“Wider acceptance of OFS by companies is because of its convenience in raising money and SEBI’s guidelines to dilute shareholding of promoters,” said Sunil Jain, head, equity research at brokerage firm Nirmal Bang.
Capital market regulator SEBI had introduced OFS in February 2012 to help companies to raise money and dilute promoters' stake to meet the guidelines of 25% minimum public shareholding.
OFS is a fast-track stake sale programme for share sale through auction method via stock exchanges which requires less time and resources as against the long-drawn processes involved in traditional methods like Follow-on Public Offers (FPOs).
“With market regulator unwilling to extend the deadline to reduce shareholding of promoters and government going ahead with divestment plan, we may see more OFS issues hitting the market in next quarter,” said Rikesh Parikh, VP-markets strategy and equities, Motilal Oswal Securities.
OFS will also play a crucial role in the Centre’s divestment programme as it aims to raise Rs.30,000 crore from sell-offs this fiscal. Around 10 more PSUs including NTPC, SAIL and Oil India are set to hit the market.