Business Desk, ETV Bharat: State-owned Indian Railway Catering and Tourism Corp. Ltd (IRCTC) announced on Wednesday that its Offer for Sale (OFS) will open on Thursday for non-retail investors and on Friday for retail investors.
The government plans to divest up to 20% equity stake, or 3.2 crore shares, in the company through the OFS. The floor price has been fixed at Rs 1,367 per share.
Given the fact that the IRCTC IPO was a huge success when it was launched in September 2019, getting subscribed by a massive 112 times that time, the OFS is likely to generate a similar response.
If you are a small investor and interested in the IRCTC OFS, here’s a detailed guide on how to apply for shares through this mechanism:
What is an OFS?
An Offer for Sale (OFS) is a form of share sale that facilitates the promoters of an already listed company to sell or dilute their existing shareholdings to meet the minimum public shareholding requirements.
Who sells shares in an OFS?
Promoters, along with any non-promoter shareholder of eligible companies (top 200 companies by market capitalization) holding at least 10% of share capital, may sell shares through the OFS mechanism.
Who can apply for shares in OFS?
All market participants like individuals, mutual funds, foreign portfolio investors, insurance companies, corporates, other qualified institutional bidders (QIBs), HUFs, NRIs etc. can bid/participate in the OFS process to buy the shares.
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How can investors buy shares in OFS?
You will require a demat account and a trading account to participate in OFS. If you are an offline investor, you will need to place bids through an assigned dealer or broker who is an existing trading member of NSE and BSE.
Investors can place bids on their trading portals specifying the quantity and the price at which they are willing to bid for a given issue.
What is Floor Price?
The floor price is the price at and above which investors can place their orders. Any bids below the floor price would be automatically rejected. The sellers have to provide a provide floor price on T-2/T-1 day (T being day of OFS).
Sellers may also provide retail investors option to bid at ‘cut-off’, where the allocation to retail investors shall be made based on the cut-off price determined in the non-retail category.
What is the implication of bidding at the floor price and bidding at ‘cut-off’ for retail investors?
Bidding at Floor price and above ensures that the bids will be considered. Allocation in such cases shall be subject to final price discovery.
Bidding at ‘cut-off’ ensures that the retail investor will get allotment where the allotted quantity will depend upon the demand at various price points.
Is there a minimum amount to be bid for in an OFS?
There is no minimum amount specified for participating in an OFS. An investor can bid for a single share through the OFS mechanism.
Will there be any minimum reservation for investors in OFS?
Sebi has made it mandatory to offer minimum 10% reservation to the retail investors and minimum of 25% for mutual funds and insurance companies.
Who are eligible to be called retail investors?
Retails investors are those who bid for a total of maximum Rs 2 lakh of shares across exchanges and have their PAN category as ‘Individual/HUF/NRI’.
If the value of bids across exchanges from a retail investor exceeds Rs. 2 lakh, then these bids will be considered as invalid.
When will you know share allotment status?
Stock Exchanges share allotment report with Trading Members at the end of the day i.e. after 6pm on the day of OFS. Investor can get the information from their trading members on the same day.
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Is it required to pay STT on the OFS transaction?
STT is applicable similar to the other stock market transactions and collected on respective settlement dates.
Is normal trading of the share available on the OFS day?
On the OFS day, normal trading in the shares of the company will continue even when the bidding process is on.
Are multiple orders, modification and/or cancellation allowed?
Multiple orders will be allowed. Further, investors opting for multiple orders across exchanges should be aware that all bids in retail category amounting more than Rs 2 lakh will be rejected. Investors can also modify and/or cancel orders during the OFS issue market hours only.
