The number of companies eligible to sell shares using the offer-for-sale (OFS) mechanism through the stock exchanges has been increased from the top 100 to 200 by market capitalisation in any of the last four completed quarters.

This has been done to encourage retail participation, said a SEBI circular issued late on Friday.

Non-promoters

Now, non-promoter shareholders having at least 10 per cent stake in a company will also be allowed to use OFS to offload their stake.

When non-promoters use OFS to sell, promoters/promoter group may participate in the process and add to their shareholding subject to extant norms for public offers and takeover, it said.

Retail investors

Retail investors (bid size of not more than Rs 2 lakh across exchanges) have been earmarked a minimum of 10 per cent in a non-promoter OFS.

Individual retail investors have been given the option to bid in the retail category and the general category with their bids under retail category becoming ineligible if the cumulative bid value exceeds Rs 2 lakh.

Cut-off price

SEBI has mandated that the lowest price at which the entire offer gets sold (cut-off price) would be determined separately for bids received under retail and non-retail categories.

After this, the retail portion would be allocated first with any under-subscription being offered to the non-retail category of investors. For excess demand allocation would be done proportionately.

The indicative price for retail and non-retail portion has to be displayed separately.

Sellers have to announce their intention to sell latest by the second working day prior to the OFS. Exchanges have to inform the market about the OFS immediately.

Floor price

The floor price has to be disclosed by the seller to the exchange latest by 5 p.m. on the previous working day followed by immediately dissemination to the market.

Details of discount and percentage of reservation to retail investors have to be disclosed in the notice of OFS to the exchange.

Sellers have an option to offer discount to retail investors either at the cut-off price or at their bid price in a multiple clearing price OFS.

In a single clearing price OFS, discount is given and shares are allocated to retail investors at the cut-off price.

Under both the methods, the discounted price (which would be the final allocation price) to the retail investors may be below the floor price.

Exchanges have been directed to implement the modifications in three weeks, amend bylaws, inform brokers and disseminate the changes on their Web sites.