What is OFS ?

In the world of stock markets, you might have come across the term OFS, or Offer for Sale. It usually pops up in financial news when promoters or the government are offloading their stake in a listed company.

But what exactly is an OFS? Why is it used, and how is it different from an IPO or FPO?

Let’s break it down in a simple terms.

📌 What is an Offer for Sale (OFS)?

An Offer for Sale (OFS) is a mechanism that allows promoters or major shareholders of a listed company to sell their shares to the public through the stock exchange platform.

Unlike IPOs, OFS is only available for existing listed companies, and it's mainly used for dilution of stake.

Think of it as a fast-track way for big investors or the government to sell a portion of their holdings without issuing new shares.

👥 Who Can Use OFS?

• Promoters of listed companies
• Government of India (for disinvestment in PSUs)
• Large institutional investors or shareholders holding more than 10% stake

🧾 Why Do Companies Use OFS?

Here are the key reasons:

1. ✅ Meet SEBI’s minimum public shareholding norms
2. 🏛️ Government disinvestment in public sector undertakings
3. 💰 Raise capital for personal or business use
4. 🔄 Facilitate liquidity for large investors

🔁 How Does OFS Work?

OFS is conducted through a stock exchange window, just like regular trading, but with a few special rules.

Here’s the typical OFS process:

1. Company announces OFS date and floor price (minimum price)
2. Retail and institutional investors place bids through their brokers
3. Bidding window is usually open for one trading day
4. Shares are allotted based on bid price and availability
5. Successful bidders receive shares in their demat accounts within T+1 days

⏱️ OFS is much faster than an IPO or FPO. No waiting for weeks!

🏦 Who Can Participate?

• Retail Investors (reservation of up to 10%)
• Mutual Funds and Insurance Firms
• High Net-Worth Individuals (HNIs)
• Qualified Institutional Buyers (QIBs)

💡 To qualify as a retail investor, your total bid value should not exceed ₹2 lakh.

🪙 Is OFS a Good Investment?

It can be, but like all investments, it depends on the valuation, demand, and fundamentals.

✔️ Pros:

• Transparent, exchange-based bidding
• Often available at a discount to market price
• Allotment happens quickly (T+1 settlement)

❌ Cons:

• Limited research compared to IPOs
• No guarantee of allotment
• Risk of price correction post-OFS

🧮 OFS vs IPO vs FPO: Quick Comparison

Feature	OFS	IPO	FPO
Company Type	Already listed	Unlisted	Already listed
Shares Offered	Existing shares	New / Existing	Mostly new shares
Time to Execute	1-2 days	Weeks	Several days
Eligibility	Promoters / Large holders	Company-wide	Company-wide
Fund Raised For	Promoters	Company	Company

🧾 Tax Implications on OFS

If you buy shares through OFS and sell them later:

• Holding period < 1 year → Short-term capital gains (STCG) taxed at 15%
• Holding period > 1 year → Long-term capital gains (LTCG) taxed at 10% (after ₹1 lakh exemption)

📊 Real-Life Example

Let’s say the government wants to reduce its stake in a PSU like ONGC. Instead of going through an IPO, it launches an OFS and offers shares at a 5% discount. Retail investors can bid for those shares via their broker on the NSE/BSE platform.

If you're lucky, you get allotment in one day and can sell it when the price rises—or hold for long-term gains.

🎯 Final Thoughts

Offer for Sale (OFS) is a quick and efficient way for promoters to offload shares and for investors to potentially grab quality stocks at a discount. But before bidding, always assess:

• The company's fundamentals
• Market conditions
• Your investment horizon

OFS can be a smart opportunity—but like every investment, it’s important to do your homework.

FAQs :-

1. What does OFS mean in the stock market?

OFS stands for Offer for Sale. It is a method through which promoters or large shareholders of a listed company sell their shares to the public via the stock exchange.

2. Who can invest in an OFS?

Both retail and institutional investors can invest. Up to 10% of the total OFS size is reserved for retail investors (with a maximum investment of ₹2 lakhs).

3. How is OFS different from IPO or FPO?

Unlike IPOs and FPOs which can involve new shares, an OFS involves selling existing shares of an already-listed company, and is typically faster and simpler.

4. What is the minimum investment amount for OFS?

There’s no official minimum, but the bid must be above the floor price and within your investment limits (₹2 lakh for retail).

5. How are shares allotted in OFS?

Shares are allotted based on price bids and availability. Retail investors often receive allotment at a discounted or cut-off price.

6. Is OFS safe to invest in?

OFS is generally safe if the company fundamentals are strong, but prices can fluctuate post-allotment. Always evaluate before investing.

7. When will I receive shares bought in OFS?

Allotment is quick—usually within T+1 working day after the OFS bidding window closes.