SEBI issues circular on OFS route

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In January, the Securities and Exchange Board of India (SEBI) introduced two additional routes for listed companies to meet the minimum 25% public shareholding requirement under the listing agreement: the institutional placement programme, and the offer for sale (OFS) of shares through the stock exchange. The primary objective of these new routes was to provide promoters with an effective mechanism to dilute their stake in a seemingly sluggish market.

On 18 July, SEBI published a circular to provide comprehensive guidelines on the OFS mechanism. Some key features detailed in the circular are discussed below:

Origami_money_treeEligibility

The OFS mechanism is only available to: promoter/promoter group entities that hold more than a 75% interest and are required to reduce their stake to meet the minimum public shareholding thresholds under the listing agreement; and promoter/promoter group entities of the top 100 companies, on the basis of average market capitalization.

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The legislative and regulatory update is compiled by Nishith Desai Associates, a Mumbai-based law firm. The authors can be contacted at nishith@nishithdesai.com. Readers should not act on the basis of this information without seeking professional legal advice.

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