SEBI to okay quota, discount for retail investors in offer for sale

Market regulator SEBI proposes to reserve for retail investors as much as 10 per cent of the issue size of offer-for-sale (OFS) of shares through the stock exchange platform.

As part of its efforts to enhance retail investors’ participation in OFS, SEBI also intends to allow sellers of shares to offer discounts to retail investors.

For this purpose, retail investors will be those who bid for amounts less than ₹2 lakh.

The OFS route is also proposed to be open to non-promoters.

Till date, the OFS mechanism — launched in February 2012 — is allowed only for promoters so as to help them achieve minimum public shareholding in listed companies.

The OFS route is also proposed to be made available for shareholders of top 200 companies by market capitalisation. Currently, the OFS mechanism is available for promoters of top 100 companies by market capitalisation.

These steps aimed at expanding the framework for OFS will be taken up for approval at the upcoming board meeting of SEBI on June 19, sources close to the developments said.

Although the current OFS of shares through stock exchanges has been a success, retail investor participation has remained low.

To create a level playing field between listed public sector undertakings and private sector companies, the SEBI board will consider a proposal to increase the minimum public shareholding (MPS) in PSUs to 25 per cent from the current 10 per cent.

PSUs are likely to be provided a three-year time frame to meet the revised MPS norm. SEBI can consider relaxation of this norm on a case-to-case basis.

Once the SEBI board approves this proposal, the capital market regulator will have to take up the matter with the Finance Ministry for amendment to the MPS norms under the Securities Contracts (Regulation) Rules, official sources said.

Currently, while all non-PSUs are required to have minimum 25 per cent public shareholding irrespective of their size or market capitalisation, PSUs are required to have MPS of only 10 per cent. SEBI is of the view that this rule is discriminatory and would be inconsistent with the broader market design.

As of May 19 this year, there are 38 PSUs which have public shareholding of less than 25 per cent. Of the 38 PSUs, 36 are active while two are suspended. To increase the public shareholding to 25 per cent, these companies need to offload shares worth ₹57,922 crore at the price level of May 19.