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Notices
Notice No20120727-26Notice Date27 Jul 2012
CategoryTradingSegmentEquity
SubjectComprehensive Guidelines for Bidding in Offer for Sale (OFS) Segment
Content

 

 
 
Comprehensive Guidelines for Bidding in Offer for Sale (OFS) Segment
 
 
This is in continuation of the Exchange notices no. 20120222-34 dated February 22, 2012 and 20120228-30 dated February 28, 2012regarding the Guidelines for Offer for Sale through the Stock Exchange Mechanism, Trading Members and Custodians are requested to note that Securities Exchange Board of India (SEBI) has issued Comprehensive Guidelines on Offer for Sale (OFS) of shares by Promoters through the Stock Exchange mechanism vide its circular no. CIR/MRD/DP/18/2012 dated July 18, 2012. Accordingly the Exchange has made the necessary changes/ development in the OFS module. The Exchange would make available the OFFER FOR SALE platform on iBBS (Internet Based Book Building) platform with new requirements as per SEBI’s aforesaid circular with effect from August 1, 2012.
 
Please find appended below the revised detailed operational instructions and guidelines for participation in OFS segment at BSE.
 
The guidelines also contain the requirements to be complied by Seller(s) or Promoter(s) when they intend to select the Exchange (BSE) as Designated Exchange for any offer of sale of their shareholding. Trading Members and Custodians are also required to refer to the above SEBI circular for further details.
 
For any further clarifications, Trading Members/ Custodians and intending Seller(s) i.e. Promoter(s) are advised to contact following Exchange officials –
 

Name of Official
Contact Number
Department
Email ID
Radhika Khatau
022-22728892
Listing Sales
radhika.khatau@bseindia.com
Pavan Naik
022-22728899
Listing Sales
pavan.naik@bseindia.com
Surendra Rashinkar
Sanjay Narvankar
022-22728306
022-22728113
Clearing & Settlement
surendra.rashinkar@bseindia.com
sanjay.narvankar@bseindia.com

 
 
For and on behalf of BSE Limited
 
Bhushan Mokashi
Assistant General Manager
Contents
           

 
In accordance with SEBI Circular CIR/MRD/DP/18/2012 dated July 18, 2012, the Exchange has made the necessary changes/ development in the OFS module and now enabled Offer for Sale (Segment) to all Trading Members of the Exchange on iBBS (Internet Based Book Building System) of the Exchange. All Trading Members are allowed to access this module. No separate registration or payment of any charges is required currently to access the OFS segment on iBBS.
 
This separate window would facilitate Seller(s) or Promoter(s) to dilute/offload their holding in listed companies in a transparent manner with wider participation to achieve a minimum public shareholding.
 
One of the core requirements in the revised OFS module is to collect 100% of the order value in cash from Non-institutional Investors at the order level for every buy order/ bid. Institutional Investors shall have an option to pay either 25% of the order value or 100% of the order value in cash at the order level for every buy order/ bid.
 
Modification/ Cancellation of orders/ bids will be allowed only for bids for which 100% upfront margin has been received.
The OFS module on iBBS module can be accessed from internet. Internet explorer version IE above 6 is most preferred mode to access OFS.
 
Trading Members can also access the OFS module through leased line
 
 
The Exchange would issue notice at least one trading day prior to any offer for sale by promoters on its website. (Refer example below). The notice would detail the name of the company, the Seller(s) or Promoter(s), number of shares being offered, bid time, allocation methodology, Seller Member(s) etc.
 
Example: If a seller wants to have offer opens say on August 3, 2012 Friday, the Exchange must issue notice on August 2, 2012 before market hours i.e. 9.00 AM. The seller / promoter(s) must submit application to the Exchange on August 1, 2012 end of business hours.
The duration of the OFS shall not exceed one trading day and placing of bids by Trading Members shall take place during trading hours.
                    i.   All promoter(s)/ promoter group entities of such companies that are eligible for trading and are required to increase public shareholding to meet the minimum public shareholding requirements in terms Rule 19(2)(b) and 19A of Securities Contracts (Regulation) Rules, 1957 (SCRR), read with clause 40A (ii) (c) of Listing Agreement.
 
                  ii.   All promoter(s)/ promoter group entities of top 100 companies based on average market capitalization of the last completed quarter.
 
For (i) and (ii) above, the promoter/promoter group entities should not have purchased and/or sold the shares of the company in the 12 weeks period prior to the offer and they should undertake not to purchase and/or sell shares of the company in the 12 weeks period after the offer. However, within the cooling off period of +12 weeks, the promoter(s)/promoter group entities can offer their shares only through OFS/ Institutional Placement Programme (IPP) with a gap of 2 weeks between successive offers. The above shall also be applicable on promoter(s) /promoter group entities who have already offered their shares through OFS/IPP.
1.      Seller(s) / promoter(s)/ promoter(s) group entities should not have been in the list of debarred entities as notified by SEBI.
2.      The seller(s)/ promoter/ promoter group entities should not have purchased and/or sold the shares of the company (whose shares are offered in OFS) in the 12 weeks period prior to the offer and they should undertake not to purchase and/or sell shares of the company in the 12 weeks period after the offer.
3.      Seller must inform the Exchange name of selling member broker at least one day prior to opening of the offer.
4.      In case the seller chooses to disclose the floor price, the seller(s) shall declare it after the close of trading hours and before the close of business hours of the exchanges on T-1 day else the seller(s) shall give the floor price in a sealed envelope to DSE before the opening of the offer. (T day being the day of the offer for sale)
5.      In case the seller(s) chooses not to publicly disclose the floor price, the seller(s) shall give the floor price in a sealed envelope to the Exchange (if BSE is designated stock exchange) before opening of the offer. The envelope will be opened in presence of the company (the seller) representative on the day of OFS issue after market hours and the floor price suitably disseminated to the market.
6.      The floor price if not declared to the market, shall not be disclosed to anybody, including the selling broker(s).
7.      Seller(s) must ensure collection of funds from selling member brokers appointed by it.
8.      Seller(s) must disclose upfront in its application to the Exchange conditions if any for withdrawal or cancellation of the offer.
9.      Seller(s) can not extend or reduce bidding period once notice is issued by the Exchange on schedule of bidding.
10. Seller(s) must ensure the Seller member(s) transfer of shares to the designated stock exchange’s Clearing Corporation at least one day prior to the opening of the offer.
The seller(s) / promoter(s) would be required to make application to the Exchange on its letter head for obtaining consent for using offer for sales software of BSE as per the prescribed format as per Annexure 2.
 
The seller(s)/promoter(s) would have to execute an undertaking as per prescribed format as per Annexure 3 at the time of submitting application to the Exchange.
 
In pursuance of the trading regulations of the Exchange, following operating parameters are available for trading in Offer For Sale (OFS) segment –
The duration of the offer for sale will not exceed one trading day. The placing of orders by Trading Member(s) will take place during normal trading hours i.e. from 9:15 am to 3:30 pm. The seller(s) as defined in point 2.1 above can decide the bidding period which can by any time during normal trading hours and subject to SEBI circular of July 18, 2012 on OFS through Stock Exchange Mechanism.
 
3.1.2.      In case of market closure due to the incidence of breach of ‘market wide index based circuit filter’, the offer for sale shall be halted.
 
3.2.1.1.            Every bid/order for an Institutional Investor should be backed by 25% (Fixed) Cash Margin or 100% (Full) Cash Margin of the bid amount.
3.2.1.2.            Every bid/order for a Non Institutional Investor (NII) should be backed by 100% (Full) Cash Margin.
3.2.1.3.            Every order/ bid place on shall be validated against the cash deposit as per 3.2.1.1 and 3.2.1.2, whichever is applicable. 
Member(s) shall issue contract notes as per the same format and specifications as in the equity market segment. The settlement type will be retained as “OFS”.
The bidding process for OFS segment will be available through iBBS module, under the OFS segment. The OFS segment supports manual as well as upload bid entry facility. The file structure for upload is given in Annexure I.
At the order/bid entry level Trading Members can opt for Full Margin (100%) or Fixed Margin (25%) for institutional investors and opt for only Full Margin (100%) for non-institutional investors.
 
For every institutional order/bid a 100% or 25% cash margin and for every non-institutional order/bid a 100% cash margin of the value of the offer/bid amount will be adjusted upfront on an on-line basis from the cash collateral deposited by the Trading members with the ICCL.
 
In respect of bid/ order enter for institutional investors, Trading Members can either ensure availability of funds or margins of these institutional client at their end i.e. 25% or 100% or give up such bid/order to custodians. The balance 75% is required to be paid in the pay-in of the settlement of OFS on T+1 day as per stipulated timings.
Trading Members have a facility for on-line real-time give-up of bids/ order to the Custodians for their confirmation by entering the Custodian Clearing Code and Client CP Code at the bid entry level. In such case, on confirmation by the Custodians, the cash collateral of the Custodians will be directly adjusted upfront on on-line real-time basis without adjusting the bidding Trading Member’s cash collateral. In case of institutional trades, the custodians shall conclude the confirmation of bids with the available funds not later than the end of the half an hour post close session.
 
Bids awaiting custodian confirmation will be treated as incomplete bids and will be given temporary bid ids till they are confirmed by the Custodian(s) not later than the end of the half an hour post close session. Once these bids are accepted by custodians via RTRMS, the bids will be treated as confirmed bids and would be considered for the display for indicative or weighted average price on the Exchange site. If the on-line given-up bids are either rejected by the Custodians or not confirmed by the Custodians, then such bids will be treated as cancelled and will accordingly lapse.
In case of an off-line give up facility, the Trading Members must not enter the Custodian Clearing code while bidding in OFS iBBS module. Hence, initially at the time of order/ bid entry the member’s cash collateral will be adjusted on-line upfront as mentioned above. Such bids will be considered normal i.e. valid bids. Trading Member(s) can give-up and Custodian(s) can take up such bids through RTRMS not later than the end of half an hour post close session.
The bid entry screen will require the following data to be provided by the users (Trading Members)

Field Name
Requirement
Action
OFS Symbol
Mandatory
Dropdown Menu
Category
Mandatory
MF / IC / OTHS / NII
Client/CP Code
Non Mandatory
Alpha Numeric
UCC
Mandatory
Alpha Numeric
Custodian Code / ID*
Non Mandatory
Numeric only Required for Online Give Up Bids
Margin Type
Mandatory
100% Upfront Margin
25% Fixed Margin
Qty
Mandatory
Numeric
Price
Mandatory
Numeric
Value
Mandatory
Auto Generated

         * Trading Members please note that only custodian code which is numeric is to be entered in the field of Custodian Code/ID.
A bulk upload facility is available within the OFS module. Upto 100 records can be uploaded by members in a single comma or pipe separated .csv or .txt file. Submitting the file will lead to blocking of 25% fixed or 100% upfront margin in RTMS against the said member’s cash collateral deposited with the Exchange. The bids successfully accepted will be allotted a bid id or order no. as mentioned in point 3.3.1. For file formats refer Annexure 1.
 
Note: The bids having a Custodian code/ id once submitted will be allotted a temporary bid id (order no). Once the bid is accepted or approved by the Custodian it shall be treated as a confirmed bid. For bids wherein margin is blocked against cash collateral of members, members can be given up to Custodian on T day till the end of half an hour post close session.
Successful bids would be available for modification and cancellation. Bids can be modified or cancelled manually and via bulk upload facility. Modification and cancellation will not be allowed in the last 60 minutes before the closure of the issue.
 

Bid Status For 100% Upfront Cash Collateral
Modification
Cancellation
Before Give Up
Allowed
Allowed
After Give Up till approved by Custodian
Allowed
Allowed
After Give Up, after approval by Custodian
Not Allowed
Allowed

 
Please Note: Modifications and Cancellation will not be allowed for bids backed by 25% Margin.
The bid book download will be available in the OFS module in real time basis. The provisional allocation file shall be available within the same screen on T day. PAN number of the client/buyer shall be considered for allocation, therefore PAN number in the UCC details given to the Exchange is mandatory for a bid to be reckoned as valid order.
Transaction Charges, STT and other levies currently collected in the equity segment would be applicable for OFS segment.
 
Selling Member(s) would be provided trade file for collection of required charges and levies.
Selling Member(s) would be required to deposit shares with the Exchange for OFS in advance before 11.00 am on T – 1 day where T is day for offer for sale.
Trading Members/ Custodian Members will be required to upfront deposit cash collateral for bidding on OFS Segment. The process of depositing cash collateral is the same as that of Equity Cash Segment. However, while instructing the Clearing Banks for the same, the members should specify the segment, inter alia, the collateral is to be deposited in favour of Indian Clearing Corporation Ltd, for all the segments of BSE.     
Obligations for settlement will be downloaded to the members on T day. 
 
The net funds pay-in obligation of members pertaining to the OFS segment shall be adjusted against the cash collateral deposited by the concerned members for the respective settlement and the balance on account of other dues shall be recovered on the pay-in day through the pay-in process from settlement accounts of the members maintained with designated clearing banks. The pay-in and pay-out of funds and securities for OFS segment is to be done through the designated clearing bank accounts and securities pool accounts currently used by members of BSE in Equity Cash Segment respectively.
 
The market types for giving instructions to the Depositories for securities pay-in pertaining to Offer for Sale segment would be “OFS”.
 
A typical settlement cycle for OFS Segment shall be as under:
 

Activities
Timings
T Day  :
 
Settlement obligations download.
 By 6.00 pm (approx)
Confirmation of give-up bids by Custodians
Not Later than the end of half an hour post close session.
T+1 Day  :
 
Pay-in of funds and securities.
 11:00 am.
Pay- out of securities/funds
 01:00 pm.