Markets Glossary
Offer for Sale (OFS)
An exchange mechanism through which promoters or large shareholders sell existing shares to the public — no new shares are created and the company receives no money.
By Amit Tyagi, Fitoor Capital · AletheiaAI Glossary
Definition
An Offer for Sale lets existing large shareholders — typically promoters — sell part of their stake through a separate exchange window over one or two days. Buyers bid at or above a floor price. Crucially, an OFS transfers existing shares: the company issues nothing and receives no proceeds, unlike a QIP or rights issue.
Because supply hits the market at a floor price usually set below the prevailing market price, the stock often trades down toward the floor around an OFS announcement.
India Context
The OFS route was created by SEBI largely to help promoters comply with the minimum public shareholding rule (at least 25% public float for most listed companies) and is also the standard mechanism for government stake sales in listed PSUs. A portion of every OFS is reserved for retail investors, who sometimes get a small discount. Why the promoter is selling — deleveraging, compliance, or exit — matters more than the mechanism, and the answer is usually in the OFS notice and the promoter's pledge/debt disclosures.
Example
A promoter holding 78% must reach 75% to meet the public shareholding norm and announces an OFS for 3% at a floor price 6% below market. The stock falls toward the floor, institutional bids clear the issue on day one, and the shareholding pattern next quarter shows public float at the required threshold.
Frequently Asked Questions
Does the company get money from an OFS?
No. An OFS sells existing shares held by promoters or large shareholders — proceeds go to the seller. Fresh capital raising uses a QIP, rights issue, or FPO instead.
Is an OFS bad news for the stock?
Short term it adds supply at a discount, which usually pressures the price. Longer term it depends on why the seller is selling and who absorbed the stock — details visible in the OFS notice and subsequent shareholding pattern.
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