Offer for Sale and Follow-on Public Offer explained with examples

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The promoters have the option to make a secondary issuing of shares available to everyone, as opposed to a rights issue limited to current shareholders. The Exchange provides a special window through stockbrokers for the Offer for Sale. 

It will only authorise a company to route finance via OFS if the Promoters wish to sell all their holdings and/or remain in accord with minimum public shareholding requirements (Govt. PSU must guarantee 25% public holding).

The firm has established a floor price, at which both Retail and Non-Retail investors can offer bids. At the cut-off rate or higher, the exchange will settle the shares into the investor Demat account within T+1 days.

An example of an Offer for Sale is NTPC limited, which extended up to 46.35 million shares at a floor price of Rs 168 over two days and was eagerly taken up. This OFS took place on 29th August 2017 for Non-Retail Investors and the following day for everyone else.


An FPO shares the same purpose of raising additional capital as an IPO. However, a varied way of applying and allotting shares is employed. With this method, the number of stocks available can be increased by issuing new ones or decreasing their value. 

In order to initiate the process, an appointed Merchant Banker drafts a Draft Red Herring Prospectus, which must gain approval from SEBI. After this has been done, investors are welcome to submit bids within a given range of 3-5 days through ASBA. 

Eventually, based on the Cut-off Price determined in the book-building process, the stock will be allotted accordingly. Though FPOs were popular prior to 2012 when OFS was introduced, they are rarely used nowadays because of the long period needed for approval.

The company establishes a Price Band for their FPO, advertising it publicly. Through Internet Banking, prospective investors can place bids using the ASBA portal, or utilise the offline option and apply via a Bank Branch. Once the bidding process has been concluded, the cut-off price is declared in accordance with market demand and any extra shares are listed for secondary trading on the exchange.

Engineers India Ltd underwent an issue in February 2014, with a price band of Rs 145-Rs 150. It was oversubscribed three times, while the lower price band offered buyers a 4.2% discount from the market price (Rs 151.1).

Difference between OFS and FPO

– An OFS enables Promoters to reduce their stake in a company, while an FPO helps firms to finance new initiatives.

– In an FPO, dilution is possible, which results in a transformation of the Shareholding structure. On the other hand, OFS has no impact on the number of authorized shares.

– Only the top 200 companies by Market Capitalisation have access to the OFS route for raising funds, while all listed companies can opt for a FPO.

– Since the introduction of OFS by SEBI, there has been a decline in FPO issues, resulting in companies increasingly opting for the OFS route to obtain funds.

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