sebi's board on Tuesday.
In order to enhance retail participation in OFS process and to simplify the bidding process for retail investors, Sebi in a circular said "OFS notice shall continue to be given latest by 5 PM on T-2 days. However T-2 days shall be reckoned from banking day instead of trading day."
Besides, it would be mandatory for sellers to provide the option to retail investors to place their bids at cut off price in addition to placing price bids, Securities and Exchange Board of India (Sebi) noted.

Giving an example, Sebi Chairman U K Sinha earlier this week said that the notice for the OFS is currently required to be made on Thursday for a share sale taking place on Monday.

However, the change in the norms to banking days, instead of trading days, would mean that the notice can be given on Friday evening as Saturday can be counted as an intermediate banking day.
As the notice can be issued on Friday evening, no trading can take place in the shares before the OFS begins on Monday morning, thus putting a check on any possible speculative trading that might take place.
However, there would be no material change in cases when the OFS takes place on days other than Mondays, barring some exceptions where banks are open on days closed for trading.

While the OFS rules are same for the public and private sector companies, the government has been of the view that the speculators tend to have a field day soon after an announcement is made about the share sale in a PSU and this was hampering its share sale prospects.
The government had asked Sebi to reduce the mandatory notice period to one day to cut down on speculation, but the markets regulator said it was necessary to give sufficient notice period to retail investors to arrange for funds.
Sebi had floated a discussion paper earlier on the review of OFS through stock exchanges. This route acts as a fast-track process for the listed companies to raise funds and dilute promoter shareholding and has been preferred for many PSU disinvestments by the government.