What is OFS

An Offer for Sale (OFS) lets existing shareholders sell their shares in a listed company through the stock exchange without issuing new shares. It’s a quick, transparent method used by promoters to dilute holdings and meet regulatory norms, with reserved participation for retail investors.

What Is Offer for Sale? A Clear Guide

Introduction to Offer for Sale (OFS)

An Offer for Sale (OFS) lets current shareholders sell their shares in a listed company through the stock exchange.

This method is quick and easy to understand, helping the company stay compliant without needing to raise extra capital.

The idea of what is offer for sale is quite helpful when promoters need to lower their share or follow SEBI rules.

What Does OFS Mean in the Stock Market?

In simple words, offer for sale meaning refers to a stock market mechanism where existing shareholders sell their shares directly on the exchange platform.

• There are no new shares issued.
• The company doesn’t raise any money.
• Shareholders and public investors do the deal.

This is different from IPOs or FPOs, where the company itself raises money.

Why is OFS Used by Promoters and Stakeholders?

Promoters and large investors use offer for sale for several reasons:

• To comply with the minimum public shareholding regulations.
• To increase liquidity.
• Diversify their holdings.
  It’s a quick method compared to other public issue routes and doesn’t require issuing new shares.
  

How Does an OFS Work?

OFS Process Explained Step-by-Step

Here’s how the offer for sale IPO process works:

• The company announces the OFS 1-2 days before the opening.
• Exchanges (BSE/NSE) notify investors of the floor price and time window.
• Investors put their bids online during a short session (typically 10 to 11 a.m.).
• The allocation is done based on price priority or proportionally, depending on demand.

Key Guidelines by SEBI for OFS

SEBI has set several rules for smooth functioning of the offer for sale process:

• Applicable only to the top 200 listed firms (by market cap).
• Promoters must provide at least a one-day notice.
• The minimum size is ₹25 crores (unless mentioned otherwise).
• At least 10% of shares are reserved for retail investors.
• A maximum of 25% of daily turnover can be granted.

These principles protect investment interests and promote openness.

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Eligibility and Participation in OFS

Who Can Sell Through OFS?

Only certain entities are allowed to offer shares via offer for sale in IPO context:

• Promoters and Promoter Group.
• Existing institutional investors hold a big interest.
• Government divestments in PSUs also occur through OFS.
  

Can Retail Investors Participate?

Yes, retail investors are welcome to take part in an OFS.

• At least 10% of the total offer is reserved for them.
• Bidding can be done through your broker’s online platform.
• The maximum bid limit for retail investors is ₹2 lakhs.

This makes offer for sale a simple entry route for individuals looking to buy large-cap stocks.

Minimum Bid Size and Reservation for Retail Investors

• Investors must bid for at least one lot (usually 100-1,000 shares, depending on the firm).
• Bids above 2 lakhs will go under the non-retail category.
• Shares are distributed proportionally or on a price-priority basis.

So if you’re curious about what is offer for sale in IPO, it’s basically a route for promoters to sell and for investors to buy without new issuance or long waiting periods.

OFS vs IPO vs FPO: What’s the Difference?

Ownership and Fundraising Goals

Let’s compare the offer for sale vs IPO and FPO quickly:

In an offer for sale, no new funds are raised, whereas IPO and FPO are about capital infusion.

Regulatory Process and Use of Proceeds

• IPO and FPO involve drafting a prospectus, regulatory filings, and book building
• Offer for sale is simpler and faster with fewer disclosure requirements.
  So when you’re evaluating an offer for sale vs IPO, remember that an OFS is purely a secondary market, while an IPO is about listing and raising capital.
  

Advantages and Risks of Investing in an OFS

Transparent Process and Price Discovery

Benefits of participating in an offer for sale include:

• Transparent bidding system.
• Clear visibility of floor prices and bids
• Quick allocation and settlement
• There is no application paperwork or significant waiting period like with IPOs.

Plus, the presence of institutional bidders can provide confidence about pricing.

Market Risks and Limited Time Window

Some risks to keep in mind:

• The OFS window is often open for just 1 trading session (30 mins to 1 hour).
• If you miss it, you can’t apply later.
• Market volatility during that hour can affect pricing.
• Sometimes pricing isn’t attractive compared to the secondary market.
  These are key factors if you’re considering buying through offer for sale IPO routes. 

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Final Thoughts: Should You Invest in an OFS?

What is Investment Banking? It’s a world that facilitates large financial transactions—like mergers, IPOs, and Offer for Sale (OFS). If you understand what an OFS is, you’ll realize it’s a strategic way to buy large-cap stocks directly from promoters or institutions—often at discounted rates. Unlike IPOs, OFS skips the flashy roadshows and aggressive marketing, making it a quieter but effective capital market tool.

That’s why research is crucial. Learning how to analyze such opportunities is a key skill taught in an investment banking course, helping you make informed investment decisions.

Here’s when OFS makes sense:

• You’re investing in well-known, large companies.
• The floor price is lower than the current market price.
• You’re comfortable with quick decision-making.

Skip OFS if:

• You prefer detailed disclosures like in IPOs.
• You’re unfamiliar with the company fundamentals.
• You can’t monitor bids during live market hours. 

FAQs on What is OFS

What is the full form of OFS in the stock market?

It means Offer for Sale, a way for existing shareholders to sell shares through a stock exchange.

How is OFS different from IPO and FPO?

In OFS, existing shares are sold with no fresh fundraising. IPO and FPO involve issuing new shares for capital infusion.

Can retail investors apply for OFS?

Yes. A portion is reserved for them, and bids can be placed online for up to ₹2 lakhs per retail investor.

What are the risks of investing in an OFS?

Short bidding windows, price volatility, and limited information compared to IPOs are some of the risks.

Partham Barot is an ACCA-certified professional. showcasing his expertise in finance and accountancy. he’s revolutionising education by focusing on practical, real-world skills. Partham’s achievements underscore his commitment to elevating educational standards and empowering the next generation of professionals.

Current Role

Co-Founder & CEO at Zell Education

Education

• ACCA – Association of Chartered Certified Accountants, Finance (2011 – 2014)
• Bachelor of Commerce (BCom), Financial Markets from H.R. College Of Commerce & Economics (2010 – 2013)

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Mumbai, India

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