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What is an OFS (Offer for Sale)
An OFS is a mechanism where a promoter or large existing shareholder sells their existing stake in a listed company directly through the exchange. No new shares are created and the company receives no proceeds. It is faster and cheaper than a secondary offering.
In one line
An OFS (Offer for Sale) is a SEBI-approved mechanism where existing shareholders of a listed company (typically promoters or pre-IPO investors) sell part of their stake to the public through the exchange platform in a single session at a floor price, with the company receiving no proceeds because only existing shares change hands.
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Why OFS exists and who uses it
Before SEBI introduced the OFS mechanism in 2012, a promoter who wanted to reduce their stake in a listed company had to go through a slow, expensive block deal or a secondary offering process. OFS created a fast, transparent, exchange-driven alternative. The seller announces a floor price (the minimum price at which they will sell) and the quantity on offer. Institutional and retail investors bid through the exchange on the announced date.
OFS is most commonly used by promoters of listed companies who want to reduce their stake, by private equity or venture capital investors exiting pre-IPO positions, and by the government when divesting stakes in PSUs. For government divestments, OFS is a primary tool because it is quick, market-driven, and transparent, avoiding the political and logistical complexity of a full public offering.
How the OFS process works for investors
An OFS typically runs for 1 trading session (with a separate window for retail investors if SEBI mandates retail participation). The bidding is done through your broker, similar to placing a limit order. You specify the number of shares and the price (at or above the floor price). After the session closes, successful bids are allotted at the clearing price, which is the price at which the entire offering is fully subscribed.
Retail investors (those bidding for up to 2 lakh rupees) are given a reservation in many OFS deals and may also receive a discount to the clearing price, typically 5%, as an incentive. This discount is not guaranteed for every OFS, it depends on the seller's terms. The shares allotted in an OFS credit to your demat account through normal settlement, usually T+1.
OFS vs IPO vs block deal
An IPO involves the company itself issuing new shares to the public for the first time. A primary OFS within an IPO involves the promoter selling existing shares as part of the IPO (so the company still gets IPO proceeds from the fresh issue portion, but the OFS proceeds go to the selling shareholder, not the company).
A block deal is a private negotiated transaction between two large institutional parties, done directly on the exchange's block window rather than through a public offer mechanism. Block deals are faster but lack the broad retail participation of an OFS. OFS has the wider reach and SEBI-mandated minimum retail reservation in many cases, making it more accessible to smaller investors than a block deal.
FAQ4 reader questions · AEO-eligible
Common questions on what is an ofs.
Does the company get money from an OFS?
No. In an OFS, existing shareholders sell their own shares. The company issues no new shares, so the proceeds go to the selling shareholders, not to the company's treasury.
How do I participate in an OFS?
You bid through your broker during the OFS window, specifying the quantity and the price (at or above the floor price). The process is similar to placing a limit order. Your broker will notify you when an OFS is available for subscription.
Is there a discount for retail investors in OFS?
Many OFS deals offer a 5% discount to retail investors (those bidding up to 2 lakh rupees) on the final clearing price, but this is at the discretion of the seller and is disclosed in the OFS notice. Not every OFS offers a retail discount.
What is the difference between OFS and block deal?
An OFS is a structured public offer on the exchange, open to retail and institutional investors, with a floor price announcement and a defined bidding window. A block deal is a private, negotiated trade between large parties on the exchange's block window, typically with no retail participation.
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